TRENTON, N.J. — The New Jersey Department of Investment last week took its first step toward outside management of nearly $9 billion of the state's $66.4 billion pension fund.
On Nov. 8, the state's investment council, chaired by attorney Orin Kramer, approved a recommendation to begin an alternative investment program, targeting up to 13% of the fund's assets, or a total of about $8.6 billion, in three classes: real estate, private equity and absolute-return strategies or hedge funds.
The fund's current allocation, all of it internally managed, is 50% domestic equities, 23.7% domestic fixed income, 16.5% international equities, 5% cash, 3.5% international fixed income and 1.3% mortgages.
"New Jersey is the only seriously large pool of capital in the United States which is entirely internally managed and which is utterly devoid of alternatives," said Mr. Kramer, a partner at Kramer Spellman LP, a New York-based hedge fund. "If you asked ‘why are we doing this,' the why is because all the theoretical evidence and all the empirical evidence is that one is supposed to do this," he said in an interview.
State Treasurer John McCormac said the 11-member council is now beginning to set policies and procedures — specific details on asset classes and allocations as well as guidelines to ensure manager searches are handled "with appropriate due diligence."