A Virginia pension system is considering adding crypto yield farming to its portfolio to boost returns

• A pension system in Fairfax County, Virginia, is reportedly considering allocating money to funds focused on crypto yield farming.
• Yield farming involves locking up, or staking, cryptocurrency for a period of time in exchange for interest or other rewards.

A pension system in Virginia's most populated county may allocate some money to two crypto funds that use yield farming as an investment strategy, a move that could bolster returns for its portfolio, according to reports.

If approved, the Fairfax County Police Officers Retirement System will aim to add money to the funds in the next three weeks, according to a Tuesday report from The Block, citing the system's Chief Investment Officer Katherine Molnar. Molnar spoke at the Milken Institute of Global Conference in Los Angeles.

Similar to earning interest from money deposited at a bank, yield farming involves locking up, or staking, cryptocurrency, for a period of time in exchange for interest or other rewards, such as more cryptocurrency. The process provides liquidity to decentralized exchanges.

The report said Molnar views yield farming as a fixed income replacement, or an opportunity to make higher returns than rate-sensitive assets.

"We're using it as a high-yield substitute...the yields we're expecting are, let's say, closer to nine to 11 % in one case and the other manager probably slightly higher than that, so attractive as a fixed income replacement," she was quoting as saying.

Fairfax County became one of the first counties in the US to put pension money into crypto-linked investments in 2019, according to Bloomberg. Fairfax's crypto-focused investments add up to more than 8% of its portfolio, Molnar told Bloomberg, which reported first about consideration of the yield-farming strategy.

The Fairfax County Police Officers Retirement System and Fairfax County Employees' Retirement System in 2021 invested $50 million into Parataxis Capital Management LLC's main fund, which buys various digital tokens and cryptocurrency derivatives, according to Bloomberg.