VRS reports investment gains, and one key loss

By: Michael Martz | Richmond Times-Dispatch
Published: September 01, 2010

The Virginia Retirement System fared well with market investments in the past year, but now the $47.7 billion pension system is about to lose its chief investment officer.

Charles W. Grant, who’s been the system’s chief investment officer for five years, said yesterday that he will not accept reappointment when his contract expires next August. The VRS Board of Trustees said it will immediately begin searching for a successor.

The job is critical to the retirement system, which depends on investment income for 70 percent of the revenue it needs to pay present and future pension obligations for about 600,000 public employees, retirees, and beneficiaries.

“It’s fair to say the last two to three years have been hard on [Grant] and the rest of the investment staff,” VRS Director Robert P. Schultze said yesterday.

The retirement system lost about $15.4 billion of its value in two years because of the recession-driven meltdown in the stock market, but last year VRS investments produced a return of 14.1 percent and recovered about $4.8 billion in the value of its assets.

“We feel really good about what the investment department achieved,” Schultze said.

VRS investments fared better than most of the market benchmarks it uses to gauge performance. The system tripped only in private equity markets that are difficult to compare with public market investments, Schultze said.

Overall, the 14.1 percent return lagged below the one-year benchmark of 15.3 percent.

This summer, VRS lowered its long-range expectations for investment performance from 7.5 percent to 7 percent a year, which is used to estimate the system’s assets to pay all pension obligations over the lifetimes of covered employees.

Retirement system officials say the state will need to increase contribution rates for state employees and teachers in the next two-year budget, and probably the subsequent two-year budget, to make up for about $520 million in contributions that were foregone this year to balance the budget.