NJ High Drama Over Hedge Funds Opportunistic & Unconstrained Fixed Income in Focus

31 May

NJ High Drama Over Hedge Funds Opportunistic & Unconstrained Fixed Income in Focus

Busy week for the Public plans, among the 150+ documents added to Public Plan IQ last week, were materials for Rhode Island, Arizona Public Safety, Alaska Permanent, Louisiana Schools, Kansas, Hawaii, Nevada, Montana  and StanCERA. We highlight a few here and encourage you to login to Public Plan IQ for full details.

Last week we attended the New Jersey State Investment Council Meeting. The meeting began with the directors report. The focus being the underperforming equity allocation and outperformance of private equity and real estate. Within equity the plan expects to maintain their tactical overweight to domestic equity and underweight China within the emerging market allocation. The council’s forward looking outlook was decisively negative for traditional asset classes and alternatives were expected to outperform over the next market cycle.

Next on the NJ agenda was the Fiscal Year 2016 -2017 investment plan, Almost immediately into this agenda item discussion, board vice-chair Adam Liebtag of the AFL-CIO made a motion calling for a reduction in hedge funds across all classes, reducing total allocation from 12.5% of the total portfolio, to 4% with a statutory cap to be placed at that level. In addition, the proceeds from the Hedge Funds divestment would be restricted from allocation to alternative investment strategies.  After over an hour of vigorous debate the vote came to a 7-7 tie, there is currently a vacancy on the 15 member board.  Please see our news post for the full meeting details.

Last week both Arizona Public Safety and Louisiana Schools initiated consideration of unconstrained and opportunistic fixed income strategies. At the Arizona meeting, NEPC provided a fixed income and private credit overview.  NEPC recommending to focus on adding unconstrained fixed income managers and continue to reduce the internally managed fixed income portfolio.  At Louisiana Schools, Segal Rogerscasey provided an Opportunistic Credit review with a recommendation to either hire a couple of specialist mannagers or a single multi strategy manager.

Research presentations added this week included LP Capital providing Kansas a Private Equity educational session, Kansas is in process of doubling their private equity allocation from 4% to 8%.  This week Verus will address the Active Management Environment with Fresno County.