Buyouts Snapshot: NJ explores exit of JLL fund with stake in payday lender

The New Jersey State Investment Council tasked Director Chris McDonough to explore an exit of the state pension system’s commitment to a JLL Partners fund that owns payday lender ACE Cash Express.

New Jersey law prohibits payday lenders from operating within the state. In July, the Consumer Financial Protection Bureau forced ACE to pay $10 million in penalties and refunds for illegal debt collection tactics including harassment and false threats. Fortune first reported on the issue in April.

New Jersey committed $50 million to the fund that owns ACE, JLL Partners Fund V, and its stake in the company stood at around $4 million, McDonough said at the pension meeting. Fund V returned a 1.6x total multiple as of February, according to state documents.

The pension may explore exiting the fund on the secondary market, though McDonough and other board members cautioned that a forced exit could lead to New Jersey taking an unnecessarily steep discount. McDonough and council members repeated the point several times during the meeting the division’s investment staff will consider how an exit would impact beneficiaries.

New Jersey moved to increase its exposure to JLL Partners in January when it cleared a $150 million re-up to JLL Partners Fund VII. That commitment was approved by staff and the council, but remains in legal negotiations.

The ACE Cash Express situation did not come to light during New Jersey’s due diligence of Fund VII, McDonough said during a spirited discussion with activists from the NAACP and the New Jersey Citizen Action committee.

“We absolutely should have the character and nature of the (fund) principals and investments be part of our due diligence,” said Tom Byrne, chairman of the investment council. “For whatever reason, this didn’t come to my attention. I don’t want to make excuses, but the place is thinly staffed. And … sometimes you miss something.”

“I feel like this one is just something that slipped through the cracks,” said council member Jeffrey Oram about JLL’s ACE Cash Express investment. “This would have raised red flags with me.”

It’s not clear if the ACE Cash Express situation will affect New Jersey’s commitment to Fund VII. JLL could not be reached for comment.

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