It’s been nearly four years since New Jersey’s pension system terminated an investment with Angelo, Gordon & Co, an investment firm where Mary Pat Christie, wife of Gov. Chris Christie, is managing director.
But as the International Business Times reports, the pension system is still paying fees to the firm because certain portions of the investment are particularly illiquid – the pension system has yet to be able to exit them fully.
Some say the situation is a troubling conflict of interest. Others say it is emblematic of one of the criticisms of alternative investments: pension funds can’t exit whenever they like.
From the International Business Times:
When the New Jersey pension system terminated a $150 million investment in a fund called Angelo, Gordon & Co. in 2011, that did not close the books on the deal. In the three years since state officials ordered the withdrawal of that state money, New Jersey taxpayers have forked over hundreds of thousands of dollars in fees to the firm. As those fees kept flowing, Angelo Gordon made a prominent hire: Mary Pat Christie, wife of Gov. Chris Christie, who joined the company in 2012 as a managing director and now earns $475,000 annually, according to the governor’s most recent tax return.
The disclosure that New Jersey taxpayers have been paying substantial fees to a firm that employs the governor’s spouse — years after state officials said the investment was terminated — emerged in documents released by the Christie administration to International Business Times through a public records request.
New Jersey’s original $150 million investment in Angelo Gordon was initiated in 2006, under Gov. Jon Corzine, a Democrat. By October 2011, state records show, the investment — which was in a multi-strategy hedge fund called AG Garden Partners — had generated just a 5.5 percent return in six years. That month, New Jersey investment officials sent a letter telling the firm to “withdraw, as of December 31, 2011, one hundred percent of the [state’s] capital account.” Yet the state subsequently paid Angelo Gordon management fees of more than $255,000 in 2012, more than $132,000 in 2013 and more than $82,000 for the first three quarters of 2014.
[New Jersey Treasury Department] Spokesman Santarelli told IBTimes that while “New Jersey redeemed its interest in the AG fund and ended its investment [in 2011] we still have a remaining market value of $6.6 million invested related to illiquid investments, which have been winding down slowly over the last few years.”
New Jersey State Investment Council chairman Thomas Byrne gave his reaction to the IB Times:
“This is standard; we are not doing something different here that is outside the norms of the financial industry and the world of private partnerships,” he said.
“We are paying fees on whatever money is left in there, so it could be an asset that could be increasing in value,” Byrne said. “So why should the manager work for free if they are hamstrung in the short term but they have made an investment that makes sense? A contract is a contract and presumably both sides are working in good faith to get out of it, and a deal is a deal.”
Read the entire IB Times report here.
Photo by Timothy Appnel via Flickr CC License