New Jersey to Boost Cap on Alts to 38%; Negotiating Fee Cut

(October 22, 2010) — New Jersey State Investment Council voted to support regulations that would permit the state’s pension system to bolster its investment in alternatives.

While the $70.2 billion pension system’s current statutory limit for alternatives is 28%, the new regulations would reportedly allow as much as 38% of its portfolio into the asset class. Currently, the system has allocated 23.95% to domestic equity, 19.77% to international equity, and 31.49% to domestic fixed income. Furthermore, the New Jersey council is expected to add $50 million to two hedge funds — King Street Capital and Davidson Kempner Institutional Partners Fund — as well as $100 million to an oil and gas exploration and production fund, the Sheridan Production Partners II.

In other news, New Jersey’s pension fund for teachers and government workers is negotiating fee cuts as the state seeks to up its target for alternative investments to 38%, Bloomberg reported, citing a testimony at a State Investment Council meeting on Thursday. Similarly, on Wednesday, California Public Employees’ Retirement System (CalPERS), the biggest public pension fund in the US, negotiated a cut in fees from CIM Group LP, a Los Angeles based investment manager.

According to a recent report presented to the State Investment Council and obtained by Bloomberg, New Jersey’s pension fund for retired teachers and government workers gained 8.3% for the fiscal first quarter ended September 30. For September, the fund realized investment gains of 4.2%. US equities returned 9.4%, international stocks gained 9.3%, and domestic fixed income was down 0.14%, according to the report.