N.J. Division of Investment seeks high-yield bond advisers

New Jersey Division of Investment, which oversees the $71.8 billion state pension system, plans to issue an RFP for high-yield fixed-income and municipal bond advisers, confirmed William Quinn, a spokesman for the state Treasury Department.

A timetable for posting or completing the RFP hasn't been established.

The division's contracts with four high-yield fixed-income advisers expire in June 2013. The division is part of the state Treasury.

They were hired in 2008 to provide “non-discretionary investment advice” on portfolios with an aggregate market value of about $1 billion, according to a memo prepared by Timothy Walsh, division director, presented Oct. 11 to the State Investment Council, which formulates investment policies for the division and consults with Mr. Walsh.

The current high-yield bond adviser firms are Logan Circle Partners, Pacific Investment Management Co., Post Advisory Group and Nomura Securities. Mr. Quinn said they are allowed to rebid.

Anticipating the expiring contracts, the division plans to issue an RFP for high-yield fixed-income advisers and “expand the mandate from U.S.-only to allow both U.S. and non-U.S.” high-yield fixed-income securities, according to the memo.

The division wants to hire as many as eight advisers, said the memo, noting that the division expects to increase the pension system's exposure to high-yield securities. The target allocation for the fiscal year that started July 1 is 6% of all state pension fund assets. The target for the recently completed fiscal year was 2.5% of total assets, although the actual year-end allocation was 3.5%, the memo said.

As part of the proposed RFP, the division plans to hire as many as two advisers “to provide nondiscretionary advice on state and municipal general obligations and public authority revenue obligations,” the memo said.

Mr. Quinn said these firms would be the pension system's first municipal bond advisers. Municipal bonds currently represent about 2% of pension fund assets.

Separately, Robert Grady on Oct. 11 was re-elected chairman of the State Investment Council for a one-year term, confirmed Mr. Quinn.

Mr. Grady was first elected as council chairman in September 2010, replacing Orin Kramer, who had been chairman since 2002. Mr. Grady is managing director of Cheyenne Capital, a private equity firm.