New Jersey Division of Investment, Trenton, plans to search in fiscal year 2014 for more high-yield, emerging markets, private equity and real estate managers, and possibly a hedge funds-of-funds manager focused on small global macro and managed futures managers.
The additional managers will be needed to fulfill a new asset allocation adopted at the Thursday meeting of the New Jersey State Investment Council, which approves investment policies for the $75.3 billion New Jersey Pension Fund.
The investment division, which manages the state pension fund, will implement an asset allocation at the start of the new fiscal year on July 1 that combines all public equity into a single global portfolio; adds non-U.S. securities to the inflation-linked portfolio; splits the current real estate portfolio into real estate equity and real estate debt and moves the real estate debt into the income portfolio; and reduces allocations to hedge funds and commodities/real assets.
An RFP will be issued to expand the pool of high-yield managers, possibly including non-U.S. firms, and a pending RFP seeking emerging markets equity managers will be expanded to include international small-cap equities and frontier markets, according to a report to the council from investment consultant Hewitt EnnisKnupp. Timetables and other specifics about the searches were not available.
According to Hewitt EnnisKnupp's report, the New Jersey state pension fund's new broad asset class targets are:
- Risk mitigation (global macro and managed futures hedge funds) decreases to 3.5% from 4%;
- Liquidity (cash equivalents, Treasury bonds and inflation-linked bonds) decreases to 4.5% from 6.5%;
- Income (credit, high-yield, credit hedge funds and debt-related real estate and private equity), rises slightly to 26.3% from 26%;
- Real returns (commodities, real assets and real estate equity) falls to 6% from 9.5%; and
- Global growth (U.S. and non-U.S. equity, equity hedge funds, private equity and venture capital) rises to 59.7% from 54%.
In specific subasset classes, the target allocation to hedge funds drops to 11% from 12.5%; private equity increases to 10.5% from 7.7%; real estate equity remains at 5.5%; and commodities/real assets drops to 2.5% from 4%.