New Virginia Retirement CIO Andrew Jankin takes on ‘difficult task’ in new role

Starting a new job is not an easy task for anyone, but especially for Andrew H. Jankin, the new CIO for Virginia’s pension system, who joined VRS after the plan had shown strong results in two years.

In FY 2021, the $96.8 billion defined benefit fund recorded a return of 27.5%, and in FY 2022, the fund reported a net return of 0.6%, well above the benchmark of -5 .5% and exceeds most of its peers.

“As a CIO, coming in and doing those two years is quite a challenge,” said Mr. Jankin, who joined VRS in September and officially took over from former CIO Ronald D. Schmitz after he retired in January.

Mr. Jankin, formerly Chief Information Officer of the Rhode Island Investment Commission in Providence, said he joined VRS because “ensuring the safe and secure retirement of nearly 782,000 members and beneficiaries makes a real difference.”

When he arrived, the portfolio was already in great shape, Mr. Jankin said, adding, “I didn’t have to come in and be an agent of change.”

According to Mr. Jankin, the plan includes about $61 billion in alternative investments, which mainly consist of private equity, real assets and lending strategies. According to the September 30 investment report, the system allocates 19% to private equity, 16% to real assets, and 15.2% to lending strategies.

VRS also has a 2.7% commitment to private investment partnerships — a combination of private equity, private debt and private real assets — that is also included in the alternatives, Mr. Jankin said. He added that the last $10 billion or so is in long/short stock managers.

As to why the plan was so successful, Mr. Jankin attributed its success to a high-quality private equity portfolio, a “slightly defensive bias in our public equity portfolio that paid off in a down year” and a “value skew.” throughout the portfolio of public shares.

As of September 30, the plan had committed $23.1 billion, or 23.9% of its portfolio, to public equity.

“The team was very, very thoughtful about the strategic objectives of the portfolio investment with our long-term target asset allocation, but also at the execution level was very attentive to short-term trends,” Mr. Jankin. said.

In a follow-up email, Mr Jankin said: “We carefully monitor and manage liquidity for the plan and do not run into liquidity issues. We have already seen some write-downs in our private asset classes, but they were mostly in line with expectations given the public market returns.”

While he worries about inflation, Mr Jankin said it’s not a new issue and “the real asset portfolio does most of the hard work” in terms of inflation protection, which consists mostly of real estate as well as infrastructure. forest land and agricultural land.

Asked about his views on ESG, Mr Jankin said the fund is reviewing all relevant information about specific investments, “some of which will not appear on the balance sheet or income statement.”

For example, in a real estate portfolio, a plan may consider LEED-certified buildings but not solely focus on their energy efficiency. For them, criteria such as energy efficiency represent another investment risk.

“We are really focused on fair risk and return,” said Mr. Jankin. “But risk sometimes carries different labels.”

Mr Jankin noted that one of the risks that many are weighing right now is the possibility of a recession.

“If a recession occurs, it will probably be the most anticipated recession in the history of all recessions,” Mr. Jankin said, although it is not yet clear what the outcome will be.

That’s why VRS remains somewhat defensive in its public equity portfolio, he said. In a follow-up email, Mr Jankin said the plan remains defensive with “the impact of low volatility stock strategies and generally (keeping) our beta below 1.0.”

Mr. Yunkin noted that “geopolitical event risk is a risk that no investor can escape,” citing Russia’s invasion of Ukraine last year as an example.

However, he also said that “there is a risk of rethinking things” when it comes to risk management.

“We just focused on our long-term goal of the profits needed to keep the pension plan healthy and on its path to providing benefits to all beneficiaries,” Mr Jankin said.

As of June 30, the pension plan is funded at 81.8% actuarial value and 83.4% market value. Its estimated rate of return is 6.75%.

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