Pension funds

The Caisse's crypto fiasco

OPM 1 min read

Please note that I want to occasionally write about topics of interest to Montreal people. (I usually focus on Bay Street). After you subscribe, you can pick "Montreal" as a topic.

Quebec’s La Caisse, Canada’s second largest pension fund and the one most prone to walk into a lamppost was a major backer of Celsius, a crypto lending platform that has now imploded. Celsius is the talk of the markets globally today, after it suspended withdrawals. Its proprietary coin has lost virtually all its value.

In October 2021, the Caisse invested about $150m as co-lead in a financing that valued Celsius at US$3b. At the time, the Caisse said it was focused on making “opportunistic” investments in “diamond in the rough” early-stage companies leveraging blockchain technology. It was described as a “small diversification play”. In practice, crypto has proven more akin to leverage than diversification.

The Caisse’s Chief Technology Officer, Alexandre Synnett, said at the time that the Caisse would not consider allocating funds directly to coins. His exact quote was: “Bitcoin? No, absolutely not.” However, Bitcoin, for all its faults, has held up better. For now.

The investment in Celsius is a drop in the bucket for the Caisse. More importantly, I have very little doubt that given the persistent outperformance of technology over the the past decade and the job-preservation inclinations of people working for pension funds, the Caisse has been caught partying like it’s 1999. For instance, records show that it tripled its position in Shopify in the first quarter of 2021 at prices above $1k. They also added to Tesla and Zoom, while selling Suncor and Canadian Natural Resources. It's always unfair to pick on specific trades over short horizons, but the broader point is that the Caisse should simply index.

Many reasonable people knew that Celsius was something like a Ponzi scheme. I see little point in rehashing the details, but if you are interested, the French counterpart of CBC wrote a thorough post detailing the Caisse's investment, Celsius's louche connections and questionable regulatory practices. You can read that here (in French).

If you have tips about other Montreal stories I should write, let me know.

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