N.J. Lawmaker Seeks To Ban Pension Hedge Fund Investments

Oct 9 2012 | 10:38am ET

New Jersey's public pension funds have been among the earliest and most aggressive adopters of hedge funds. But one Garden State legislator wants that to stop.

State Senator Shirley Turner (D-Lawrenceville) has introduced legislation that would ban state pension and annuity funds from investing any money at all in hedge funds or derivatives. Turner acknowledges that the pension is "woefully, severely underfunded because we haven't made regular deposits for 15 years." But, she warns, it is "wrong" for the pension to try "to make up for those skipped payments by gambling on an aggressive, high-risk investment strategy."

"It is high-risk, high-reward, but so far the hedge funds the state has invested in have not returned the 8.2% that they had anticipated—this past year they've only returned 2.9%," Turner said.

"My attitude has always been, if you find yourself in a hole, the best thing to do is stop digging, and when you start gambling and risking so much, you just dig yourself deeper into that hole…. We need to stop this now because it's very dangerous."

Turner added that it was particularly urgent due to the pension's plan to boost its hedge fund exposure from "23% to 30%."

"You can't gamble with retirees' money," Turner said.

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