The New Jersey Pension Fund, Trenton, reduced the amount of management fees and expenses paid for alternative investments in the fiscal year ended June 30 vs. the previous fiscal year.
It also trimmed bonuses — called performance allocations — paid to alternative asset managers that exceeded certain goals.
The pension fund paid $334 million to external managers of private equity, real estate, real asset, opportunistic, global diversified credit and hedge funds for the fiscal year ended June 30, said an annual report by the State Investment Council.
The pension fund paid $363.1 million for the fiscal year ended June 30, 2018, according to the report, posted on the state Treasury Department's website.
The council provides investing guidelines to the New Jersey Division of Investment, the state Treasury Department unit that handles New Jersey Pension Fund Investments.
The lower management fees were "driven primarily by a decrease in private equity, global diversified credit and hedge fund fees and expenses," the council report said. "The reduction in hedge fund fees is consistent with the council's decision to reduce the overall allocation to hedge funds."
The pension fund's payment for performance allocations dropped to $248.6 million from $267.9 million between the two fiscal years.
Most of these payments went to private equity managers — $155.9 million, or 63%.
The division of investment "is committed to negotiating preferential terms that incentivize strong performance, provide the division with meaningful governance rights, and ensure alignment of interests," the council's report said.
Alternative investments accounted for $24 billion of the pension fund's $80 billion in assets as of June 30, 2019.
The aggregate return, net of fees, for alternative investments was 6.07% for the fiscal year. Private equity funds had the highest return (9.06%); opportunistic funds were the worst performer (-3.9%).
For the fiscal year ended June 30, 2018, the aggregate return of alternative investments, net of fees, was 11.88%.
