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CalPERS gauging cryptocurrency exposure in private equity portfolio

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CalPERS gauging cryptocurrency exposure in private equity portfolio

CalPERS is investigating its exposure to cryptocurrencies in its private equity portfolio, said Marcie Frost, CEO of the $443.2 billion Sacramento-based pension fund.

While the California Public Employees’ Retirement System does not have direct investments in cryptocurrencies, “there are likely indirect exposures that includes public index holdings,” including in cryptocurrency exchange Coinbase Global, Ms. Frost said at Wednesday’s board meeting.

CalPERS officials declined to provide further information. According to an SEC filing, CalPERS owned 319,037 shares of Coinbase as of Nov. 9.

CalPERS’ SEC filing also reveals indirect cryptocurrency exposure with investments in Tesla, and software and cloud services firm MicroStrategy. Both businesses are impacted by their cryptocurrency holdings.

As of Nov. 9, CalPERS owned 5,738,492 shares of Tesla worth $1.5 billion, the SEC filing said. Tesla had $218 million as digital assets on its balance sheet as of Sept. 30, after investing $1.5 billion in bitcoin in the first quarter of 2021, according to its most recent 10-Q filed with the SEC on Oct. 24. Tesla acknowledged that its profitability is impacted by its digital asset holdings, saying that any impairment charges “may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase.”

CalPERS owned 20,029 shares of MicroStrategy worth $4.3 million as of Nov. 9. MicroStrategy owned $2 billion of bitcoin as of Sept. 30, its Nov. 1 10-Q shows.

“Fluctuations in the price of bitcoin have in the past and are likely to continue to influence our financial results and the market price of our class A common stock,” MicroStrategy said in the SEC filing.

In other action, the board on Wednesday approved a $112 million (5.4%) increase in its fiscal year 2023 budget to $2.2 billion, mainly for additional real asset external manager fees resulting from more capital commitments to infrastructure.

CalPERS has budgeted a total of $1.1 billion for external money manager fees in fiscal year 2023, a 9.5% increase from the prior fiscal year, a committee report shows. CalPERS said in the report that the external management fees were higher than originally estimated due to increased capital deployed in real assets and private equity. CalPERS committed a combined up to $15.2 billion to new and existing alternative investment strategies in the third quarter.

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