The New Jersey Division of Investment, which manages investments for the $79.1 billion New Jersey Pension Fund, Trenton, will redeem full interest in two hedge funds of funds — Archipelago Partners and Arden Garden State NJ Fund.
The division announced its decision Wednesday at a meeting of the State Investment Council, which governs investment policies for the division.
As of May 31, the pension fund had $522.1 million invested in the Arden Asset Management portfolio and $110.4 million with Archipelago, according to a division report presented to council members.
“As the division’s hedge fund program continued to diversify and evolve over time, the need for a multimanager platform became limited, and the division has redeemed partial interests over time,” the report said in reference to Archipelago. “Given that the division has and continues to identify specialists within equity-oriented strategies with limited beta exposures, the Division has submitted its notice of full redemption.”
As for Arden, the report said the pension fund was redeeming its interest because “Arden has experienced a high level of turnover among its investment professionals.” The report noted “the individuals primarily responsible for constructing and managing the division’s portfolio have recently left the firm,” leading to the division’s “concerns about the stability of the firm going forward.”
The report noted that $450 million of redemption proceeds will be invested in three hedge funds approved on Wednesday — Stone Milliner Macro Fund, Laurion Capital and Laurion Capital Global Markets Fund.
Separately, a division report said the pension fund’s return on investment was 4.58% for the 11 months ended May 31, beating the benchmark of 3.84% but below the 12-month assumed rate of return of 7.9%. Fiscal year results will be published in September.
Also, the division has “taken a number of steps” regarding the pension fund’s investment in JLL Partners Fund V, Christopher Santarelli, a Treasury Department spokesman, wrote in an email.
In 2005, the division invested $50 million in JLL Partners Fund V, a middle-market buyout fund that acquired Ace Cash Express, a payday lender, in 2006. Payday lending is prohibited in New Jersey. State Investment Council members asked the division in May to develop a plan for dealing with this investment.
The division is “performing an evaluation of the future expected value of our interest in the fund,” Mr. Santarelli wrote, and it is “exploring a number of different potential options for disposing of NJ’s interest in the fund or in Ace Cash Express.”
