New Jersey Division of Investment, which handles investments for the New Jersey Pension Fund, Trenton, reduced the amount of bonuses paid to external alternatives managers by about 3.5% for the fiscal year ended June 30.
The bonuses, known as performance allocations, totaled $239.8 million for the recently completed fiscal year vs. $248.6 million for the year-earlier period. These bonuses are paid to management firms that exceed certain goals.
The bonuses were paid to managers of hedge funds, private equity, real estate funds, real asset funds, opportunistic fund and global diversified credit funds, said an annual report by the State Investment Council, which formulates policies for the division. The report is posted on the division's website.
The lower bonuses were "primarily due to a reduction in performance allocation for private equity that was offset by increases in performance allocations for real estate and real assets," the report said.
Also for the fiscal year ended June 30, total fees and expenses for the six alternatives investment categories were $330.9 million vs. $334 million for the year-earlier period. The lower fees and expenses were "driven primarily by a reduction in hedge fund fees," the report said.
This group of alternative investments lost an aggregate of $487.2 million, producing a net return of -2.82% for the fiscal year ended June 30. The New Jersey Pension Fund's net return was 1.2% for that fiscal year, falling below the benchmark of 4.1%. For the six months ended Dec. 31, preliminary data show a net return of 14.8% for the pension fund, exceeding the benchmark of 13.9%.
By comparison, alternative investments contributed a profit of $1.48 billion and a net return of 6.1% for the fiscal year ended June 30, 2019. The New Jersey Pension Fund had a net return of 6.27% for the year-earlier period.
Among alternatives, the only categories showing a positive net return for the fiscal year ended June 30 were opportunistic investments (8.2%) and private equity (0.2%). The worst-performing categories were real assets (-19.4%) and real estate (-3.4%).
Prior to the fiscal year ended June 30, the group of alternative investments "had been a significant driver of favorable returns for the total pension fund over longer term periods," the council's report said.
For the fiscal year ended June 30, the $22.1 billion in alternative investments accounted for 28.8% of total pension fund assets of $76.7 billion.