The 300 Club has appointed Virginia Retirement System (VRS) CIO Ron Schmitz as its latest member. Schmitz oversees the $68bn VRS’s investment programme.
What did you want to be when you grew up?
When very young, I wanted desperately to be a baseball player when I grew up.
What was your favourite subject at school and why?
This one depends on my age. In my younger years, I liked history and this triggered a lifelong interest in reading biographies. Late in college, I took general business classes and always found the investment classes the most interesting. (Most of my classmates thought marketing and advertising were much more sexy, but I was a numbers geek.)
What was your first paid role?
I started out as an accountant and soon decided that, while I liked numbers, accounting wasn’t for me. With all due respect to accountants, I found it to be too boring and backward-looking.
What led you to a career in investment?
I enjoy investments as it marries the science of math and numbers with the art of looking into the future at possible or likely outcomes.
What are your priorities for this role?
First and foremost, I hope to continue to work with the dedicated and bright group of investors at VRS to produce better than benchmark returns for our members and beneficiaries. That is the bottom line. Beyond that, I hope that when I leave VRS there is a strong stable of successors to fill my role as well as all senior roles at the investment side of the organization. (Since I inherited a very strong staff, this part of my job is relatively easy. I just have to be reasonably thoughtful about filling key roles, as they come along, with team players dedicated to our mission.)
What is the biggest investment hurdle for institutional investors to overcome at present?
Unfortunately, I believe a golden age of investing has come and gone in the early and mid-stages of my career. The positive secular trends of demographics (baby boomers now aging) and the 30 year trend of lower interest rates and expanding access to credit are secular trends that have reversed themselves. I believe that the last 5 to 10 years of my career will be much more challenging than the first 25 to 30 years proved to be.
If you could make one change to investment legislation/regulation, what would it be?
I may be in the minority here, but I think the FASB and GASB rules that, in part, require the use of current interest rates to discount liabilities is mis-guided. I understand the “going concern” rationale behind those rules. But I think the unintended (or at least unfortunate) consequences of the rules are that too many organizations invest for accounting reasons (avoid unpleasant financial statement impacts) and do not invest for economic reasons (high risk-adjusted returns). This regulation-induced shift in focus leads to non-optimal portfolios when looked at it from the perspective of having investment returns mitigate long term pension costs.
What do you like to do in your spare time?
I used to like to play golf, but like many before me I have decided that golf is a nice walk ruined. I guess now my most sought after activity is to spend time at our weekend house. Drinking coffee in the morning (and wine in the afternoon) while looking at the lake in front of me and the mountains in the distance is a pleasant thing to do. And, I do so as often as I can.
