THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, February 5, 1995 TAG: 9502050286
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 59 lines
With a different roster of trustees in place, the board of the Virginia Retirement System has been able to avoid the political infighting that plagued the state pension fund in the early 1990s.
But members of the VRS board may have to wrestle with another matter - the pension fund's investment performance.
For the fiscal year that ended June 30, the fund generated a dismal 1.7 percent return on its investments. That was down sharply from its 11.5 percent return for fiscal 1993 and its average return of 11.1 percent for the five years from 1989 through 1993.
Joseph L. Boyd, the newest member of the VRS's nine-member board, isn't daunted by the position's responsibilities. ``I always like a challenge,'' the dean of Norfolk State University's School of Business says.
The VRS, which covers state employees and some municipal employees in Virginia, wasn't the only pension fund to register poor investment results in 1994. Rising interest rates throughout the year drove down stock prices around the world and cut bond values, making 1994 a trying year for the industry.
A respectable investment performance is important to a pension fund because poor returns may require an employer to inject additional money into the fund to meet its obligations to retirees.
But state and municipal governments, buffeted by calls to cut taxes, could find it painful to make higher contributions to their employee pension funds. So the pressure on the VRS and other public-employee funds to squeeze out better investment results is likely to grow.
In their attempts to generate higher returns, pension funds already are shifting some assets away from U.S. stocks and bonds to less traditional investments like stocks and bonds in less developed ``emerging'' markets in Asia and Latin America.
In November, the VRS board voted to boost the percentage of its assets in international stocks to 20 percent from 8.1 percent. In addition, it increased the percentage devoted to real estate to 9 percent from 6.8 percent.
But the VRS board took a U-turn in August and halted the system's use of another less-traditional investment - managed futures - after three years of use.
These investments, a mix of stock, bond, currency and commodities futures, had been consistently profitable. However, hefty commissions on these futures produced lower returns than those available from conventional investments, the VRS said. ILLUSTRATION: Graphic
STAFF
VIRGINIA RETIREMENT SYSTEM
SOURCE: Virginia Retirement System
[For complete graphic, please see microfilm]
KEYWORDS: PROFILE BIOGRAPHY NORFOLK STATE UNIVERSITY
BUSINESS SCHOOL by CNB