The Financial Markets Authority (FMA) has sought assurance from a handful of local fund managers amid concerns of a crypto-currency contagion sparked by the meltdown of the Bahamas-based FTX exchange.
In a statement supplied to Investment News NZ, the FMA said it had “engaged with licensed MIS [managed investment scheme] managers who are known to have exposure to crypto-assets to understand further how they are managing the implications of the recent sharp falls in the value of crypto-assets”.
It is understood the latest crypto-crash had raised alarm bells at political levels, however, the regulator said it made the manager queries “proactively and was not acting on a request from the Minister [David Clark]”.
“The FMA sought information from fund managers known to have investments in either crypto-currency or crypto-related assets, for its own assurance, and also uses this in the context of briefing the Minister on financial market matters as part of regular meetings,” the statement says.
Just five licensed local fund managers have known exposure to crypto-assets including NZ Funds, Kōura, Vault, Pathfinder and Simplicity (the latter two via private equity stakes in NZ exchange, Easy Crypto).
But the total crypto investments in NZ licensed funds remains tiny. Most local punters would have purchased bitcoin etc direct through unlicensed exchanges located here or, more likely, offshore: data on the sector is patchy.
Most famously, NZ Funds, made a big bet on crypto in 2020 through various holdings including several strategies offered by the US-based Galaxy digital asset manager. As at the end of September this year the NZ Funds KiwiSaver growth fund reported less than 2 per cent (or about $10 million) was held in Galaxy funds compared to over 13 per cent just 12 months previously.
Meanwhile, the Kōura KiwiSaver ‘carbon neutral’ crypto fund reported only $390,000 under management as at September 30 while the Vault product (offered under the auspices of Implemented Investment Solutions) had accrued almost $3.4 million at the same date.
Pathfinder invested about $300,000 in Easy Crypto while Simplicity has a small exposure through an underlying private equity vehicle operated by Icehouse Ventures.
“Information received to date shows there is no material net exposure to these assets, and net effect on these funds’ investments in crypto-currency was consistent with the broader changes in market value of many cryptocurrencies – about 15-20% since the end of September,” the FMA said.
Offshore, however, several big-name institutional investors have been stung by direct bets on the now-bankrupt FTX crypto-exchange led by former poster-boy for the sector, Sam Bankman-Fried.
The Singapore sovereign wealth fund, Temasek, wrote down US$275 million for its stake in FTX while the Ontario Teachers’ Pension Plan lost US$95 million after the exchange collapsed.
Several other institutions, such as the Alaska Permanent Fund and the Washington State Investment Board, have also suffered FTX-related losses through respective holdings in a private equity fund run by Sequoia, which had bet on the Bankman-Fried enterprise.
In August this year another large Canadian pension fund, Caisse de dépôt et placement du Québec (CDPQ), wrote-off US$150 million after the crypto-lender Celsius Network also disintegrated.