The Ontario Teachers’ Pension Plan (OTPP) lost $95 million on the cryptocurrency exchange platform FTX Trading, which went bankrupt in November. The OTPP group initially put $75 million into the cryptocurrency platform in 2021, and then put in another $20 million at the beginning of 2022. The FTX platform, which was once worth $32 billion, is now worthless. More than US$182 billion in net assets are managed by OTPP on behalf of Ontario school teachers, making it the largest single-profession pension plan in Canada. It invests “strategically across key markets and sectors to deliver steady returns,” as stated on its website.
Prior to that year, 1990, the plan’s assets were only put into government bonds. Teachers’ Venture Growth (TVG) is a platform for investing in various asset classes including equities (both public and private), fixed income, real estate, infrastructure, natural resources, credit, and venture capital. According to OTPP’s statement, “Naturally, not all investments in this early-stage asset class perform to expectations.” In addition, the statement reassured faculty that the investment accounted for less than 0.05% of the organization’s total net assets, so any losses would be minimal.
The question is not about how much money was at stake, but rather whether it was the right decision to make. It’s the second time in as many months that a major Canadian pension fund has made headlines for a questionable cryptocurrency investment. When Celsius Network Ltd., a cryptocurrency exchange, filed for bankruptcy in July, the Quebec teachers’ pension fund, the Caisse de depot et placement, had invested US$150 million in it, just ten months after its launch.
The president at the time admitted to the press, “It is certain, when we now look at it, that we went in too early into the sector, which was in transition.” There is debate surrounding the use of crypto currencies. Although the US government does not recognize bitcoin as legal tender, it has been adopted as a means of exchange in El Salvador. The Chinese government has outlawed any and all cryptocurrency dealings. There have been significant losses in the industry, with some estimates putting the value of cryptocurrencies in 2022 at a loss of US$2 trillion.
A teacher was quoted as saying that he expected his colleagues to be angry about the fact that their pension funds were invested in a “volatile sector” of the market. Teachers in Canada have some of the highest salaries in the world, but even in high-income countries, teachers are not paid as much as workers in other sectors. Now, more than ever, when so many people are thinking about leaving the profession due to burnout caused by COVID-19, the security of their pension is crucial. Pension plans need to take more precautions to ensure that their investments are safe.
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Whether in Canada, the United States, Kenya, or South Africa, teachers’ pensions are typically based on their total number of years in the profession and their average final salary. To make up for the fact that nations can’t afford to pay for everything, investment is used. Some evidence suggests, however, that pension funds have made riskier assumptions about the expected returns from their investments in countries where relevant data is available.
Risky decisions that affect the teaching profession’s financial stability in the face of a global recession will have a negative impact on education. Considering that over 60% of the population is clueless about crypto currencies and that 32% of those who have invested in bitcoin admit to not understanding it well enough, perhaps there are better ways to invest in teachers’ futures.