RICHMOND -- The $31.5 billion Virginia Retirement System is considering letting other state agencies invest in its portfolios.
Nancy Everett, deputy chief investment officer, said the pension fund probably could invest the money at a lower cost than the state agencies now pay.
"It doesn't make some sense unless we can save the state some money," she said.
VRS officials are studying whether they could "unitize" the pension fund's portfolios, allowing other state organizations to purchase units in the portfolios, much the same way investors buy shares in mutual fund portfolios.
VRS' returns -- 20.6% for the year ended Dec. 31 -- probably would be attractive to the state agencies. The fund ranked in the 31st percentile of the Trust Universe Comparison Service, she said.
The move to unitize is unprecedented. But in other states, including Florida, Wisconsin and West Virginia, state investment boards manage more than just pension assets. It also is not unusual for state pension systems to manage a cashlike option for municipalities within the state.
Moreover, many state and city defined benefit systems also offer their investment skills to 457 plans, helping them choose mutual fund companies and administrators, for example.
But in Virginia, the VRS is charged with managing only pension assets. New legislation could be needed to broaden its mandate.
The state pension fund would need to charge the other state agencies investment management fees, but officials have not yet determined how to calculate those fees.
A law passed last year already requires VRS to manage some nonpension money -- $23 million in assets for the Commonwealth Health Research Fund, a state-funded organization. But VRS officials aren't required to invest the assets, only to hire and fire outside money managers.
In an unrelated development, VRS terminated two domestic equity managers and brought the money in-house.
It terminated Ardsley Partners, Greenwich, Conn., which had run a $250 million midcap growth portfolio. The money was reallocated to international equities and domestic fixed income, part of a rebalancing from U.S. equities, said Robert F. Hill Jr., director of equity.
VRS also terminated Delaware Investment Advisers, Philadelphia, running a $300 million large-cap value portfolio, because its investment philosophy no longer fit in with VRS' investment strategy. Instead, VRS is considering asking Delaware to run a concentrated portfolio across different strategies, Mr. Hill said.
Meanwhile, VRS officials also are planning to hike the fund's exposure to long-short investing whenever opportunities present themselves.
VRS has $1.8 billion -- or about 12% of its U.S. equity portfolio -- invested in such strategies and would like to increase that amount to 20%, Mr. Hill said.