New Jersey Division of Investment, Trenton, which manages investment for the $76.8 billion New Jersey Pension Fund, has adjusted its target allocations to reduce the overall risk in the pension fund portfolio by, among other things, raising the cash allocation and reducing equity exposure.
The revised allocation strategy for the fiscal year ending June 30, 2014, was presented to, and approved by, the State Investment Council on Monday. The council provides investment advice to the division, which is a unit of the state Treasury Department.
Although the target allocations will change, the new allocations are still within the long-term target ranges.
Among the highlights, the division:
- Will raise the target cash allocation to 6% from the previous target of 1%. The allocation as of Jan. 27 was 5.62%. “The revised asset allocation increases target cash level to approximately one-year worth of net benefit payment outflows plus an additional cushion to fund capital calls for private equity and real estate,” the division’s allocation document said.
- Said it had raised more than $3.2 billion in cash since the September meeting of the investment council by selling $1.1 billion in U.S. equity, $725 million in international developed markets equity, $250 million in emerging markets equity, $875 million in investment-grade fixed-income securities and $250 million in high-yield bonds.
- Will raise the target hedge fund allocation to 4.5% from the previous target of 3.5%. The current allocation is 3.17%.
- Will cut the target allocation in the broad income category to 24.2% from the previous target of 26.3%. The current allocation is 23.14% for a category that includes investment-grade credit, high-yield fixed income, credit-oriented hedge funds, debt-related private equity and debt-related mortgages.
- Will reduce several allocations in the broad global growth category. The target for the U.S. equities subcategory will drop to 25.9% from 26.5%. The current allocation is 27.33%. The target for emerging markets equity will be cut to 6.5% from 8%. The actual allocation is 6.79%. The target for buyouts/venture capital will fall to 7% from 8.5%. The current allocation is 7.15%.
Also, the pension fund returned 9.38% on its investments for the six months ended Dec. 31. The customized benchmark was 9.01%. The calendar-year return of 14.6% exceeded the benchmark of 12.43%.