Ontario Teachers’ statement on FTX
In light of continuing developments in relation to FTX, we wanted to provide additional context and transparency around our investment.
In October 2021, Ontario Teachers’ invested US$75 million in FTX International and its US entity (FTX.US). In January 2022, we made a follow-on investment of US$20 million in FTX.US. These investments were made through our Teachers’ Venture Growth (TVG) platform, alongside a number of global investors, to gain small-scale exposure to an emerging area in the financial technology sector. Our investment represented less than 0.05% of our total net assets and equated to ownership of 0.4% and 0.5% of FTX International and FTX.US, respectively.
TVG was established in 2019 to invest in emerging technology companies raising late-stage venture and growth capital. Investments are structured to provide Ontario Teachers’ with returns commensurate with the risk undertaken and to provide proprietary insights that inform investing elsewhere across the Plan. Naturally, not all of the investments in this early-stage asset class perform to expectations, however, since inception, TVG has delivered solidly on intended objectives.
Ontario Teachers’ investment departments, including TVG, conduct robust due diligence on all private investments. Supported by experienced, external consultants with financial, commercial, and other relevant expertise, and often in consultation with investment partners, due diligence is designed to use company-provided materials and other research to assess the risk related to a specific investment. In FTX’s case, our underwriting process included working closely with third-party advisors and FTX to explore commercial, regulatory, tax, financial, technical and other matters. Recognizing that no due diligence process can uncover all risks especially in the context of an emerging technology business, the investment in FTX was sized moderately in relation to TVG and the overall portfolio of the Plan.
Recent reports suggest potential fraud conducted at FTX which is deeply concerning for all parties. We fully support the efforts of regulators and others to review the risks and causes of failure for this business.
Our strategy aims to diversify investments across asset classes, geography, time horizons and economic outcomes, to mitigate risk and enhance returns. This supports the Plan’s ability to perform well in a variety of investment environments and mitigates the adverse impact of any one investment loss on the fund overall. The investment size in FTX reflects our approach to diversification.
We will be writing down our investment in FTX to zero at our year end. The financial loss from this investment will have limited impact on the Plan, given its size relative to our total net assets and our strong financial position. However, we are disappointed with the outcome of this investment, take all losses seriously and will use this experience to further strengthen our approach.
Updated November 17, 2022