Orin Kramer, chairman of the New Jersey State Investment Council, Trenton, said he wants more flexibility in the use of alternative investments such as hedge funds and private equity for the state's $67.6 billion public pension fund.
In an interview Friday, Mr. Kramer said the flexibility includes increasing the statutory limits now placed on various categories of alternative investments, but he hasn't offered a specific number or percentage.
“My recommendation (for raising the limits) will move forward so that we will consider it at the council meeting in September,” Mr. Kramer said.
Mr. Kramer discussed his ideas at a Thursday meeting of the council, which advises the New Jersey Division of Investment. The division, a unit of the state Treasury Department, oversees the New Jersey pension fund, which includes seven public retirement systems.
“There will be a debate” among the 13 council members, Andrew Pratt, communications director for the department, said in an interview.
Mr. Pratt said each of four strategies in the public pension fund's alternatives category — real estate, private equity, hedge funds and commodities/real assets — may account for no more than 7% of assets, for an aggregate of 28%.
The allocation to alternatives is well below the 28% aggregate ceiling, and the amount invested in each of the four categories is well below the 7% limit. According to the Division of Investment's website, alternative investments accounted for $10.1 billion, or 14.9% of the state pension fund's assets, as of May 28, the latest data available — 5.8% for private equity, 5.3% hedge funds, 2.5% real estate and 1.3% commodities.
Mr. Pratt said no one at Thursday's council meeting proposed raising the alternatives ceiling by a specific amount.
In an e-mail sent to council members prior to Thursday's meeting, Mr. Kramer noted “some of us discussed (at the end of 2009) the possibility of proposing a significant increase in the permissible regulatory limits for various forms of non-traditional investments, such as private equity, real estate, hedge funds and commodities.” The e-mail was provided to P&I Daily by Mr. Pratt.
“The theory was not that the council would necessarily wish to increase allocations in any of the relevant areas, but that relative to the most successful institutional investors —endowments, major corporate and public pension plans — our regulatory ceilings are low,” the e-mail said.
Mr. Kramer's e-mail pointed out that changing the fund's investment regulations would take nine months. “The objective in raising the ceilings would be to give future council members the flexibility to respond to what they might perceive to be market opportunities and risks on a timely basis,” he wrote.