Legal and Policy Basis for the Program

Section 11 of Article X of the Constitution of Virginia requires that the funds of the retirement system remain separate and independent trust funds segregated from all other funds of the Commonwealth and invested and administered solely in the interests of the members and beneficiaries of the retirement system.

The Code of Virginia (§51.1-124.30) requires that VRS diversify the system's investments to minimize the risk of large losses. As a result, assets are allocated among different types of investments or asset classes in order to maximize the investment return while controlling risk within an acceptable range.

The VRS Board of Trustees has approved an asset allocation policy that provides for a mix of asset classes that are intended to maximize the investment return while controlling risk to an acceptable level. These asset classes are:

• domestic and non-US public equity,
• fixed income (bonds) and
• alternative investments (private equity, real estate, and high yield credit and convertibles).

Program Objectives

Three tiers of performance objectives or benchmarks have been established for the VRS investment portfolio. Two benchmarks have been established for the fund's entire investment portfolio:

• Intermediate-Term Benchmark: Represents the fund's asset allocation plan.
• Long-Term Benchmark: Defines the risk profile of the fund and was developed during the asset allocation process. Consists of a blend of U.S. stocks and bonds.

Individual performance benchmarks have also been established for each of the fund's individual investment programs.