New Jersey Lawmakers To Evaluate Performance of Pension System’s Alternatives Portfolio

A committee of New Jersey Senators is meeting today to evaluate the performance of the alternative investments in the state pension system’s portfolio.

It’s unclear what action the lawmakers might take if they disapprove of the alternative investments.

From NJ Spotlight:

It’s been roughly a decade since New Jersey decided to let private money managers play a bigger role in state pension-system investments, and now lawmakers want to take a close look at whether the policy shift has paid off for beneficiaries.

The Senate Legislative Oversight Committee will hold a hearing in Trenton tomorrow morning to both evaluate the performance of so-called alternative investments and to see whether those stakes in hedge funds and other nontraditional investments are worth the millions in fees and performance bonuses that fund managers have collected from the state in recent years.

State pension officials, meanwhile, have staunchly defended the alternative-investment strategy as a sound way to mitigate risk while maximizing returns. They also say the criticism has been based on several misconceptions.

[…]

But the hearing set for 10:30 a.m. tomorrow has been billed as more of a fact-finding mission. It was under former Democratic Gov. Jon Corzine — who had a long career on Wall Street before taking office in Trenton in 2006 — that the state shifted its investment strategy to focus more on alternative investments and the use of outside money managers.

“Today, $3 out of every $10 in our pension system is invested in hedge funds, private equity, real estate or other alternatives,” said Sen. Robert Gordon, who chairs the Senate Legislative Oversight Committee.

“It is time that we engage in an honest assessment of where New Jersey stands relative to other large pension systems and determine if these investments are truly worth the fees,” said Gordon (D-Bergen).

New Jersey’s pension system invests roughly 30 percent of its assets with private managers. Those managers have access to investments that aren’t available on normal stock markets, but they charge fees for their services.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons