The Ontario Teachers' investment is outrageous. They are charging middle-class people (by definition) good money from their retirement savings to make reasonable investing decisions and do due diligence.
It's not about performance or risk management, it's about due diligence. They should not be giving any amount of money to an organization with such poor internal checks of their finances.
I'm sorry but thats not how it works. This investment was made out of their venture fund which deliberately makes risky bets, but is a small amount of the overall pie. OTPP is fine and is going to produce returns which are favorable, let's stop with the hyperbole.
--if you made an investment based on audited books but the books were still cooked - what more can you do? - audit the auditer maybe - at some point you have to trust the books --
What if you made an investment based on not seeing any books, there not being any reliable guide as to the company's liabilities, seen or unseen, and not being aware of any regulation or oversight preventing fraud and/or blowing up? But you had a good feeling about the company's hype and the CEO seemed like a nice young man with main character energy?
If the company turns out to be a fraud and the investment worthless, are you still entitled to say "nobody could have known" and "only 1 in 10 has to be a winner"?
Canadian teachers and retired teachers have $220b, which they paid into the plan from their not particularly opulent pay packets. Nearly $100m was given to a company based in a regulatory haven, which does not know to within $5bn how much money it has, and which was able to steal from its customers without any oversight.
Ontario Teachers were an anchor investor in a round which lots of less clueless people must have passed on.
They accepted the risk of losing $100m because they thought there was a significant chance of getting a much bigger return. Obviously in this case the bet didn't pay off, but putting 0.05% of the AUM in a high risk investment is hardly a scandal.
Teacher's Venture Growth is 8bn AUM. It makes complete sense to me that Ontario Teachers as a whole should put 4% of its assets into a venture fund.
TVG put well over 1% of its assets into FTX. Numerous people who work for the venture fund, who are paid 10-100X the income of the retirees in the fund to make investing decisions, went ahead with this investment without asking themselves:
1. Why isn't there a crypto-savvy lead investor for this funding round? Why are we, Teachers Venture Growth, the best placed people to make this investment?
2. Why are 3 individuals with, ostensibly, enormous personal wealth, seeking outside investment from Ontario Teachers for this business?
3. Why isn't this business headquartered in a jurisdiction where people who commit massive financial fraud will be investigated and held to account?
4. What checks and balances regulate the relationship with Alameda, a hedge fund which a) trades with leverage and favorable fee structures on FTX b) is reputed (long before the Series B and the recent trouble) to have privileged access to FTX data c) is run by a romantic partner of the head of FTX?
5. Who are the grown-ups at FTX? You might well think that SBF and his posse have some magical crypto skills. But why don't they have senior people with experience in accountancy, compliance, or risk management helping keep them on the right path? This is the easiest question to answer - you can simply check who works for them, who's on risk committees and other oversight bodies, and what their resume is.
People like to excuse massive due diligence failings like this by pointing out that not all venture investments are supposed to end up in the money. It's fine, if you have huge winners, to use them to justify a certain number of losers.
If you don't have a proven track record for finding out-of-the-park winners, it's perfectly reasonable to ask why you think you can risk large amounts of money on things that look dubious to other investors, while not performing basic checks.
1% of the 4% for a single years worth of capital isn't that much, especially considering the good reputation and other high end investors putting money in.
-- also it was out of their early stage fund - the vast majority of their money is in traditional investments - don't understand why everyone is so up in arms - they really think they know better than the most successful investment group in Canada? --
Why do an investment group which is successful in making large, traditional, real money investments think they know better than the numerous seasoned venture funds and experienced crypto investors who did not give $95m to FTX?
What was it about FTX's lack of internal controls or experienced decision-makers which only TVG was able to identify as a source of value?
Lol. FTX’s investors were a whose who of “seasoned venture funds and experienced crypto investors”.
Sequoia, Third Point Iconiq etc. Coinbase Ventures gave them money. Blackrock was an investor.
If you want to see FTX as an indictment of the entire venture industry I think there is an argument to be had there. But picking on OTP is just a lazy rhetorical device. They made a similar investment to other funds in the industry they are in, that was a reasonable size of their portfolio in an investment style known to be risky.
an enormous amount of our economy is based off gaslighting and manipulation
they can blur the line between honest mistake, gross negligence, nepotism, corruption, and thievery, enough that people who will applaud beating up a shoplifter for taking 20 dollars of junk will say "oh but they have nice suits and went to Stanford" about someone who gave 75 million dollars for magic beans.
