Virginia Retirement System, Richmond, returned a net 7.5% in its fiscal year ended June 30, with assets hitting a record $78.6 billion, the pension fund reported Wednesday.
Chief Investment Officer Ronald D. Schmitz said in a statement that the portfolio exceeded its 7% assumed rate of return due to strong performance in several sectors, especially private assets. However, the return trailed the 7.7% benchmark return for the year.
"Longer-term performance generated by staff and its external partners continue to add value compared to passive benchmarks. Over time, this excess performance reduces the cost of providing benefits to public employees," Mr. Schmitz said.
Fund performance net of fees was 7.1% annualized over three years, 8.3% over five years and 6.1% over 10 years. VRS returned 12.1% in the previous fiscal year ended June 30, 2017, topping the 11.8% benchmark.
The strongest performer for the fiscal year, net of fees, was private equity at 15.8%, compared to a 16.6% benchmark, followed by public equity at 9.7% (10.9% benchmark); real assets at 9.5% (7.4%); the strategic opportunities program at 7% (8.8%); and credit strategies at 5.2% (3.7%). Fixed income returned -0.1%, below the 0.14% benchmark return.
VRS' strategic opportunities portfolio is used for strategies that would otherwise not fit in individual program mandates or benchmarks.
The pension fund's asset allocation as of June 30 was 40% public equity, 15.8% credit, 15.4% fixed income, 13.5% real assets, 10% private equity, 2.4% strategic opportunities and the rest in cash.
The portfolio included $31.4 billion in public equity, $12.4 billion in credit strategies, $12.1 billion in fixed income, $10.6 billion in real assets, $7.9 billion in private equity and $1.9 billion in strategic opportunities portfolio, as of June 30, 2018.