New Jersey Pension Fund returns 4.16%, surpasses benchmark by 123 basis points

New Jersey Pension Fund, Trenton, returned a net 4.16% for the fiscal year ended June 30, exceeding the pension fund's benchmark of 2.93%.

The return on investment was below the $79 billion pension fund's assumed rate of return of 7.9%.

The results, which are unaudited, were presented Wednesday at a meeting of the State Investment Council by the New Jersey Division of Investment, which manages pension fund investments. The council governs investment policies for the division, which is a unit of the state Treasury Department.

This was the fifth consecutive year that the pension fund had outperformed its benchmark, said a report by the division of investment. The five-year annualized return was 10.49% vs. the benchmark of 9.2%.

For the year ended June 30, the report noted that of the seven investment categories that exceeded the 4.16% return, six were part of the pension fund's alternative investment program. Categories surpassing the overall return figure were buyouts/venture capital, real estate, debt-related private equity, real estate debt, equity-oriented hedge funds and global diversified credit. The other category outperforming the overall average was domestic equity.

The biggest gainer was buyouts/venture capital with a return of 18.75%. It represents 8.05% of the total pension fund allocation. Domestic equity posted a return of 7.48%. It is the largest component of the pension fund, representing 28.84% of total assets.

The worst-performing category was commodities, down 20.85%. It represents 1% of total pension assets.

The division report also said the pension fund's aggregate alternative investments outperformed the total pension fund for the most recent fiscal year — 7.89% vs. 4.16% — as well as on an annualized basis for the past five years — 10.87% vs. 10.49%.

On a risk adjusted basis, the annualized five-year volatility of the aggregate alternatives portfolio was 4.47% vs. 6.27% for the entire pension fund portfolio, the report said.