New Jersey’s pension fund unveils program to diversify portfolio

The New Jersey Department of the Treasury’s Division of Investment on Wednesday unveiled a new initiative to further diversify the private markets portfolio for the state’s roughly $95 billion pension fund.

The first proposed investment of up to $250 million, in a separately managed investment vehicle by Barings Funds & Co-Investments, would kick off the program, which is aimed at helping New Jersey access smaller managers and broaden market diversification.

“I applaud Treasury and the Division of Investment for putting the wheels in motion and casting a wider net to attract a broader range of diverse investment opportunities, including investment managers from underserved communities,” Gov. Phil Murphy said. “We are essentially putting together a farm team to build up the next generation of talent — emerging managers who have the skills, but not necessarily the access, to make it to the major leagues.”

The Division of Investment formally presented the initiative to the State Investment Council on Wednesday after it was reviewed by the SIC’s Investment Policy Sub-Committee earlier this month.

“This platform will enhance the pension fund’s exposure to a broader range of fund managers, including diverse fund managers,” state Treasurer Elizabeth Maher Muoio said. “The Division of Investment has a fiduciary duty to invest pension fund assets for the financial benefit of the fund’s beneficiaries — New Jersey’s hardworking public employees. I applaud the Division of Investment for identifying this unique opportunity, exploring it and acting upon it.”

The Emerging Managers program is centered around a platform of Separately Managed Accounts that will source, conduct due diligence on, invest in and oversee allocations to emerging managers.

DOI will begin by investing with large, well-established asset management firms with adequate resources and expertise, selecting firms who are long-term primary investors with the ability to anchor first-time funds and scale with the underlying funds throughout their development.

DOI intends to gradually build out the program, starting first with private equity, where the universe size is largest, historic track records of success have been built and new fund creation is most plentiful. Given the broader and unique offerings from emerging fund managers, most of the opportunity would be focused on the earlier to midstages of private equity, namely seed, venture capital, growth and replacement capital. DOI is effectively creating a mechanism to invest in emerging managers within the different asset classes, with private equity being the first asset class sleeve and potential opportunities for other classes to follow.