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Our
History
The West Virginia Investment Management Board came into existence in the spring of 1997 after years of hard work modernizing the State’s investment management structure. This structural modernization was widely perceived as a necessary precursor to the passage of a constitutional referendum to allow investments in stocks. The risks in stocks were thought to be too great to be managed by anything but a modern, professional entity.
Although the West Virginia Investment Management Board’s predecessors, the West Virginia State Board of Investments and the West Virginia Trust Fund, Inc., brought about vast improvements, each had shortcomings. However, with the creation of the West Virginia Investment Management Board, the State achieved the ideal balance between control and independence that will allow efficient and prudent investment management of long-term assets well into the future.
The beginning of the modern era in investment management by the State goes back to the late ’70s with the consolidation of investment authority for the State’s defined benefit plans, employment security plans, and other assets into a newly created West Virginia State Board of Investments. One of the goals of that legislation was to achieve efficiencies that size brings by commingling like assets.
Significantly, this newly created West Virginia Board of Investments was staffed by the State Treasury and the board itself was made up of the state’s Governor, Treasurer, and Auditor.
Although a step in the right direction, the initial West Virginia State Board of Investments lacked proper or sufficient control features. After a few problems in the ’80s, principally involving its short-term pool, the Consolidated Fund, the board was expanded to seven members, adding four members from the private sector including an attorney experienced in financial matters and a Certified Public Accountant.
In the fall of 1990, the Legislature took a huge leap forward by creating a staff for the West Virginia State Board of Investments separate from the staff of the Treasury. This provided clear accountability to the Board of Investments—something that did not exist previously.
Other very important control features included: (1) a statutory requirement for an internal auditor, (2) an annual external audit by a nationally-recognized accounting firm, and (3) monthly reporting requirements to government leaders in accordance with GAAP (Generally Accepted Accounting Principles). This last feature dictated that all pools with a weighted average maturity in excess of 90 days must be marked-to-market (carried at market value), something that had not been done in the ’80s.
At the same time, the West Virginia State Board of Investments made its first tepid step towards a diversified portfolio to be invested in stocks domiciled in the United States. Although it made some initial stock purchases in 1993 (that were subsequently liquidated at a gain), the statute was challenged and the West Virginia Supreme Court ruled that investing in equities was unconstitutional.
Then, in 1996 in an ill-fated effort to satisfy the constitutional strictures, the Legislature carved out the pension and employment security funds with long time horizons and placed them in a trust to be managed by a new entity called the West Virginia Trust Fund, Inc. While the creation of the trust ultimately did not satisfy the constitutional concerns of the State Supreme Court, it did bring about three very important changes. The Legislature, demonstrating incredible managerial foresight, granted the West Virginia Trust Fund, Inc. control over its own budget. With the same impeccable foresight, the Legislature also imposed personal fiduciary liability on its board and staff. Of no less importance was the creation of representative roles for members of the retirement systems and employment security systems.
With the failure of the West Virginia Trust Fund, Inc., it and the West Virginia State Board of Investments were replaced, in 1997, by a new entity, the present day West Virginia Investment Management Board. The basic modernization process was complete. All of the improvements made in the West Virginia Board of Investments and the West Virginia Trust Fund, Inc. were incorporated into the new entity.
Finally, in 2005, the Legislature, for policy reasons, transferred the Consolidated Fund to a newly created West Virginia Board of Treasury Investments, chaired by the Treasurer. This was widely perceived as a policy move to ensure direct governmental oversight of state general and special revenue funds. The West Virginia Investment Management Board continues to manage the retirement funds, the employment security funds, and other assets with long time horizons.
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