The New Jersey Division of Investment decided July 20 to seek managers for a variety of asset classes. The $79.4 billion fund will also boost its commitments to alternatives--the only area where it currently uses external managers. Over the past decade, New Jersey underperformed its peers due to a lack of diversification and these moves should improve returns.

The division will hire international equity managers to handle 5.2% of its assets, emerging market equity firms for 2.5%, small- and mid-cap managers for 2.8%, and high-yield firms to oversee a 3% maiden foray. In addition, the division will invest 1% in real estate investment trusts, 4% in commodities and 3% in Treasury inflation-protected securities. The fund hasn't set a time frame for the searches and will probably discuss inplementation in September, said Orin Kramer, chairman of the board.

The division approved a plan to invest $3.8 billion in hedge funds this year. New Jersey will make private equity commitments worth $1.9 billion. In addition, the fund will invest $75-125 million with emerging private equity managers to access their differentiated deal flow and because it is sometimes possible to negotiate an equity stake in emerging firms. Kramer intends to grow this program to $400 million over three years.