The New Jersey Division of Investment, which manages investments for the $71.5 billion New Jersey Pension Fund, Trenton, approved investments of up to $1.6 billion in alternatives, the division reported Wednesday.
The division said it would invest up to $1 billion in a hedge fund-of-funds separate account managed by BlackRock, according to a division report submitted Wednesday to the New Jersey State Investment Council, which governs investment policies at the division.
The initial investment would be up to $500 million, and the division would report to the investment council prior to committing additional funds, the report said. BlackRock “will identify a diverse range of hedge fund strategies” with an emphasis on risk mitigation, said the report. “The underlying hedge fund investments will primarily be structured via managed accounts or fund-of-one structures.”
The announcement comes on the same day the New Jersey State Investment Council approved cutting the overall hedge fund allocation in half.
The division has committed more than $1 billion to BlackRock in private equity transactions, the report said. “This hedge fund relationship will expand the mandate,” the report said. “It will allow for increased fee savings and greater ability to leverage BlackRock's resources and systems.”
The division also will invest up to $400 million in diversified credit managed by Owl Rock Capital Partners, and “up to $200 million for related overage and co-investment opportunities through one or more separate account vehicles,” said a separate division report to the investment council.
Owl Rock “will primarily target floating-rate, senior-secured, first-lien positions,” and it also will invest in subordinated loans, mezzanine loans, equity-related securities and warrants, the report said.
The report also said the division will receive an unspecified ownership interest in Owl Rock. This “will allow the division to participate in economics related to the U.S. middle-market lending business in exchange for paying certain management expenses,” the report said.
Separately, the division reported on Wednesday that the New Jersey Pension Fund had a return on investment of -1.46% for the first 11 months of the fiscal year that ended June 30. The benchmark was -0.35%. The assumed rate of return is 7.9%. Full fiscal year returns have not yet been released.