The rapid growth of the cryptocurrency market over recent years has attracted a wide range of investors. However, major institutional investors like public pension funds have largely remained cautious. While individual and speculative investors rushed into digital assets, many pension systems limited or avoided direct exposure to cryptocurrencies. This conservative approach has shielded many retirement funds from the worst effects of recent market crashes, such as the collapse of the FTX exchange.
Most large U.S. state and local government pension funds do not hold digital tokens directly. Instead, any exposure to the crypto market is typically small and often indirect—through crypto-related stocks, ETFs, or other financial products. This strategy has helped protect retirees’ savings from extreme volatility.
As Thomas Aaron, a Senior Credit Officer at Moody’s Investors Service, noted:
A stock market crash would have a much more significant impact on pension portfolios since equities represent a much larger share of their investments.
According to an informal Bloomberg survey, nearly all of the top 10 U.S. pension funds by assets confirmed they do not invest directly in Bitcoin or other cryptocurrencies. One notable exception is the Florida Retirement System (FRS), which holds $119 million in net assets across Bitcoin, Ethereum, and Solana.
Both the California Public Employees' Retirement System (Calpers) and the New York State Common Retirement Fund—the two largest U.S. pension funds—stated they have no direct crypto investments. However, they acknowledged potential indirect exposure through equity holdings in crypto-related businesses.
Understanding Indirect Crypto Exposure
Pension funds often invest in alternative assets, including venture capital, private equity, and hedge funds. Some of these funds may, in turn, invest in cryptocurrency startups, mining companies, or trading platforms. This creates indirect exposure that is not always clearly reported.
Doug Offerman, a Senior Director at Fitch Ratings, explained:
It's interesting—we all know crypto exposure exists, but it's often hidden within the alternative investments that pensions carry. At any given moment, the extent of that exposure isn't always clear.
For example, the New York State Common Retirement Fund held 172,828 shares of Coinbase stock as of September 30, representing an $8 million investment—a tiny fraction of its $250 billion fund. Similarly, Calpers held 319,037 shares of Coinbase, worth approximately $15 million.
Case Studies: Conservative Allocation Amid Market Volatility
Some pension systems have made modest, deliberate allocations to digital assets. The Houston Firefighters’ Relief and Retirement Fund allocated 0.5% of its $5.5 billion in assets to cryptocurrencies last year. This fund is among the few that invest directly in both Bitcoin and Ethereum.
According to Chief Investment Officer Ajit Singh:
We did not invest in lending tokens or anything exotic. None of what’s happening with FTX currently affects us.
Similarly, the Fairfax County Employees’ Retirement System in Virginia allocated about 3.5% of its assets—approximately $150 million—across various crypto-related strategies and funds. The county’s police fund also holds more than 7.5% in crypto assets. Both funds reported minimal direct exposure to FTX.
Could Crypto Become a Major Pension Asset?
Pension funds are under constant pressure to achieve high returns to meet their obligations. With traditional assets like bonds offering relatively low yields, some fund managers have begun exploring alternative investments—including digital assets.
Gil Luria, a strategist at D.A. Davidson, noted:
Pension funds are known to be yield chasers. The enormous returns in crypto have forced institutional investors, including public pensions, to consider allocations to cryptocurrencies.
However, this search for yield comes with risks. Many public pension systems already assume unrealistically high annual returns. For example, the Houston firefighters’ pension assumes an 8.5% annual return—well above the national average of 6.9%.
Over the past decade, U.S. pension funds have increasingly turned to riskier asset classes to meet their targets. While this can boost returns, it also increases vulnerability during market downturns.
Risks Beyond the Balance Sheet
Even without direct crypto investments, pension funds may face risks related to the broader digital asset ecosystem. The collapse of FTX revealed partnerships and financial ties that reached into traditional finance and asset management.
For instance, the New Jersey Treasury Department stated it does not actively seek crypto investments. Yet, its pension system holds shares in Coinbase, MicroStrategy, and other companies with indirect crypto exposure, such as BlackRock and Signature Bank.
Moreover, individual retirees may face personal losses from their own cryptocurrency investments. As inflation and market volatility continue, the financial resilience of future retirees could be affected even if their pension fund remains conservative.
Frequently Asked Questions
Do most pension funds invest in Bitcoin?
No, the majority of large public pension funds in the U.S. do not invest directly in Bitcoin or other cryptocurrencies. Most exposure is small and indirect, often through stocks of crypto-related companies.
How are pensions affected by crypto market crashes?
Pension funds with little or no crypto exposure are largely insulated from crypto market downturns. Those with indirect exposure—such as through equities or crypto-adjacent investments—may see minor impacts, but these are typically small relative to the total portfolio.
Should pensions increase their crypto allocations?
This is a topic of debate. While crypto assets offer the potential for high returns, they also come with high volatility and regulatory uncertainty. Most pension funds prioritize stability and asset preservation over high-risk growth. Before considering higher crypto allocations, funds must evaluate risk tolerance, liquidity needs, and fiduciary responsibilities.
What is indirect crypto exposure?
Indirect exposure refers to investments in companies or funds that are involved in the cryptocurrency market—such as crypto exchanges, blockchain technology firms, or ETFs that hold digital assets—rather than holding the cryptocurrencies directly.
Can crypto help pensions meet high return targets?
In theory, yes—cryptocurrencies have shown potential for high returns. However, their extreme volatility and relatively short track record make them a risky choice for retirement funds that require predictable, long-term growth.
How can I learn more about pension fund investment strategies?
👉 Explore more about institutional investment approaches
Conclusion
Most U.S. pension funds have limited exposure to the cryptocurrency market, either directly or indirectly. This cautious approach has helped protect retirees from the severe downturns that have affected the digital asset space. While a handful of smaller funds have experimented with crypto allocations, the overall trend remains conservative.
Pension fund managers continue to prioritize diversification, liquidity, and risk management over high-risk digital asset investments. As the regulatory environment evolves and the crypto market matures, this may change—but for now, retirement systems are proceeding with caution.
For those interested in the evolving relationship between traditional finance and digital assets, staying informed is key. 👉 Discover updated investment insights