THE VIRGINIAN-PILOT  
              Copyright (c) 1996, Landmark Communications, Inc.

DATE: Saturday, June 8, 1996                TAG: 9606080500
SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 
SOURCE: BY TOM SHEAN, STAFF WRITER 
DATELINE: NORFOLK                           LENGTH:   43 lines

CONSULTANTS TELSS VRS TO WATCH ITS EXPENSES RETIREMENT SYSTEM'S RETURNS ARE GOOD, HE SAYS, BUT COSTS ARE HIGHER THAN AVERAGE.

Despite achieving a respectable return on its investments last year, the Virginia Retirement System should look more closely at the cost of managing its assets, a pension-fund consultant told the VRS board Friday.

VRS had a healthy 26.4 percent return on its investments last year, but its investment costs were higher than the average for several pension funds of similar size, said Keith P. Ambachtsheer, a Toronto-based consultant hired to analyze the pension fund.

That's partly because the VRS relies more heavily than other funds on outside managers, Ambachtsheer said. In addition, the retirement system has invested a higher percentage of its assets in real estate and other investments that are more expensive to manage.

The VRS, with $21.7 billion of assets, handles pensions and other retirement benefits for 262,000 state and municipal employees in Virginia and 81,000 retirees.

Since the installation of a new board in 1994, the VRS has changed several investment practices and reduced the number of outside investment managers from 88 to 65.

The benefit of these changes is likely to show up in VRS's financial results for 1996, said Ambachtsheer, who specializes in measuring pension funds' costs against their returns.

In his report to the VRS board, Ambachtsheer compared the Virginia pension fund's investment costs against 15 other pension funds, including those of AT&T Corp., BellSouth Corp., Washington State Investment Board, and Los Angeles County Employees Retirement Association.

There was no indication that pension funds paying more for investment-management services achieved better returns than those funds with lower costs, Ambachtsheer said.

On Friday, the VRS board completed three days of meetings with its investment advisory committee and real estate advisory committee.

KEYWORDS: VIRGINIA RETIREMENT SYSTEM VRS by CNB