This content is from: Portfolio

New Jersey Votes to Slash Hedge Fund Allocation — Again

The state's investment board previously decreased its allocation to these funds in 2016.

New Jersey’s state investment council has decided to cut its allocation to hedge fund strategies in half yet again.  

Bloomberg reported Wednesday that the state’s pension plan has approved a measure that would reduce the exposure to hedge funds from six percent to three percent. A spokesperson for the investment office did not immediately respond to a phone call and email seeking comment.  

The state previously cut its exposure to hedge fund strategies from 12.5 percent to six percent  back in 2016, the investment office's 2018 annual report showed. At the time, labor-nominated council members led the effort to decrease exposure to the funds, the report stated.  

The latest push to decrease allocations came from the state’s Democratic governor, Phil Murphy, who called for the state’s pension funds to divest from both hedge funds and private equity because of their high fees and “middling results,” his campaign website showed.   

“The governor supports the objective, independent investment process followed by the State Investment Council and applauds its decision to reduce New Jersey’s reliance on hedge fund investments,” a spokesperson for the governor said via email Thursday.  

During the fiscal year 2018, the pension fund redeemed $1.2 billion from its hedge fund allocations to align with its allocation goals, the 2018 annual report showed.  

[II Deep Dive: New Jersey’s Investment Chief Chris McDonough Resigns

As of April 30, the pension plan’s investments in hedge funds were valued at about $4.3 billion, an investment report from the state showed. According to that report, the hedge fund investments New Jersey is still holding onto include assets held by Davidson Kempner Capital Management, King Street Capital, and Chatham Asset Management, among other firms.  

It’s unclear at present how long the further divestment will take. When it previously reduced its hedge fund investments, the pension fund wound down those investments over an extended period of time, the annual report stated.  

Related Content