Virginia pensions lifts PE, RE investment cap to 10%

Virginia Retirement System increases real estate and private equity allocations by three percentage points, saying it wants more flexibility in its portfolio.

The $58 billion (€38 billion) Virginia retirement plan, Virginia Retirement System, has approved plans to allow its real estate and private equity allocations to increase to 10 percent from 7 percent, the pension told PERE.

The Richmond–based scheme, which represents Virginia's public sector employees, approved the increase in the maximum investment cap at a recent meeting in an effort to improve flexibility, spokeswoman Jeanne Chenault said.

Real estate investments saw a 23.8 percent return for the fund up to June 2007 – outperforming its benchmark by 460 basis points. Chief Investment Officer Charles Grant, however, warned future gains would not be so strong. “We recognize that fiscal 2007 was an unusually good year and not likely to be repeated very often,” he said in an investment statement posted on the plan website.

Estimating overall fund returns of seven to eight percent in the long-term, the statement added: “Our expectation is that returns will be more moderate over time and ultimately reflect the growth and earnings potential of the economy.”

Two-thirds of Virginia’s real estate investments are in private assets mainly office developments and retail and largely in the Pacific and northeast US region.

Private equity meanwhile returned 33 percent for the fund to March 2007. Investments were focused overwhelmingly in buyouts (54 percent), followed by venture capital on 16 percent. As of June 2007, the value of the private equity program was approximately $3.6 billion, the website said.