NJ pension commits $500m to private equity funds as assets decline

The public pension looks to alternatives to drive returns, ploughing $825m into private equity, real estate and hedge funds.

The New Jersey Division of Investment, one of the largest public pension funds in the US, has experienced declining assets since April with assets under management totaling $77.7 billion (€49 billion) as of 30 June, down from $82.5 billion during the same period last year.

Of its total assets, $9.1 billion, or 11.7 percent, is made up of alternative investments, in excess of the 10.3 percent target allocation.

Alternative investments excluded, the portfolio was down 4.9 percent for the month ended 30 June and 3.1 percent for the year ended 30 June. Alternative investments are excluded due to lags in reporting.
The major driver of negative returns has been underexposure to commodities, according to the pension’s investment reports.

At the 17 July meeting of the State Investment Council, the pension was briefed on commitments to three private equity funds: $100 million to JPMorgan Venture Capital Institutional Investors IV; $100 million to Lehman Brothers Secondary Opportunities Fund II targeting, $1.5 billion; and $200 million to Lindsay Goldberg’s third private equity fund.

Following the presentation, investments go forward without an approval process.

In June, the pension moved forward with a $100 million commitment to Fairview Capstone II- NJDOI Emerging Manager Separate Account for commitments to small or “emerging” buyout and venture capital funds. Fairview intends to invest 50 to 60 percent in venture capital funds, 30 to 40 percent in buyout funds and zero to 15 percent to special situations.

Also in June the investment council reviewed commitments of $75 million to Princeton, New Jersey-based absolute return hedge fund Ironbound Capital Management, $150 million to Morgan Stanley’s seventh global real estate fund targeting $10 billion to $12 billion and $100 million to the $1.75 billion enhanced return real estate fund TA Associates IX.