Va. Retiree Officials Propose Internal Management Frontier

With the help of the General Assembly and local support, the Virginia Retirement System (VRS) has backed plans to embark on a new asset management journey to be called Project Frontier, a internal money management subsidiary.

Project Frontier, an effort to leverage a portion of the VRS’ internal investment expertise into asset management for other government funds, asked the General Assembly last month to assist in drafting a bill for the measure.

On Oct. 17, the VRS Board of Trustees voted 7-1 in favor of having system staff look for a legislative sponsor to propose the measure that will allow for the Richmond-based retirement agency to manage outside assets that could potentially add some additional revenue to the pot through its “expanding internal investment staff,” The Richmond-Times Dispatch reported over the weekend.

VRS officials have said that the retirement system only wants the ability to consider Project Frontier as a potential venture; they note that this will not distract the retirement system from managing the more than $58 billion retirement fund and its liabilities, the local paper said.  

Also, the VRS Board will govern the new subsidiary company, but notes in the drafted legislation that the Board, staff at the retirement system are not liable for any losses or damages, the Richmond-Times Dispatch reported.

According to the memo obtained by the local news outlet, former CIO Charles W. Grant, whom now serves as managing director of internal asset management, said in a presentation last month to trustees that the internal management company “represents a very good investment opportunity for VRS.”

“What we do know is the investment management business is a very profitable business, and this venture could provide VRS an opportunity to get on the other side of the table and potentially earn meaningful supplemental fee income for the fund, with very little downside,” Grant said in the memo.

It was listed that project has uncovered $40 billion in Virginia public funds that could potentially be included in the proposed management company. He explains that all monies will be included in investment strategies currently utilized by the VRS.

The local media account noted that Joint Legislative Audit and Review Commission (JLARC) is also reviewing the proposal.

At press time, emails sent to VRS spokesperson Jeanne Chenault and JLARC Director Hal Greer seeking comment on the proposed measure were not immediately returned. JLARC's next meeting is slated for Nov. 12, according to its website.

According to IMMP records, the Board also heard on Oct. 17 that more than $600 million was approved in new credit and real assets strategies investments. The firms included BlueBay Asset Management, a London-based wholly owned subsidiary of the Royal Bank of Canada, EIG Global Energy Partners, which has U.S. offices in Washington, D.C. and Houston, and global firms Pantheon and Lone Star Funds.

As of June 30, the 600,000-member plan, which reported an 11.8% return for the 2013 fiscal year, had about $25.2 billion in public equity, $10.4 billion in fixed-income, $10.6 billion in credit, $5 billion in private equity and $5.5 billion in real assets, the statement listed.