As of June 30, 2015 the New Jersey Division of Investment reported having $79 billion in assets of which $22 billion was in Alternative Investments. Tracking from August 31, 2012 the performance of those Alternative Investments in general and one investment in particular we see:
Visium Balanced Offshore Fund, Ltd appeared on the books in August, 2012 for its $100 million purchase price and, assuming the standard 2/20 fee structure for hedge fund investments, would have cost the fund almost $17 million in fees.
What has New Jersey gotten for their $117 million? For valuation purposes they got to say the trust had over $145 million in assets as of the last valuation date. In reality…..
According to an ibtimes story:
The multibillion-dollar hedge fund Visium Asset Management has collapsed in the throes of an insider-trading crisis.
The fund told investors Friday that it planned to shut down. Business Insider wrote that it “imploded in the biggest scandal to hit the industry in years” — the largest such closure since officials forced the shutdown of SAC Capital* in 2013.
Visium’s performance has been lackluster of late. It now plans to liquidate its flagship fund and sell another to asset manager AllianceBernstein. That decision was relayed to investors just days after prosecutors announced charges against portfolio managers for allegedly making trades while relying on confidential government information about generic-drug approvals. A Food and Drug Administration official allegedly relayed confidential information to Sanjay Valvani, a top portfolio manager, who was charged with wire and securities fraud.
New Jersey investment people will be scrambling to recoup whatever money they can from a busted scheme that turned out to be too good to be true, not unlike what participants in the pension plan they are supposed to be funding are doomed to experience.
* Interestingly enough SAC Capital and its founder Steven Cohen also had a New Jersey connection.