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Council rejects proposal to allow cryptocurrency in pension-stabilization trust, 3–2
Summary
After an extended debate over risk, fiduciary duty and economic development PR, the City Council voted 3–2 against revising the pension-stabilization trust investment policy to permit cryptocurrency exchange-traded funds with a proposed 2.5% cap.
The El Segundo City Council considered a staff-and-citizen proposal to amend the city’s 115 pension-stabilization trust Investment Policy Statement to permit investment in cryptocurrency exchange-traded funds (ETFs). The motion, which would have authorized a maximum exposure of 2.5% of the pension-stabilization trust to cryptocurrency ETFs and required trustee approval, failed on a 3–2 vote.
Staff and advisors provided background on the trust: the 115 pension stabilization account was seeded with an initial city contribution and now holds roughly $6.2 million, the product of periodic contributions and investment gains. City staff said the IPS does not currently list cryptocurrency as an allowable asset, and any change would require approval by the independent trustee (AltaTrust).
Proponents, including former elected treasurer Matt Robinson and a member of the public who positioned the idea as an economic-development signal, argued the allocation would be small and could generate PR value for a city seeking to be seen as technology-friendly. Robinson said a modest exposure could serve as a forward-looking modernization and a portfolio diversifier.
Opponents, including the mayor pro tem and other council members, stressed fiduciary duty under Government Code sections 53600 et seq., which require a trustee to act prudently and prioritize safeguarding principal and liquidity. They emphasized the high volatility and regulatory uncertainty surrounding cryptocurrency and warned of public backlash to using pension-related assets for speculative investments.
Shuster Advisory Group—El Segundo’s investment advisor for the 115 trust—told the council the firm does not place Bitcoin or crypto in managed discretionary portfolios; the firm said it will transact such assets on behalf of clients in a non-discretionary account if directed but would not recommend placing crypto in the city’s managed fiduciary portfolio. Shuster said trustee approval would be required if the council directed a change to the IPS.
City staff had proposed a 2.5% maximum allocation to the trust if the council chose to allow the asset class, which staff said equated to roughly $160,000 of the trust’s current balance; when viewed across the city’s broader investable asset base, staff noted, the figure would be proportionally smaller.
After multiple council members expressed concern about fiduciary duties and the optics of tying municipal pension funds to cryptocurrency, the motion to amend the IPS was defeated 3–2. Council asked staff and advisors to monitor regulatory and institutional developments and report back if the trustee or market conditions change.
Ending: The council’s vote leaves the IPS unchanged; staff will retain the current asset-class framework and continue to consult the trustee and advisory manager on investment policy.
