The Virginia Retirement System (VRS) achieved an 11.8% return on its investment portfolio in fiscal year 2013, ending the year with $58.3 billion in assets, the VRS reports.
The news is not exactly unexpected. The the stock market reached record highs over the past year, allowing the VRS to generate an 18.6% return on its public equity portfolio, more than making up for the dismal -0.1% return on its fixed-income investments. But the overall return, which is significantly higher than the 7% annual rate of return assumed for the purposes of calculating future liabilities, is welcome nonetheless. In theory, 5% more juice from the portfolio reduces the need for future cash contributions from state and local governments by some $2.5 billion.
That’s serious moolah.
Of course, there’s a caveat. There is enormous variability in year-to-year returns, and there is no guarantee that the VRS will replicate that performance in future years. Indeed, one could make a case that fixed-income investments like bonds have nowhere to go but down, unless the Fed continues its Quantitative Easing pretty much forever, and that the stock market is cruising for a correction.
Still, there is precious little good news of any kind in the world. If this is the only bone we get, we’re happy to flop down on the floor and chew on it a while.
— JAB
