Florida State Board of Administration, Tallahassee, has no plans for direct investments in digital assets because of their substantial correlation with equity volatility but views the role of digital assets in the $201.7 billion Florida Retirement System pension plan “with optimism.”
That sentiment is reflected in a letter from Chris Spencer, Florida SBA’s executive director, to Jimmy Patronis, Florida’s chief financial officer and one of three trustees for the board that also includes Gov. Ron DeSantis and Attorney General James Uthmeier.
The letter to Patronis, included with materials for SBA’s March 3 investment advisory council meeting, was a response to an Oct. 29 letter from Patronis requesting the board investigate the “feasibility, risk, and potential benefits of directing a portion of the state retirement system monies into digital assets.”
While SBA has no plans to invest directly in digital assets, staff believes the Trump administration’s accommodative approach to digital assets might mitigate regulatory concerns, could result in continued capital flows into the asset class, potentially having the effect of “dampening the characteristically high level of volatility around digital asset prices over time,” Spencer said in his letter.
Accompanying Spencer’s letter to Patronis is an analysis by Marco Perzichilli, SBA’s senior investment policy officer, in which he states that while SBA “believes in the future of digital assets and that they can play a role in an investment portfolio,” they don’t believe digital assets can be seen as a bona fide asset class. In his analysis, Perzichilli said assets/investments generally serve the function as either a cash substitute, reserve asset, capital asset, diversifier and/or hedge.
None is feasible, Perzichilli said, although “perhaps the strongest potential role for digital assets in the plan’s portfolio would be as a diversifier and/or hedge.” Unfortunately, because of the high correlation with equity volatility, “the diversification benefits of bitcoin have tended to fade when they’re needed most,” he said.
However, Perzichilli says it is possible digital assets could be seen as a reserve asset in the future due to the “increasing acknowledgement and acceptance of bitcoin's potential as a reserve asset, with particular relevance to corporate treasuries, government treasuries, and monetary authorities.”
SBA has been indirectly investing in digital assets for at least the past four years, primarily through its interests in venture capital funds that have invested in various blockchain-based projects and digital asset enterprises. According to Perzichilli, the total value of its digital asset-based private equity investments is $808 million. SBA also has holdings in public companies such as Coinbase Global Inc. and Solana Labs.
In his conclusion, Perzichilli said SBA is “following the rapid pace of developments on the digital asset landscape with great interest” and “has been — and will continue to be — actively seeking opportunities to invest in digital assets. The vast majority of the ways of doing so are available to the Plan and the SBA without issue.”
“Additionally, the SBA continues to actively monitor the evolving landscape and empirical characteristics of prominent cryptographic tokens for changes that might allow for a role in the Plan portfolio as a cash substitute, capital asset, diversifier, or hedge,” he said.
Florida State Board of Administration oversees $270.5 billion in state assets, including the Florida Retirement System pension plan.
