13% Net Return on 2012 Virginia Retirement System

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July 9 (Bloomberg) -- William and Mary School of Business Assistant Dean Deborah Hewitt discusses Virginia's retirement system with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)

We know that the virginia retirement system has achieved a 13% net return on its investment portfolio last year.

How does the team to it?

There is a lot of focus at the vrs on the asset allocation and strategic allocation among the various asset categories.

I have to give credit to the board to spend a great deal of time focusing on that, as they should.

The investment committee that i serve on provides input to them.

They take a long-term approach and set the asset allocation, and to their credit as well, gives the staff flexibility to maneuver strategically and tactically within those allocations.

I think is a combination of those factors that that has, over time, allow their performance to be so good.

We know that your specialty is emerging markets.

In the past, you have said there are three components to managing those regions.

What are they?

The first two will be no surprise to anyone.

The federal reserve policy, u.s. fiscal policy, and the third one is china.

While that is probably not a great surprise to most people either, i think what is different about the way i perceived that is, china is now the third leg of the school that you have to look at in every aspect, not just -- their growth forecasts have been cut but a couple percent, that would be missing the point entirely.

We have a new paradigm here.

Another country is equally important over this decade to the investment returns in most asset categories.

Equally important to what is going on in the united states.

Investors really need to look at how everyone of their asset categories is more to be influenced long-term buy what is going on in china, as much as we now do for what is going on at the u.s. federal lazar board and u.s. fiscal policy.

What does that mean as far as an investor is concerned.

-- concern?

Does that mean betting on certain parts of the chinese economy or certain companies here that do business in china?

I think it is a combination of all those and so much more, too.

There is a lot of work to be done to understand how this will play out.

It is a multiple year initiative that we all need to get started on.

I can give you a few of the ideas that we have so far.

For example, china now has $3.50 trillion in reserves.

They are held about 60% in the u.s. dollar.

They are not happy about holding such a large part of their reserves in u.s. treasury bonds.

They are looking to diversify, and they have done already.

The smithfield acquisition is just one of the more recent acquisition they have made internationally.

U.s. investors, you do not hear them talk about the fact that they own part of london heathrow airport, that they own and number of ports around the world.

What will happen it is china will diversify their holdings, and if we can identify the sectors that they are going to move into, and even to some extent, the country they are likely to move into, that will have to determine the investor returns in those categories.

You mentioned infrastructure.

That is basically a big theme no matter where in emerging market you are considering.

I want to ask you about brazil, with the olympics, world cup, an area of the country a lot of people are paying closer attention to.

We know that infrastructure is a challenge.

There are some people that say they cannot fly in or out.

Are there good opportunities right now in brazilian infrastructure?

I think there are, but i do not think brazil is the best place.

They are running flat out now trying to get ready for the world cup and olympics.

I was there a year ago and you are right.

The airport there in sao paulo is like a local airport here in the u.s. you cannot imagine how it will handle volume of traffic.

There is clearly a need there, but i do not think that is the best investment in infrastructure.

I am looking more at ports, and that is where the chinese are putting a great deal of money globally.

They are setting out for a port structure around the world that will be able to handle the new, larger carriers.

Those are in more strategic places around the world.

Out of curiosity, when you talk about foreign ownership of sports, are their security concerns, is this something that an investor needs to keep on his or her radar screen?

Here in the u.s., that is a concern.

We did see the port deal turned down a year ago by dubai, making an acquisition offer on u.s. ports.

I think that will be true for the chinese as well.

They have small stakes in the port of seattle and los angeles, but to see them have a very large stake here in the u.s. will be out of the question for now, but that is not true in other countries.

Look at africa.

They have big stakes in nigeria because of the oil.

They are looking at some other south african ports due to the commodities.

In other countries, there is such a need for that capital.

Here in the u.s., we can take a different stance because become probably finance those upgrades ourselves.

Not always the case abroad.

This text has been automatically generated. It may not be 100% accurate.


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