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Virginia reports 28% loss on real estate investments

In the year to the end of June, Virginia Retirement System’s real estate portfolio returned -28.3% compared to a 19.8% benchmark. The pension has lost $12.2bn in value in 12 months.

Virginia Retirement System has lost 28.3 percent on its real estate investments in the past 12 months, the $42.9 billion public pension confirmed today.

Real estate was the worst performing asset class for the plan sponsor, underperforming its benchmark by 8.5 percent. In the fiscal year ending June, VRS’ overall portfolio declined in value by $12.2 billion.

VRS said it had suffered “significant losses” in value in the past 12 months, but said despite the “economic outlook remain[ing] challenging”, the pension’s portfolio was “well-positioned” for the long term.

Virginia has 7.2 percent of its portfolio allocated to private real estate, and 1.3 percent to public real estate. It also an 8.4 percent allocation to private equity. As of the end of June, the private real estate portfolio was worth $3.1 billion, the public property portfolio worth $600 million and the private equity assets worth $3.6 billion.

In the fiscal year 2009 ending June, private equity returned -21.8 percent, compared to -28 percent for public equity and -7.7 percent for credit strategies. The only positive performer was fixed income returning 4.6 percent in the year to 30 June. Overall the fund lost 21.1 percent of its value.

However, Virginia’s performance during the first half of 2009 offers some glimmer of hope for the US pension. Fixed income, public equity and credit strategies made positive returns of 4.5 percent, 10.1 percent and 16.8 percent respectively.

Only real estate and private equity lost value in the calendar year to date, according to Virginia, which represents 600,000 teachers and government employees.

Real estate lost 17 percent in the first six months of 2009, while private equity reported -16.4 percent returns for the same period. Overall in the first half of 2009, VRS recorded 2.8 percent returns.