NJ Refuses to Cut Back Pension Hedge Fund Investments

The New Jersey State Investment Council refused to adopt a plan that would cut back on hedge fund investments by over eight percent. The notion, which was pushed by public labor leaders, was split by a tie vote on whether or not to adopt the new investment proportions. Members of the board threatened to resign if the vote went one way or the other.

NJ.com has more on the topic:

Public labor leaders who have been pressuring the state to reduce its controversial pension investments in hedge funds on Wednesday failed in their attempt to force a drastic cutback in such alternative investments.

The State Investment Council that manages the public pension fund investments split 7-7 on a move to slash the stake in hedge funds from about 12 percent of the total investment portfolio to less than 4 percent.

The board is comprised of public employee union and gubernatorial appointees, and all but one labor representative voted for the rollback.

So contentious was the action that Guy Haselmann, managing director at OpenDoor Trading and a member of the investment council, threatened to resign if the council slashed these investments, which he said would violate his responsibility to the fund.

New Jersey’s public pension fund supports the retirement of hundreds of thousands of retired and active workers and has been on the decline, falling from $79 billion at the end of June to $70.9 billion at the end of March.

The investments have lost 2.14 percent in the current fiscal year that began in June and returned 0.88 percent this calendar year.

Alternative investments, and hedge funds specifically, have been a matter of disagreement between union leaders who say the assets don’t pull their weight or warrant the high fees charged by managers, and investment representatives, who argue they provide a safety net in market downturns.

The fund paid out $400 million in management fees and $328.4 million in performance bonuses for its alternative investments, which make up about a third of the total portfolio.

Some board members believe that the current notion is not enough of a reduction for hedge fund investments, and that a more drastic cut is needed to make a difference.