Stalling NJ Pension investment Plan

njspotlight reported:

It looks like New Jersey’s public-employee pension system will enter the next fiscal year without a new investment plan in place thanks to a lingering disagreement over how heavily to rely on hedge funds. The deadlock on the hedge-fund issue won’t bring investment activity for the $71 billion pension system to a halt when the new fiscal year begins July 1, but it will prevent in-house fund managers from enacting the fine-tuning they’ve recommended to keep up with changing financial markets over the next 12 months.

Based on past practice this may be for the best.  For example:

When selling a hedge fund investment to trustees of a government pension fund you make up a memo and include a summary paragraph in the Investment Council meeting agenda like:

Visium Balanced Fund, L.P

Maneck Kotwal along with Jake Walthour of Cliffwater presented a proposed investment of up to $150 million in Visium Balanced Fund, L.P. Visium is specialized in healthcare, which gives them an edge over generalist funds that invest in the healthcare space. The fund is managed with a market neutral exposure (+/-10%), making it a good complement to the long-biased orientation of a number of the managers in the equity-oriented hedge fund portfolio. Visium was founded in November of 2005 by Dr. Jacob Gottlieb along with the healthcare team which spun out of Balyansy Asset Management. The Fund has an attractive return profile with a 10.93% annualized return with 9.74% SD from inception through March 2012. Chair Grady reported that the Investment Policy Committee has determined that appropriate and adequate due diligence was performed.

Nothing about:

  • past performance not being an indicator of future performance,
  • what ‘market neutral exposure’ or ‘long-based orientation’ really means, or
  • why a fund specializing in healthcare has any edge over a diversified fund.

Practically any explanation will pass muster with the possible exception of the truth:

Politically connected advisers presented a proposed investment that is guaranteed to make everyone involved big money in fees for a few years and may even work out for the pension fund if it gets out before authorities catch on to how that money is being made and it all falls apart.


9 responses to this post.

  1. Posted by Eric on June 23, 2016 at 2:00 pm

    If the so called “managers” wanted to make money for the NJ Pension Fund in healthcare, they could simply purchase JNJ (Johnson & Johnson) which was founded in 1886, and increased its dividends for 53 consecutive years. Many individual investors have gotten very rich on this NJ based company, by owning its stock. Its high yield would also assist in the fund’s payout nightmare.
    The game, however, is not to have the best interests of the pensioners as the focus, since getting rich via fraud is so much more fun and interesting. This is especially so when all legal restraints no longer exist, courtesy of the NJ Supreme Court.
    The pensioners are irrelevant, “cannon fodder”, nothing more.


  2. Posted by Anonymous on June 23, 2016 at 2:27 pm

    It looks like the pension system outlasted TL


  3. Posted by Anonymous on June 23, 2016 at 6:05 pm

    So where is the union oversight, this hedge fund has insider trading issues and is breaking up, so what is the Chairman talking about?


  4. Posted by dentss dunnigan on June 24, 2016 at 1:53 pm

    With interest rates already at Zero …last quarter S&P flat ..and now Brexit ,we won’t see any real rate of return this quarter as well .Most likely a drawdown of 2.5 billion due to pension checks going out just where the pension stands at this point …who knows


  5. Posted by Javagold on June 24, 2016 at 6:30 pm

    The crash is only just beginning. Forget the pensions. They are finished.


  6. Posted by Anonymous on June 24, 2016 at 8:16 pm

    Ok, chicken know little !!!


  7. Posted by Anonymous on June 25, 2016 at 9:40 pm

    What are we waiting for Trump let’s put everyone’s SS nestegg in the stock market so they can live large in retirement!


    • Posted by Anonymous on June 26, 2016 at 9:59 am

      Your comment is why there are laws to protect investors from ignorant financial advisors.


  8. Posted by Eric on June 28, 2016 at 10:35 am

    Most financial advisors are not ignorant. Many are crooks. Read: Where are the Customers’ Yachts?
    What Schwed wrote more than 50 years ago, holds true today. Pen and paper have been replaced by computes, but the clients’ money is still separated, and deposited with the so called “advisor.”
    Do your own research and investing, and trust no one.


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