Virginia Pension Fund Eyes DeFi Yield Farming Investment

Key Points

• Fairfax County on Tuesday announced plans to invest pension funds in DeFi yield farming.
• If approved, the funds will be used to provide liquidity on decentralized exchanges.
• Fairfax’s investment comes at a time when US pension funds are increasingly looking to crypto.

Katherine Molnar, chief investment officer at the Fairfax County Police Officers Retirement System, announced on Tuesday that her county is looking to invest pension money into two crypto funds that engage in an investment strategy called “yield farming.”

Yield farming is the process of generating yield from crypto assets, through staking, lending, or the provision of liquidity.

Speaking at the Milken Institute Global Conference, Molnar said that, if approved, the pension fund money would be used to provide liquidity on decentralized crypto exchanges.

This would make Virginia-based County the first pension fund to invest in decentralized finance, or DeFi. Existing DeFi applications, such as decentralized exchanges, build on the decentralized, permissionless, and anonymous technologies behind cryptocurrency. People can trade, borrow and lend anonymously and without intermediaries like banks or brokers.

According to Molnar, the funds invested into DeFi yield farming are expected to generate a yield of at least 9.0%. “We view this as a growth investment,” Molnar added, who compared yield farming to traditional fixed-income products but with the opportunity for a higher return.

Fairfax county, a crypto adoption leader

Following its latest move to allocate money into DeFi, Fairfax County has solidified its place as a market leader regarding the shift towards greater institutional adoption of crypto products in the US.

It become one of the first US counties to put pension money into crypto-related investments back in 2019 when it invested $40 million into an upstart crypto venture capital fund.

In 2020, the Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System invested a further $50 million into a crypto fund called Parataxis Capital Management.

As of 2022, Molnar said, Fairfax County’s pension fund has allocated about 8% of its portfolio into crypto-focused investments.

Fairfax’s latest investment comes as a boost to the narrative that crypto-related investments are gaining greater institutional adoption in the US. Just last week, Fidelity Investments announced plans to allow 401(k) retirement savers to allocate up to 20% of their portfolio into bitcoin (BTC), subject to retirement plan sponsor approval.