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GERS Alternative Investment Ratio Raised

Passed in 2005, Act 6794, revised the Virgin Islands Code and authorized the Board to invest in Alternative Investments. Under Title 3, VIC, Chapter 27, Section 717, subsection (b), (19) Alternative Investments, Trustees gained the authority to administer an investment portfolio that allowed no more than 5 percent of the total amount of the available investment portfolio in alternative investments. However, according to Aaron Gray’s Oct. 28 Daily News story ‘Omnibus’ sports items get mixed reception’, the Omnibus Authorization Act of 2011 unceremoniously included authority for the Government Employees’ Retirement System (GERS) to double the amount of alternative investments the GERS system can make.

The new law now permits up to 10 percent. For years AARP has monitored the Board of Trustee meetings on behalf of our government retiree members. At no time during these public meetings was any mention made of approaching the legislature to double the alternative investment amount.

Without a doubt, the last couple of years have proven to be highly volatile for investors leaving pension plans everywhere scrambling for ways to generate income to sustain retiree annuities. In the VI, our system has had an even more difficult time because not only has GERS not been able to meet their 8 percent benchmark for returns on investments, but the growing $1.4 billion unfunded liability has forced them to regularly liquidate investments to pay monthly annuities.

Because of this delicate situation, the GERS’ Board of Trustees has had to work even harder to find additional ways to generate income for the system. Perhaps that is why they employed the tactic to seek authority to invest a greater portion of the investment portfolio locally only 5 years after receiving the original authority to do so.

During the legislative hearings prior to Act 6794’s enactment, retirees were up in arms and gravely concerned about the entire section referring to alternative investments. The mere mention of the term “hedge fund” terrorized some annuitants and the potential for real estate purchases didn’t garner much support either. The fact that the ceiling has been doubled without input from members of GERS is disturbing.

GERS Trustees have been quick to point out that the Havensite Mall purchase proved to be a prudent investment, and has provided significant financial stability during the rough investment periods. Since then GERS has made several other real estate purchases. Most notably is the property in St. Thomas which GERS Administrator Austin Nibbs revealed two weeks ago during a Townhall meeting with Water and Power Authority (WAPA) employees. In this meeting it was announced that GERS would be developing a hotel, a conference center, a 105-room assisted living complex, and 125 private homes for GERS members. Until that Townhall meeting, no information on this development had been offered at the public Board meetings.

The secretive nature of the development plans coupled with insertion of the authorization doubling alternative investments into the massive Omnibus Bill, has caused speculation as to why these matters are being addressed in executive rather than public Board sessions. GERS retirees would like to know why this practice is happening. AARP Virgin Islands will continue to monitor these meetings. If you have questions or would like further information, you should contact GERS via email for further information. Let the Trustees know how you feel about this important development.