Garden State Commits $1.4 Billion To Alternatives

May 28 2008 | 11:20am ET

The $81.5 billion New Jersey Division of Investment is committing $1.4 billion to alternative asset management firms including private equity, hedge and commodity funds.

According to a memo, the division is committing to five p.e. funds: $100 million to GSO Capital Opportunities Fund, $150 million to JLL Partners Fund VI, $400 million to TPG VI, $100 million to TPG Financial Partners and $100 million to HIG Bayside Debt & LBO Fund II.

The Garden State is also committing $75 million to the Asian Century Quest Fund, run by $1.2 billion long/short equity shop Asian Century Quest Capital in New York. The firm’s flagship is a bottom-up, fundamentally-driven equity long/short fund focused on Asia, with a primary emphasis on Japan and Korea. Since inception, the fund has generated an annualized return of 15.37% with volatility of 8.12%.

New Jersey is also making a $500 million commitment to the Cargill ProAlpha Commodity Program, which is managed by Cargill Risk Management, a wholly-owned subsidiary of the giant multinational corporation Cargill.

The program looks to provide core exposure to the commodities asset class through beta and alpha components. The beta component is based on a total return swap between Cargill and Common Pension Fund E linked to either the Standard & Poor’s Goldman Sachs Commodity Index or Dow Jones AIG Commodity Index—New Jersey intends to utilize the Dow Jones AIG Index because “it has less concentration in energy-related commodities than the GSCI.”

The alpha strategy is a basket of relative value spread trades, either intra-market or inter-market, and will be close to dollar-neutral at all times.

As part of the its fiscal year 2008 investment plan, New Jersey’s investment council authorized a target allocation of 4%, or roughly $3 billion, dedicated to commodities and other real assets. The fund’s current dedicated commodity linked investments, through the portfolios managed by Gresham and Schroders, totals $800 million.

The pension last month funded $280 million of commitments to alternative investments, including an additional $100 million to the commodity fund managed by Schroders, $25 million to Carlyle Mezzanine Fund II and $22.6 million to the PIMCO Distressed Mortgage Fund. Offsetting these investments was a $100 million redemption from a multi-strategy hedge fund managed by Barclays Global Investors. Its hedge fund portfolio was up an estimated 2.2% in April.


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