New Jersey moves to ramp up PE allocation

The State Investment Council last week preliminarily approved increasing its private equity allocation, and made its first private equity-like commitment since early 2009.

New Jersey is in the process of kick-starting its private equity programme after more than a year of inactivity.

The New Jersey State Investment Council, which oversees the state pension’s $70 billion in assets, preliminarily approved increasing the pension’s allocation to alternatives from 28 percent to 38 percent. The actual allocation to alternatives stands at about 14 percent, a Treasury spokesperson said.

New Jersey’s alternatives category include four different asset categories – private equity, real estate, hedge funds and real assets, which includes infrastructure. Each category formerly had a cap of 7 percent, and those caps are proposed to change. Private equity would rise to a 12 percent ceiling, real estate’s cap would increase to 9 percent and hedge funds would max out at 15 percent. Real assets would have a cap of 7 percent.

The allocation changes are preliminary, and will go through a public review period. After the public review, the allocation changes will come back before the council for possible tweaking, and eventually a final vote, according to the spokesperson.

New Jersey has not made a commitment to private equity since early 2009, and has hovered close to its target allocation at around 6.4 percent. New Jersey’s private equity portfolio is valued at about $4.5 billion.

Last week, council approved a $100 million commitment to Sheridan Production Partners II, a Warburg Pincus oil and gas joint venture. The commitment was a re-up for New Jersey, which committed $50 million to the first Sheridan fund. Council classifies Sheridan as a “real assets” investment, though the fund has private equity characteristics.

New Jersey has also been negotiating with existing managers, and plans on negotiating with new managers, for fee cuts, the spokesperson said.

“It’s about supply and demand. New Jersey is looking at getting fees at more realistic levels given the current state of the economy,” the spokesperson said.