NJ Approves Increase in Alternative Investments

May 23, 2011 (PLANSPONSOR.com) - The New Jersey State Investment Council voted to increase how much the state’s pension system may put into alternative investments in the next fiscal year.

According to The Record, of the targeted allocations for fiscal 2012, the investment plan’s greatest shift would be toward hedge funds. Under the plan, 10% of the pension’s assets could be invested in hedge funds, up from the current 5.3%. The pension system’s allocation to private equity would be 7%, up from 6.7%.  

The news report said New Jersey has 17.3% of its $72.6 billion pension system invested in hedge funds, private equity, real estate and commodities. Under a plan the council approved, the pension system would aim for 25.5% in alternative investments in fiscal 2012 – still be below the previous cap of 28%.  

Robert Grady, who heads the council, emphasized that the pension system is not trying to boost returns by shifting more assets toward alternative investments, but is reducing overall risk by further diversifying its investments.  

By reducing exposure to stocks, Grady added, “You dampen the effect of a big drop,” such as in 2008 and 2009.