Bacon's Rebellion

Think the VRS Would Handle My 401(k), Too?

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by

James A. Bacon
in

The Virginia Retirement System earned a 12 percent return on investment in fiscal 2005, bringing its total assets to $44 billion. Each of the fund’s asset classes had a positive return. Real estate led the way at 24.4 percent return, closely followed by private equity at 21.5 percent. The portfolio performance represents a big improvement over the 3.0 percent annualized return over the past five years.

According to a VRS press release, a total payment of $1.1 million will be provided to 24 investment professionals, according to their contribution to fund performance. The payment represents a small fraction of the value added to the fund resulting from the staff’s investment decisions, noted Chairman Paul W. Timmreck. Of that amount, $292,000 will be placed in a deferred compensation account for senior investment professionals and used as a retention tool.

I hope no one begrudges the rewarding of VRS employees. State employees should be rewarded for superior performance.

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  1. Will Vehrs Avatar
    Will Vehrs

    It’ll be interesting to see the compensation in a year when the portfolio returns 3%, or has a negative return.

  2. Not Larry Sabato Avatar
    Not Larry Sabato

    God Bless the VRS.

  3. Steve Haner Avatar
    Steve Haner

    VRS is managing my wife’s teacher pension money and I still have some 457 plan accounts over there and I think paying those folks a substantial performance bonus is just fine. What is that — a average of $40K or so? Their compensation will remain far behind comparable salaries and bonuses in the private sector. Keep in mind that the better they do, the less general fund and local tax money needs to be plowed into VRS in the form of employer contributions. It is one of the best managed systems in the US — don’t screw with it.

    And Will, if the average return was 3 percent positive in a bad down market, is that not a good result? I doubt there has been a recent year that BRS didn’t beat the market in most categories.

    The bad news is that the legislature will use those returns as an excuse to retroactively cut employer contributions, “capture” the cash and spend it somewhere else. Watch them.

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