By David G. Barry
The Virginia
Retirement System has terminated one of its high-yield bond managers and
approved commitments to two European-focused funds.
At VRS’ October Board of Trustees meeting, Chief Investment Officer Ronald
D. Schmitz said that the investment department at the end of September
terminated its $510 million commitment to PIMCO HY, a separate account within
its credit strategies program. In response to a question from a board member,
Schmitz said the decision was made because of both performance and a need to
rebalance the portfolio. Neither Schmitz nor VRS spelled out the performance of
the PIMCO account.
Schmitz said VRS committed $250 million to another credit strategy: Apollo
EPF IV. The fund from Apollo Global Management will target
asset-based investment opportunities in the European market. Apollo is an
existing relationship for VRS. At the end of August, credit strategies
accounted for $14.7 billion or 14.5% of VRS’ $101.6 billion fund. The policy
weight is 14%.
Additionally, VRS also allocated €100 million (US $98.5 million) to Antin
Infrastructure Partners V, which will invest in diversified infrastructure
deals in Europe as well as the United States. Antin also is an existing
relationship for VRS.
VRS has $15.2 billion, or 15% of the fund, in real assets. Its target is 14%.
Non-real estate assets account for 4.6% of the fund, slightly above the 4.5%
target.
Schmitz, who is retiring in January, also indicated that private equity returns
may be a “little bit better than expected.” He said he had been projecting that
those returns would be around negative 8% when the September 30 numbers were released
but is now thinking it might be closer to negative 4%.
At the end of August, private equity was valued at $19.2 billion and accounted
for 18.9% of the fund. VRS has a 16% target. Schmitz indicated that the fund
would need to eventually wind down some of its overexposure to private equity
should it seek to see opportunities in public equities and fixed income.
Andrew Junkin was hired over the summer to replace Schmitz. Junkin was
previously the CIO for the state of Rhode Island.