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Newsmakers

Latest Sign of Crypto Decline: Scaramucci Bars Fund Redemptions

Despite a small bitcoin rally recently, several notable financial firms are retreating from digital currencies or running into trouble.

By Larry Light



Amid the carnage tearing through capital markets this year, with the S&P 500 in a bear market, the headlong plunge of cryptocurrency is breathtaking. Sending the latest high-profile signal of crypto’s tough times, Anthony Scaramucci is barring investor redemptions in one of his hedge funds.

His Skybridge Capital prohibited the exit, at least temporarily, of investors from Legion Strategies (estimated assets under management: $250 million) after the dramatic fall of digital assets. Some one-fifth of Legion’s assets is in private companies, which are difficult to sell when quick cash is needed to pay off fleeing investors. To Scaramucci, who won fame for his brief (11-day) tenure in the Trump White House, the step is necessary for Legacy to make it through a temporary rough patch.

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Bitcoin, the largest crypto, is down by two-thirds from its November peak, although it has managed a small rally lately, up 17% from last week.

Skybridge is the most recent financial firm to run into problems with digital money. Babel Finance, a Hong Kong cryptocurrency lender, announced Friday that it is suspending withdrawals due to “unusual liquidity pressures.”

Crypto lender Celsius filed for bankruptcy last week after prohibiting redemptions. The company has said it has $11.7 billion in assets and 1.7 million customers. Terra’s stablecoin collapsed in May, leaving thousands of investors with worthless currencies.

Another recent failure is crypto hedge fund Three Arrows Capital, which filed for insolvency in June; it’s unclear how much of its assets, if any, the fund’s investors will recoup.

Circumstances are hardly as dire at Skybridge, which has several other crypto funds. Indeed, Legion Strategies is its smallest offering. Appearing on CNBC Tuesday, Scaramucci, a fervent crypto fan, insisted that blocking redemptions would allow Skybridge to raise more capital and that better days lie ahead for crypto and Legion.  The fund is down 30% this year, but has risen 5% this week, Scaramucci said. “We’re catching the bounce back.”

Legion is not totally invested in crypto, which Scaramucci said makes up just 18% of its assets. Plus, he went on, 27-year-old Legion has no leverage, which gives it more room to maneuver.

Investors have “zero risk” of asset liquidation, a person familiar with Skybridge says. “The gate is a collective protection for our investors,” the person asserts. “The suspension will be in place until SkyBridge can ensure the fund is not forced to exit positions to the detriment of investors who want to stay in, while allowing an orderly exit for those who want one.” The majority of Legion investors agree, the person adds.

The world’s largest digital asset manager, Grayscale Investments, just issued a report that estimates the current crypto swoon will last another eight months. But then, the report contends, crypto will turn around and end up stronger than ever.

“Despite price declines, liquidations and volatility, the crypto industry continues to build and innovate, pushing the boundaries of what is possible,” the firm said.

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Home > News > Asset Allocation > Despite Falling Markets, UK DB Funding Levels Continue to Rise
Asset Allocation

Despite Falling Markets, UK DB Funding Levels Continue to Rise

Thanks to surging bond yields, the aggregate funded ratio of the PPF 7800 rose to 120.1% in June, up from 106.5% a year ago.

By Michael Katz



Despite falling equity markets, the aggregate surplus of the 5,215 defined benefit plans in the Pension Protection Fund’s PPF 7800 increased to an estimated £267.9 billion at the end June from £261.6 billion at the end of May thanks to sharply rising bond yields.

 

The increase in funding helped boost the estimated aggregate funding ratio of the pension plans to 120.1% from 118.9% at the end of May, and from 106.5% in June of 2021.

 

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Total assets for the plans in the index decreased 2.7% during the month to £1.598 trillion, and were down 9.9% over the year. However, total plan liabilities were down even more, decreasing 3.6% during the month to £1.33 trillion, and tumbling 20.2% from a year earlier.

 

The number of plans in surplus rose to 3,817, or 73.2% of all plans, at the end of June, from 3,765, or 72.2%, at the end of May, and from 2,958 plans, or 56.7% of all plans, at the end of June 2021. Meanwhile, the number of plans in deficit decreased to 1,398, or 26.8% of the total, from 1,450 plans in deficit at the end of May (27.8%), and 2,257 plans (43.3%) at the same time last year.

 

The total surplus of plans in surplus increased to £293.2 billion at the end of June from £289.8 billion a month earlier, and from £212.6 billion during the year-ago month. The aggregate deficit among the plans in deficit decreased to an estimated £25.3 billion at the end of June from £28.2 billion at the end of May, and from £104.7 billion at the end of June 2021.

 

Despite a 5% drop during the second quarter for the FTSE All-Share Total Return Index, AA-rated corporate bond and gilt yields both rose sharply, according to PwC, which said credit spreads have widened further, reflecting an increase in economic uncertainty and pessimism.  The rising bond yields have led to “significant reductions in scheme liabilities and the emergence of greater surpluses, despite the equity falls,” says a PwC report on pensions accounting trends.

 

According to PwC’s Adjusted Funding Index, the funding surplus of the more than 5,000 U.K. corporate DB plans rose to an estimated £360 billion in June.

 

“Trustees and sponsors should bear in mind that they might need to use up some of their surplus if any issues come to light for their scheme,” Laura Treece, a pension actuary at PwC, said in a statement. “For those looking to transfer their pension risk to a third party, we’re seeing a lot of data quality concerns arise in the run up to transactions. If not addressed quickly and managed carefully, dealing with data problems can easily eat up a surplus.”

 

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Corporate DB Pension Plan Funded Ratios Surge in 2021

 

 

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