RiskJuly 29, 2019

New Jersey Pension Fund Just Shy of 3.09% Benchmark

Real return is the $76 billion plan’s best-performing asset class.

Reported by Chris Butera

New Jersey’s $76 billion pension fund just missed its benchmark for the year ended May 31.

The plan returned 3.03% over the period, 6 basis points less than its 3.09% benchmark. It also missed its fiscal year-to-date and three-year benchmarks. For those periods, it has returned 2.06% and 8.17%, compared to their respective 2.87% and 8.37% targets.

During the one-year period, risk mitigation strategies returned 4.51%, liquidity returned 4%, income strategies—which holds credit and debt investments—returned 6.32%. Real return (the best performer) harvested 7.71%, and global growth, which holds stocks, some venture capital, and stockpicking hedge funds, returned 0.86%.

Of those five buckets, only real return and liquidity surpassed their one-year benchmarks, which were 5.11% and 3.67%, respectively.

Real return is also the New Jersey Pension Fund’s best-performing category, as it is the only one of the five areas that has beaten its benchmarks over the one month, year-to-date, fiscal year-to-date, and one-, three-, and five-year trials.

The report was released at the State Investment Council’s meeting. The group, which sets the policies for the division of investment, voted to change the US equity benchmark to follow the MSCI USA IMI Index from the S&P 1500 Index.

“From the division’s perspective, the new benchmark would better reflect the investment opportunity set, would be more consistent with a progression toward a global equity allocation, and would provide longer-term benefits in terms of risk analysis,” the report said.

Changes would not take effect until October.

The fund’s allocations as of May 31 were 57.30% of the total investment portfolio in global growth, 20.87% income-based strategies, 8.80% real return, 6.29% liquidity, 4.32% risk mitigation, 1.67% in its police and fire mortgage program, and 0.21% cash. Its target asset allocation aims to simplify things, putting 56.25% in global growth, 21.50% to income, 8.75% to real return, 8.50% to liquidity, and 5% to risk mitigation.

The fund has yet to release its full fiscal year results.