Virginia Retirement System Returns 6.1% in Fiscal 2023

The commonwealth’s pension fund asset value grew to $105 billion.



The Virginia Retirement System’s investment portfolio returned 6.1% net of fees for the fiscal year ending June 30, raising its asset value to approximately $105 billion from $101.2 billion one year earlier. The performance fell just shy of its benchmark’s return of 6.3% and the 6.75% assumed rate of return.

The pension fund reported a three-year return of 10.8%, a five-year return of 8.0% and a 10-year return of 8.2%. Those compare with its benchmark’s returns of 7.9%, 6.3% and 7.1%, respectively, over the same periods. Over the longer term, the VRS reported 15-year returns of 6.0%, 20-year returns of 7.7% and 25-year returns of 7.3%, although benchmark returns for those periods were not available.

Public equities was the top-performing asset class for the pension fund during fiscal 2023, returning 15.6%, but it missed its benchmark’s 16.7% return. It was followed by multi-asset public strategies, which returned 7.7% and beat its benchmark by 30 basis points. The VRS’ credit strategies program returned 5.7%, well off its benchmark’s 9.2% return, while private investment partnerships returned 1.9%, beating its benchmark’s 1.1% return.

Real assets returned 1.7%, while its benchmark lost 0.7%, and fixed-income investments returned 0.5%, beating its benchmark, which lost 0.7%. Private equity was the only asset class that did not produce returns during the fiscal year, losing 0.7%; however, it trounced its benchmark, which lost 7.3%.

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“Our disciplined strategy of maximizing returns while minimizing risk has resulted in a pattern of outperformance for the long term, exceeding the assumed rate of return for the three-, five- and 10-year periods,” CIO Andrew Junkin said in a release. “Against a backdrop of widely varying economic predictions, VRS investment professionals strategically managed the diversified portfolio to minimize losses and achieve a positive return with a lower level of risk.”

As of June 30, the VRS’ asset allocation was 33.0% public equity, up from 30.5% in 2022; 18.2% private equity, down from 18.8%; 13.6% credit strategies, down from 14.3%; 13.5% real assets, down from 14.9%; 12.8% fixed income, down from 13.1%; 3.5% multi-asset public strategies, down from 3.6%; 2.6% private investment partnerships, unchanged from last year; 1.9% cash, up from 1.0%, and 0.9% exposure management portfolio, down from 1.3%.

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Prudential Closes $1 Billion PRT Deal With PSEG

The utility company is looking for greater financial predictability and approved the partial annuitization of their pension plan.



Prudential announced today that they have closed a deal to transfer almost $1 billion in pension liabilities from PSEG, a utilities provider, for about 2,000 participants. The retirees had been employed by PSEG Power and Other, a segment of PSEG. Prudential will assume responsibility for payments beginning in 2023. 

The agreements is a “retiree only lift-out”, meaning that the plan is not terminated and only liabilities tied to these retirees are being annuitized, according to a spokesperson for Prudential.

The deal comes during a year that is being predicted as potentially record-breaking for PRT transactions, according to analysis last week by LIMRA. Sales already set a record in the second quarter at $16.2 billion in transactions, a 31% increase from 2022, according to the industry association.  

A statement from PSEG explained that this current “lift-out” is part of a general business strategy that is designed to “further increase the predictability of financial results.” PSEG also recently sold off wind farm assets as part of this strategy to reduce “large project risk.” 

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“Protecting future benefits for our retirees is something we take very seriously, and an independent fiduciary was retained for their expertise and process to select a financially strong and leading group annuity provider,” Sheila Rostiac, senior vice president and chief HR officer at PSEG, said in a statement. “We are working with Prudential to ensure a seamless transition for retirees.” 

The SECURE 2.0 Act of 2022 requires the Department of Labor to report to Congress its recommended changes to Interpretative Bulletin 95-1 by the end of 2023. IB 95-1 is an interpretative document that describes the criteria pension fiduciaries must use when selecting an annuity provider. 

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