Bloomberg reports that Strategic Investment Solutions Inc. recommended allowing as much as 43% of assets to be placed in alternatives, but the Council voted to draft regulations that would allow as much as 38% of the $68.3 billion fund to be invested in alternatives. The current maximum is 28%.
The consultant said New Jersey’s current limit on alternatives is the 18th- lowest among the 21 largest U.S. state pension funds. It claimed the fund would realize an additional 30 to 50 basis points of investment gain annually, or anywhere from $210 million to $350 million, with “modestly higher risk,” according to the news report.
The panel authorized alternative investments in 2002 and had about $9.8 billion, or 14% of its portfolio, through August 31, according to a monthly investment report. Strategic Investment said the council has approved alternatives allocations totaling 19% of the 28% allowed.
Over the past 10 years, the fund has earned a 3% annualized return, compared to the 8.25% actuaries assume the fund will gain when they determine the system’s funding adequacy, Bloomberg said.
New Jersey Governor Chris Christie recently unveiled a sweeping reform program to address the funds’ $46-billion shortfall (see NJ’s Christie Proposes Sweeping Pension Changes).Recent research shows a significant increase in the percentage of private pension portfolios investing in alternatives (see More DB Plans Using Alternative Investments).