New Jersey State Investment Council, Trenton, on Thursday endorsed an asset allocation plan that would increase its exposure to alternative investments to just more than a quarter of the $72.9 billion system’s assets.
The council endorsed the state Division of Investment’s recommendation that the aggregate alternative target be raised to 25.5% for the year starting July 1, up from a 19.2% target. The actual allocation as of March 31 was 17.1%.
The four broad alternative asset categories are hedge funds, private equity, real estate and real assets, which includes commodities.
Among changes in the new asset allocation plan, U.S. large-cap equities will be cut to 21.5% from 24.5%; international developed markets equities would drop to 15% from 16.7%; cash and U.S. Treasuries, 4.5% from 7%; and TIPS, 3.5% from 4.9%.
The allocation plan represents a “prudent and tactical shift” in allocation, said Robert Grady, council chairman. He said the proposed increase in alternatives is part of the system’s strategy to achieve greater portfolio diversity.
The goal of the new asset allocation plan is better risk-adjusted returns, said Timothy Walsh, chief investment officer of the pension system.