By Norah ODonnell
The prominent independent organization in Canada, Ontario Teachers’ Pension Plan (OTPP), has distanced itself from crypto following the fallout of the Bahamian crypto exchange FTX. The OTPP team had invested substantial assets in FTX in two consecutive rounds during the previous bull run.
In November 2022, the liquidation of the crypto exchange FTX plunged OTPP into financial crisis. The OTPP team lamented that the collapse of FTX exposed the firm to the loss of assets worth $95 million.
Impact of the Collapse of FTX
As of this writing, the OTPP controls assets worth $190 billion, dominating the largest pension fund position globally. The attempt to bolster teachers’ and schools’ well-being in Canada inspired the organization to pursue alternative investment opportunities.
In 2021 the OTPP project rerouted its resources to invest in crypto assets. Interestingly, the first OTTP crypto investment generated positive results.
The considerable gain from the crypto investment motivated the OTPP firm to invest in digital assets in 2022, which failed to create the desired results. In an interview with reporters from the Financial Times, OTPP chief executive Jo Taylor argued that the pension fund has no plans to venture into a third crypto investment.
Taylor decried that the OTPP team was still ailing from the after-effect of the collapse of the FTX. He argued that in the next crypto investment, the OTPP group would be hypervigilant when investing in digital assets.
Taylor regretted that the crypto exchange failed to disclose critical information regarding FTX digital products during the previous investment. He added that insufficient data on crypto investment undermined the firm’s ability to make informed decisions.
In his April 20 interview, Taylor stated that the OTPP team were optimistic about crypto investment, but the results were far from expectations.
The OTPP team have considered redirecting its investment to centralized finance markets, including real estate. Also, the pension fund plans to explore viable opportunities in the private credit sector.
Scope of Ontario Teachers’ Pension Plan Performance
According to the OTPP report, the team have plans to invest $7.4 million in the real estate and credit market. The team has also formulated a well-structured investment plan with a timeframe of three years.
However, the central banks spiking appetite to increase the interest rates and the global macroeconomic pressure has created mixed reactions among the OTPP group.
Taylor argued that the debt market and real estate sector lack sufficient activities to support future businesses. He announced that the OTPP team would hire new talent with experience in real estate.
Responding to Taylor’s remark, the head of investment for Ontario Teacher operating overseas, Nick Jansa, revealed that real estate provided endless opportunities to investors in the Europe, Middle East and Africa (EMEA) region. Jansa argued that no one thought the opportunities discovered in real estate in the EMEA zone existed.
Per the report, the number of teachers and learning institutions registered by the pension fund increased to 330000 this year.
Elsewhere, the Singaporean pension fund Caisse de dépôt et placement du Québec (CDPQ) suffered huge losses after lending $154.7 million to the now-defunct lending platform Celsius. In the previous Q2, Celsius was among the crypto firms that were struck by the shock waves of the crashing of the FTX. The Celsius team filed for Chapter 11 of bankruptcy protection in July 2022.
Celsius’s submission of Chapter 11 of Bankruptcy law aimed at enabling the crypto lender to restructure amid a turbulent market. The reorganization efforts have not yielded the positive result.
A recent court decision ordered the crypto firm to return assets to the affected Celsius customers. Since the exit of FTX, Celsius, Terra Luna, Three Arrow Capital (3AC) and BlockFi from the crypto world in 2022, other digital firms have struggled to restore customers’ confidence.
Notably, crypto firms have invested heavily to improve compliance in the delivery of digital assets. The 2022 events in the crypto sector have prompted the regulators to develop a healthy appetite to supervise digital assets.