Morgan Creek Warns of High Risk Exposure of Pension Funds

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Private pension funds may be in more trouble than has been purported, according to a post made by Co-founder and Partner at Morgan Creek Digital, Anthony Pompliano.

Referencing the Q4 2018 quarter-over-quarter (QoQ) of private pension fund assets, which recorded its second largest loss in close to seven decades, and the largest in a decade. A significant signal that all is not well with the private pension fund. Apparently, not only the private pension funds are taking a hit, even the Japan government’s Pension Investment Fund – the largest in the world – recorded a loss of USD 136 billion, about 9.1% in the same reference quarter. Self-proclaimed global macro analyst Otavio Tavi Costa’s remark on the level of risk exposure of retirement assets calls for puzzlement, as to why these funds are still hell-bent on patronizing the equities market when other options are available.

According to Pompliano, the disturbing fact that “one of the most conservative capital allocators in the world… almost lost a double-digit percentage of their assets in 90 days” despite their diversified portfolio in global equities and structured in such a way as to experience “uncommon levels of volatility”. He further emphasized his point, quoting his partner Mark Yusko:

“Humans do two things really well — they buy what they should have bought and they sell what they are about to need.”

Pompliano recommends diversifying a part of pension funds to the emerging class of digital asset to offset any loss that may be triggered in the equities market in the long run. He opines: “[These institutions] need to immediately evaluate the option of gaining exposure to Bitcoin, cryptocurrencies and the blockchain industry”. His logic for this reasons stems from the premise that:

“The assets have proven to be low correlation to date and have asymmetric return profile. A simple 1% allocation has the potential to materially negate any losses that could be experienced through an equity market fall.”

Pompliano further analyzed the investment strategy of Japan’s Pension Investment Fund revealed that if the fund had considered Morgan Creek’s #GetOffZero approach through its Digital Asset Index Fund last year, it would have seen a 45% return on the investment or an overall 0.46% improvement in portfolio performance. Further, he suggests that if things continue to play out as is, Digital Asset Index Fund may outperform the S&P 500 over the next 2-3 years.

Back in February, billionaire investor Mike Novogratz was puzzled why 1% of portfolios of all major macro fund wasn’t held in Bitcoin, and while most analysts have positioned the second half of 2019 to be the track for the next bull rally, Bitcoin, however, began a recent recovery, reaching a 5-months all-time high.

On the brighter side, millennials are forward-thinking as a recent survey revealed they don’t mind retirement plans facilitated by crypto. More so, Fairfax County Virginia is open to diversifying part of a police retirement fund into cryptocurrency.


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