Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, June 17, 1994 TAG: 9407130047
SECTION: BUSINESS PAGE: A11 EDITION: METRO
SOURCE: Associated Press
DATELINE: RICHMOND LENGTH: Medium
Most of the losses - $240 million - were tied to shrinkage in the equity and bond markets that is driving down larger institutional portfolios, officials said.
``This is not a first,'' acting director Erwin H. Will Jr. said.
Losses attributed to derivatives - financial arrangements whose values derive from changes in underlying variables, such as interest rates and stock markets - accounted for more than one-fourth of the $306 million dip for the first quarter of 1994.
The VRS in recent years has moved into more sophisticated investments to maintain growth in the fund, now the 33rd largest in the nation.
But some of the VRS' new overseers - the board of trustees was replaced in a sweeping reform of the state employees' pension fund - view derivatives as an unnecessarily risky vestige of the predecessor board.
The loss from derivatives could have been larger but was held to $66 million because of a decision by the trustees to dismantle a deal that had a price tag of $157 million.
Under reform legislation signed into law by Gov. George Allen, the VRS will have greater latitude on investment decisions. The new board is moving toward establishing its investment goals.
In response to criticism by General Assembly investigators, the VRS also is trying to reduce the ranks of its outside managers. It recently dropped five debt and equity managers who were handling about $1.3 billion.
The retirement fund has continued tightening its control over another controversial investment - RF&P Corp., the railroad-turned-real-estate development company.
Installed as chairman of the recently purged RF&P board of directors was Charles B. Walker, a VRS trustee who questioned the state's acquisition of the firm during an earlier term on the pension system board.
He succeeds Irving Joel, a Richmond businessman who resigned from the board.
by CNB