Institutional capital is making its way to the crypto sector.
Morgan Creek Digital Assets co-founder and partner announced that his firm had raised $40 million from several investors including two U.S. Virginia pension funds, as reported by Bloomberg on Feb. 12.
The other participants in the fund include an insurance company, private foundation, university endowment, and a hospital system.
Although Pompliano, an ex-Facebook product manager declined to provide further information, he said that they had initially planned to raise $25 million but ended up with $15 million more.
The New Venture Fund Is Huge for the Crypto Industry
The two Virginia pension funds, which Morgan Creek believes are the first such organizations to invest in the crypto sphere, join a few institutions such as Yale University in taking a plunge into the new industry.
Crypto enthusiasts believe that institutional investors will one day flock to the industry because of its volatility and potential of huge gains.
However, they have taken a cautious approach because of issues such as market manipulation and lack of regulation.
Fairfax Country Retirement Systems manages three distinct benefit plans, and two of them have invested in Morgan Creek Digital Assets, a subsidiary of Morgan Creek hedge fund.
The two pensions that have taken a bet in Morgan Creek’s fund manage a combined total of over $5 billion in assets under management (AUM), and their investment in Morgan Creek’s fund is a small fraction of their combined portfolio.
No matter how small the investment is, it possibly means that the pension funds have faith in crypto.
This is what the market needs right now especially when it has endured a bear market that has cooled the hype and interest that peaked in 2017.
If everything goes well in the new fund, it could influence other pension funds and institutional investors to take a bet in the crypto space as well.
Katherine Molnar, Chief Investment Officer of Fairfax County Police Officer’s Retirement System, which has invested in Morgan Creek’s fund, said that blockchain technology is a good opportunity for attractive returns on investments.
The Structure of Morgan Creek’s New Venture Fund
Pompliano said the new funds adopt the structure of a traditional venture capital fund and will make equity-based investments in early-stage companies operating in the blockchain and digital assets space.
The fund will also invest a minor portion of its value in cryptocurrencies such as Bitcoin.
In a phone interview, Pompliano said:
“There’s a belief in the institutional world that if the industry will be around for a long time, it will be very valuable.”
“The smart money is not distracted by price but looks at the long-term trends, and believes they’re betting on innovation as a great way to deliver risk-mitigated returns.”
Morgan Creek has previously invested in a number of high-profile crypto firms including Coinbase, Bakkt, and Harbor.
In August last year, Morgan Creek partnered with Bitwise to launch a new index fund specifically designed to attract institutional investors in the crypto market.