Pension fund also reports -0.87% fiscal-year return
New Jersey Division of Investment on Wednesday allocated up to $450 million to three alternatives funds and announced it would redeem investments in 11 hedge funds as part of the division’s restructuring of the asset allocation of the $72.2 billion New Jersey Pension Fund, Trenton.
The division redeemed $1.78 billion from 11 hedge funds as part of a new strategy approved in August to reduce the hedge fund allocation to 6% from 12.5%. But it also invested up to $200 million in Aspect Core Diversified Program, a hedge fund managed by Aspect Capital specializing in global currency, equity indexes, fixed income and commodity markets.
The division also committed up to $150 million to Benefit Street Partners Special Situations Fund, a private debt fund focusing on stressed and distressed investments primarily in North America, and up to $100 million to Warburg Pincus China Private Equity Fund, which focuses on health care, logistics, e-commerce and technology businesses as well as businesses focused on environmental improvements and protections.
The hedge fund redemptions are part of the move by the State Investment Council, which develops policies governing investments made for the pension fund by the division of investment, to cut the target allocation and reduce the number of hedge fund investments to fewer than 25 from 40.
The division’s report to the council on Wednesday on hedge funds cited the following full redemptions: Canyon Balanced Fund ($171 million) and Canyon Value Realization Fund ($129 million), managed by Canyon Partners; Arden Alternative Advisers ($287 million), managed by Aberdeen Asset Management; Brevan Howard Fund ($252 million); ValueAct Capital Partners II ($241 million); Centerbridge Credit Partners ($217 million), managed by Centerbridge Partners; OZ Domestic Partners II ($190 million), managed by Och-Ziff Capital Management Group; and Omega Overseas Partners Class-B ($62 million), managed by Omega Advisors.
The report also identified the following partial redemptions: AIMS/NJ Multi-Strategy Portfolio ($180 million), managed by Goldman Sachs Asset Management; Cevian Capital II ($27.2 million); and GSO Special Situations Fund ($25 million), managed by GSO Capital Partners.
The division also reported that the New Jersey Pension Fund returned -0.87% for its fiscal year ended June 30, compared to its benchmark of 0.23% and the annual assumed rate of return of 7.9%.
The best-performing asset classes were real estate, buyouts/venture capital, investment-grade credit and U.S. Treasuries. The worst-performing sectors were equity-oriented hedge funds, emerging markets equity, non-U.S. developed markets equity and commodities.
“The fund’s return ranked in the bottom quartile for the fiscal year among public plans with assets over $10 billion,” said the division of investment report.
Joseph Perone, a Treasury Department spokesman, wrote in an e-mail that the fiscal year ended June 30 “marked the first year in the last six” in which the pension fund underperformed its benchmark.
“The most recent fiscal year was a challenging one for most investors,” Mr. Perone added. “The fund continues to be ahead of its benchmarks for the trailing three-, five-, and 10-year periods” ended June 30.