Fairfax County highlights the value in the 'short-term nature' of yield farming

Published at: July 8, 2022

Virginia’s Fairfax County continues to be a prominent public institutional investor in the cryptocurrency space and is set to diversify its portfolio with a move into yield farming.

As previously reported, global asset managers VanEck announced that the Fairfax Employees’ Retirement System and Police Retirement System will invest $35 million into the firm’s crypto lending fund. It’s the latest investment move by the two county-run funds in the cryptocurrency space since their original foray began in 2018.

Cointelegraph reached out to Andy Spellar, the chief investment officer of the Fairfax Employees' Retirement System, to unpack their investment in VanEck's crypto lending fund and the reasoning behind it.

Spellar confirmed that the Employees' Retirement System (ERS) had committed $25 million to the fund while the Police Officers' Retirement System (PORS) had pledged $10 million. The investment will take place between July and September this year, depending on market conditions.

An initial tranche has already been received by VanEck, with Spellar revealing that the ERS and PORS have invested $10 million and $5 million, respectively, for the month of July.

The move is certainly good news for the cryptocurrency space, which is currently enduring a severe downturn alongside conventional stock markets worldwide. The decentralized finance (DeFi) sector has arguably suffered the most, with the collapse of algorithmic stablecoin Terra causing a cascading effect throughout the space.

As the wider cryptocurrency ecosystem weathers the storm, investment schemes and funds like Fairfax County’s ERS and PORS continue to see the value offered by the sector, as Spellar told Cointelegraph:

“We have looked at the space as a diversifier with our credit/high yield portfolios and particularly performance periods like the very short-term nature (1–3 months) of the positions.”

Spellar offered food for thought on the current market conditions, noting that a risk-adjusted basis outlook suggests that cryptocurrency markets haven’t sold off any more than high growth sectors like tech, life sciences or government bonds:

“We have not seen anything to counter the long-term thesis that more things than less will be digitized in the future, including traditional assets themselves. These types of markets shake out weak players and technologies and are overall healthy for markets and industries.”

The ERS and PORS funds have managed to fare well amid broad market sell-offs due to their broadly diversified portfolios. Spellar noted that both are top-performing public funds across short and long-term time domains and expects the latest quarter of the year to be no different in terms of performance.

Despite the first six months of 2022 being one of the worst performance periods on record, Fairfax expects both systems to be top decile performers over the period. Spellar said the digital asset segment of their portfolio was very small, with the vast majority made up of traditional venture capital equity investments.