(November 11, 2013) – The Virginia Retirement System (VRS) has sought permission to manage assets held by other public and private institutional institutions as a third-party investor.
The trustees of the $55 billion VRS voted seven to one last month to allow the fund to seek legislative sponsors of a draft bill that would authorise it to attempt to generate extra revenue through this new resource, the Roanoke Times reported.
“Potentially, it represents a very good investment opportunity for VRS,” said Charles Grant, managing director of internal asset management at the retirement system as well as its former CIO, during a presentation to the board October 17, the newspaper reported.
By the end of June last year, the VRS already managed almost $13 billion—equating just under a quarter—of its own assets, through six US equity funds and one core bond fund, according to its latest annual report. The costs attributable to these funds reached just more than $19,000, which is equivalent to 6.3% of its overall expenditure on investment fees.
The fund has since expanded its internal team, the Roanoke Times said, to manage more than one-third of its own assets and had identified $40 billion of public funds within the state that could be targeted as part of this drive.
Grant said the move would only offer investment ideas that were already on VRS’ existing platform and that the system was focused purely on outcomes for members.
There have been some voices of consternation, however. The one “no” vote on the trustee board came from Edwin Burton III, who told the local paper: “If they want to go into the investment management business, they should go into it in a private way, and not use VRS as the vehicle.”
Republican Senator John Watkins added that he was concerned in case a local fund transferred assets to the new vehicle and “they lose their shirt”.
The move is not unprecedented. Barely a month ago, the Catholic Healthcare Investment Management Company (CHIMCO), a $26 billion health care fund, opened for business as an asset manager.
“Hospital revenues are dropping, and they’re looking for ways to diversify their income,” said CHIMCO CIO David Erickson. “We already had existing clients, and a number of organizations who wanted to join their assets in with us.”
The VRS also has a very well-established investment advisory committee, which includes industry hard-hitters such as Theodore Economou, CIO and CEO of the CERN Pension Fund, Joe Grills, former CIO of IBM Retirement Funds, and Donald Lindsey, CIO of George Washington University.
Related content: Profile of Ross Kasarda, Virginia Retirement System