The crypto industry is still reeling from last week’s shocking events The Death Spiral of Digital Currency Exchange FTXThe company’s bankruptcy filing put financial backers on edge. Among them are the usual Silicon Valley suspects, from Masayoshi Son’s SoftBank to his VC’s Sequoia.
some names in the list Although it stands out. The Ontario Teachers Pension Plan has been invested in the company.Alaska Permanent Fund Corporation, Washington State Board of Investment others He indirectly invested in FTX through Sequoia and other venture capital firms. These funds say they have limited exposure to FTX, but their inclusion means that even non-cryptobuyers may be impacted by the growing shows an alarming trend.
what’s happening: Pension funds are increasingly investing in alternative assets in search of greater returns. Virtual currency is one example. This can be a risk for those who have invested in cryptocurrencies.
In the United States, public pension funds face serious challenges, threatening the retirement plans of millions of state and local government employees.
The top 100 US public pension funds funded just 69.3% of their total debt at the end of Q3, up from 85.5% at the end of 2021. by Milliman analysisan actuarial and consulting firm.
This means that these funds have a gap between the cash they hold and the cost of benefits promised to both retirees and soon-to-retire workers. To survive, they have to make up for it somehow. Tax hikes and budget readjustments create political issues, but the alternative is to invest in riskier and less liquid alternatives to stocks and bonds such as cryptocurrencies, private equity and hedge funds. , many are trying to make a profit.
“This really shines bright Reveal what money managers are doing to achieve higher returns. Matthew Eickman, National His Practice Leader at Prime Capital Investments, said:
Riskier investments, bigger rewards? of about $4 trillion According to the Boston College Center for Retirement Studies, about a quarter of assets managed by public pension funds in the United States are allocated to riskier alternatives such as private equity, real estate and hedge funds. This is up from 8% when we started measuring in 2001.
This is not a trend occurring only in the United States. Pension assets allocated to real estate, private equity and infrastructure have grown from 7% globally to over 26% over the last 20 years. willis towers watsonThe Thinking Ahead Institute of.
But as the FTX debacle has shown, riskier investments can make an already hurt pension situation even worse. These alternative investments are often complex and high fees, More volatile than stocks.
Portfolio managers are “investing in opaque investment strategies that are poorly understood and could cause major problems down the road,” said Joe Bruce Elas, chief economist at audit, tax and consulting firm RSM US. Stated. “My fear is in these known unknowns.”
Light of hope: This has been a tough year for the market, with many pension funds Taking a hit puts them in a position to consider investing more in non-market investments, Eickman said.
But recent events may make them think twice. “What happened with FTX will probably bring more attention to these discussions,” he said.
US markets record two days of gains before closing lower on Monday after Federal Reserve Governor Christopher Waller warned the end point of central bank rate hikes was ‘still a long way off’ I was.
Speaking at a UBS-sponsored conference in Australia, Waller said: But he warned investors that the Fed has not softened its fight against inflation. “Let’s stop paying attention to the pace and start paying attention to where the endpoint is. Until inflation subsides, that endpoint is still far away,” he said.
The comment comes after a report released last week showed October inflation was weaker than expected. Investors took the data as a sign that the Fed was nearing a break from its historically high rate hikes and that markets were at their highest since his spring of 2020.
Waller said that while the CPI inflation report was “good news”, it was “just one data point” and more measures would be needed to convince policymakers that inflation is easing. A value is required.
Mixed messages: Stocks rebounded from session lows on Monday after another Fed official delivered a somewhat different message. Federal Reserve Vice Chairman Lael Brainard has indicated that the central bank could soon slow the pace of rate hikes on Monday.
“I think it will probably be appropriate soon to slow down the pace of rate hikes,” he said in a live interview with Bloomberg News. “We raised interest rates very quickly,” she said. “We have been shrinking our balance sheet and in financial conditions we see inflation expectations very firmly pegged,” she said.
To the point: the market is remain unstable until the rate hike ends. Investors will dig deep for clues on future Fed policy in Tuesday’s producer price index report, Wednesday’s retail sales report and Thursday’s Philly Fed manufacturing index.But it’s best not to fight the Fed: when officials No single data dictates the decision-making process, they say.
President Joe Biden is 3 hour talk on monday Biden reports to colleagues on his first face-to-face meeting with China’s Xi Jinping since taking office Kevin Liptak and MJ LeeThe talks came at a time when relations between China and the United States were deteriorating.
Biden later told reporters that he was “candid and frank” with Xi on various issues on which Beijing and Washington disagreed. “I’m not suggesting this is Kumbaya,” Mr. Biden said at a press conference. [about] new cold war. ”
Economic relationship: West Reportedly criticized He accused the US of trying to build “walls and barriers” during the conference and promoting “disconnection and disconnection of supply chains.” “We oppose the politicization and weaponization of economic and trade ties and technological exchanges,” he said.
“(Biden) reiterated that the (US-China) competition should not escalate into confrontation, and that the United States and China should responsibly manage competition and maintain open communication,” the White House said in a statement. “I emphasized that it must be done,” he said. The leader asked the team to move forward with this work.
Markets encouraged: Mainland China and Hong Kong stocks rose Tuesday, my colleague Reported by Laura HeeAnalysts said the meeting’s unexpectedly constructive tone boosted sentiment. The talks sent a positive message that both sides would work to find common ground, they added.
What’s next: The White House said the US will send Secretary of State Anthony Blinken to China to follow up on the talks.