New Jersey coffers open to alternatives

One of the biggest public pension funds in the US has approved a 13 percent allocation to private equity, real estate and hedge funds, opening up a source of capital to alternative investment funds that may be worth $10 billion over five years.

New Jersey’s state investment council has approved a 13 percent allocation alternative investments, marking a major new institutional player in the private equity market.

The New Jersey Department of the Treasury’s division of investment manages some $76 billion (€59 billion) entirely in stocks and bonds. A 13 percent allocation to private equity, real estate and hedge funds would amount to roughly $10 billion. The plan, voted on yesterday, would put that capital to work over a five to seven year time frame.

Seven of New Jersey’s 11-person investment council approved the plan, with two voting against it and two absent.

According to a report in the New York Times, two labour unions are suing the Treasury department to prevent it from hiring outside investment managers to take on the mandate. The suits argue that the state lacks the authority to hire outside money managers. A source close to the pension says the investment council members in favour of the new allocation are confident of the legal basis for hiring outside managers.

Earlier this year, New Jersey hired Cesar Baez, a former principal at Hicks Muse Tate & Furst, to help the state build out a private equity portfolio. The pension has also retained consulting firm Strategic Investment Solutions as an advisor to its private equity investment programme, which has yet to make its first capital commitment.

In an interview with the Times, state treasurer John McCormac said: “We’re not meeting our fiduciary responsibility by having an undiversified portfolio.”

Last month, nearby New York City’s municipal pension plans received approval to commit as much as $4 billion to private equity over the next five years.