Virginia Pension Fund Moves Into Hedge Funds

June 24, 2003 ( - Looking for alternative investment strategies to reverse three years of declines, the Virginia Retirement System (VRS) has announced plans to invest $1 billion in hedge funds.

The $35-billion pension plan, which previously had no money allocated to hedge funds, said it plans to set aside 3% of its assets for hedge-fund investments as part of an asset allocation shakeup.   No information on VRS’ previous asset allocation was immediately available, but the money earmarked for hedge funds appears to have come at the expense of the pension fund’s equity allocation, according to a Dow Jones report.

Previously, the pension fund had allocated approximately 70% of its assets to domestic and international stocks.   However, the nation’s 39th largest pension plan will also allocate 46% of its portfolio to domestic equities, 22% to fixed income, 7% to international equities, 7% to private equity and 5% to real estate.

The move reflects a growing acceptance of hedge funds among public pension plans. Last week the $138 billion California Public Employees Retirement Plan (CalPERS) decided to increase its allocation to hedge funds to as much as $3.2 billion from $1 billion (See  CalPERS Moves To Increase Hedge Fund Investments ).   Additionally, the Massachusetts Pension Reserves Investment Management Board (PRIM) approved a plan earlier this month to make its first investment in hedge funds, allocating 5% of its $28-billion portfolio (See  PRIM OKs Hedge Fund Foray ).