New Jersey State Investment Council, Trenton, voted Thursday to support regulations that would allow the state’s $70.2 billion pension system to put as much as 38% of its assets into alternative investments, up from the current statutory limit of 28%.
Once the regulations are prepared, they will be submitted for public comment for 60 days, said Andrew Pratt, a spokesman for the New Jersey Division of Investment, which oversees seven public retirement systems. The council will then vote on a final set of rules.
As of Sept. 30, investments in alternatives — which the division describes as private equity, direct real estate and absolute return — accounted for 14.26% of total state pension fund assets, according to documents presented by the division at the council meeting.
The largest portions of the pension portfolio are domestic equity (23.95%), international equity (19.77%) and domestic fixed income (31.49%).
The state’s pension funds posted an estimated 8.27% gain during the three months ended Sept. 30, which was just below the benchmark estimated return of 8.41% established by the State Investment Council, according to a report by the Division of Investment.
For September, the pension fund’s estimated return was up 4.19% vs. the council’s estimated benchmark return of 4.13%, the report said.
“The world markets could be characterized for September with two words – ‘nervous ebullience,’” said the report by Timothy Walsh, the division’s director.
At its Thursday meeting, the investment council also approved a recommendation from the division to endorse at $100 million investment in an oil and gas exploration and production fund, Sheridan Production Partners II.
In August 2007, New Jersey invested $50 million in Sheridan Production Partners I, “which has performed extremely well in comparison to similar funds raised in that vintage,” said a report by the Division of Investment. “Therefore, we believe that the Sheridan team has the breadth and depth of experience to execute this strategy again.”
The investment council also voted to approve additional $50 million commitments to two hedge funds, King Street Capital and Davidson Kempner Institutional Partners Fund.
The division invested $100 million in King Street in March 2007, and it invested $100 million in Davidson Kempner in December 2006, according to a report by the division.