2013 U.S. Investment Management Awards — Small Public Plan

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Small Public Plan


Risk management isn’t new to Laurnz (Larry) Swartz, CIO of the $5.8 billion Fairfax County Retirement Systems. Since 2000, Swartz has overseen the implementation of a strategy that uses risk as the primary tool for constructing the portfolio rather than allocating money to traditional buckets such as small-cap equity and bonds. The plan, which still has a bit of a growth tilt, employs some futures to get cheap market, or beta, exposure, and then looks for actively managed funds to generate alpha, or returns above the benchmark. For every 1 percent of volatility that the fund is willing to take, Swartz wants 1 percent of return, balancing potential alpha with acceptable risk. Swartz, 64, who has been with the Virginia systems since 1997, says the strategy has improved the payoff for the active risks in the portfolio. “The approach is to get the best diversification we can of market risk,” he explains. “Then we use our active-risk bucket to go after products where the manager can generate alpha relative to the benchmark.” For the year ended December 31, 2012, returns for the Fairfax County Employees’ fund, the largest in the system, were 15.45 percent. Before becoming CIO in 2009, Swartz was executive director, overseeing investments and benefits administration. Swartz, who has a BA in economics from Yale University and an MBA from Rutgers University, held multiple posts at Prudential Financial before joining Fairfax County. — Julie Segal