The New Jersey Division of Investment, which manages investments for the New Jersey Pension Fund, Trenton, paid $333 million in performance-related investment fees to external managers of alternative investments for the fiscal year ended June 30, down 21% from the $422 million paid in the fiscal year ended June 30, 2022.
These "performance-allocation" fees declined due to lower payments in all alternatives' categories — private equity, real estate, real assets, private credit and hedge funds — said a report issued Feb. 2 by the State Investment Council, which governs investing policies for the division of investment. (Opportunistic funds are now calculated as part of the private equity component.)
Overall management expenses for the fiscal year ended June 30 were $415 million, which included $365 million for alternatives plus $26 million for high-yield, small cap and emerging markets advisers. The rest was for division operations, consulting fees, legal fees and custodial bank fees.
These management expenses were 16.3% higher than the $357 million in total management expenses for the fiscal year ended June 30, 2022.
Total management expenses plus performance allocation fees were $749 million for the fiscal year ended June 30, down 4% from the fiscal year ended June 30, 2022.
Acknowledging the higher cost of alternative investments, the report noted that such investments "provide exposure to rapidly growing segments of the global market which are not investable in the public market." They provide "enhanced portfolio diversification and better downside risk," the report added.
Alternative investments accounted for $26.7 billion of the New Jersey Pension Fund's $93.2 billion in assets for the fiscal year ended June 30. For the prior fiscal year, alternatives accounted for $26.1 billion of the $87.5 billion in total assets.
By year-end 2023, the pension fund's total assets stood at $95.1 billion.
Among the alternative asset categories, net returns for the fiscal year ended June 30 were private credit (9%); private equity (5%); hedge funds (3.3%); real assets (2.7%); and real estate (-3.6%).
