Giant Retirement Fund Fails $95 Million at FTX | Markets | 11/27/2022

The venture capital arm of the world’s 18th pension fund OTPP – Ontario Teachers’ Pension Plan – has assets of $191.1 billion – to write off a penny: investments in cryptocurrency exchange FTX, which has since gone bankrupt.

In October 2021, the Ontario Teachers Pension Plan (OTPP) invested $75 million in FTX International and its US unit (FTX.US). In January 2022, it made a follow-up investment of $20 million in FTX.US. These investments have been made by Teachers’ Venture Growth (TVG) platform along with a group of global investors to gain small exposure to an emerging field in the FinTech sector.

my little one
The investment represents less than 0.05 percent of OTPP’s total net assets and represents a 0.4 percent and 0.5 percent stake in FTX International and FTX.US, respectively. However, it is extremely disturbing that the OTPP is reporting this complete failure. Efforts are being made to limit the damage to the image and a statement was issued to shed light on the matter.

TVG
Venture capital platform OTPP was established in 2019 to invest in emerging technology companies that are raising venture capital and late stage growth. The investments are designed to provide the OTPP with returns commensurate with the risk it is taking and to provide ownership insights that feed into other pension plan investments. Of course, not all investments in this early-stage asset class have lived up to expectations, but beTVG has had a solid track record right from the start, according to the Ontario Teachers Pension Board.

The investment was preceded by close cooperation with external consultants and FTX
Ontario’s teacher investment divisions, including TVG, perform strict due diligence on all private investments. With the help of experienced outside advisors who have financial, business, and other relevant expertise, and often in consultation with investment partners, due diligence is designed using other materials and research provided by firms, to assess the risks associated with a particular investment. In the case of FTX, our underwriting process involved working closely with outside consultants and FTX to examine commercial, regulatory, tax, financial, technical and other issues. Because due diligence cannot reveal all risks, especially for a start-up technology company, investing in FTX measured moderately relative to TVG and the overall plan portfolio.

suspected of fraud
Recent reports point to possible fraud in FTX, which is something of concern to all involved. She said the OTPP fully supports the efforts of regulators and others to review the risks and causes of failure of this company.

Diversification approach is maintained
OTPP’s strategy is to diversify investments across asset classes, geographic regions, time horizons and economic outcomes to reduce risk and enhance returns. This supports the plan’s ability to perform well in a variety of investment environments and mitigate the negative impact of a single investment loss on the fund as a whole. The level of investment in FTX reflects our approach to diversification.

OTPP will write off the investment in FTX to zero by the end of the year
Powerd said the financial loss from this investment would have a limited impact on the pension plan given its size relative to total net assets and the company’s strong financial position. However, she is disappointed with the outcome of this investment, and takes all losses seriously and will use this experience to further her approach. (KB)