New York, Ohio pensions take hits on FTX exposure through Thoma Bravo growth fund

The collapse of cryptocurrency exchange FTX has affected at least two retirement systems via commitments made to Thoma Bravo’s first growth equity fund.

The FTX collapse has hit a few private equity and venture capital firms that participated in a financing round last year. Thoma Bravo, BlackRock, Insight Partners, Lightspeed Venture Partners and Sequoia are a few shops that invested in the company.

FTX filed for bankruptcy on November 11 after a flood of customer withdrawal requests the exchange was unable to meet. The collapse and private equity’s presence as a backer of the company has led to questions from limited partners about the level of due diligence performed before the firms made their investments.

“It was a FOMO-type of play,” said a family office LP. “It makes everyone look pretty bad.”

New York State Common Retirement Fund and State Teachers Retirement System of Ohio gained exposure to FTX through commitments to Thoma Bravo’s debut growth fund.

A New York State Common spokesperson confirmed the system wrote down a “very small” loss due to Thoma Bravo’s investment in FTX. STRS Ohio did not respond to questions seeking information about its exposure to FTX.

Thoma has been raising its first growth fund this year, targeting $2 billion. The strategy differs from other Thoma funds, in that the growth fund takes non-control stakes in growing businesses. The growth strategy is co-led by Thoma Bravo partners Ross Devor and Robert Sayle.

Sources previously told Buyouts Thoma Bravo could launch a second growth fund in 2023.

Thoma Bravo founder and managing partner Orlando Bravo heavily touted the crypto space in general – and especially FTX. He described FTX as the “most cutting-edge, sophisticated cryptocurrency exchange in the world” in a press release still available on its website.

Thoma Bravo declined to comment.

Missouri State Employees’ Retirement System earlier disclosed a $1.2 million markdown due to its exposure to FTX through a $125 million commitment to a BlackRock co-investment fund.

Total exposures to FTX are a fraction of the overall total sizes of pension systems. But this has caused LPs and advisers to question the quality of due diligence conducted by GPs when investing in or buying portfolio companies, particularly in the tech sector.