New Jersey Division of Investment, Trenton, can retain its $9.1 billion investment in hedge fund strategies, but external managers cannot make investment decisions for the division, according to a state appeals court ruling.
We have nine external managers, including five for emerging markets and four in high-yield debt. We are currently conferring with legal counsel on the impact of the ruling and what legal option should be taken, said Thomas Bell, spokesman for the division, which oversees $77.7 billion in state pension assets.
The Appellate Division of the Superior Court of New Jersey made the ruling Aug. 22 in a case filed by the Communications Workers of America and the New Jersey Education Association after the division started investing in hedge funds in 2005.
All three parties the division, CWA and NJEA have to decide whether to take the case to the states Supreme Court to resolve the issue of whether hedge fund strategies should be managed directly by the Division of Investment, which employs about 60 internal asset managers. Alternatively, the division could seek to get New Jersey lawmakers to pass legislation to allow for outside managers.
Our concern is that our members pensions would not be subjected to risky investments that will endanger the future of the pension system. We are reviewing the court decision to see what the impact is on both of those issues, said CWA spokesman Robert Master.
NJEA is disappointed that the court will allow the state to pursue riskier investments with the state pension fund, said NJEA spokeswoman Christy Kanaby. NJEA is pleased, however, that the court held that outside contractors could not be hired by the state to manage these funds.