Even though Christie doesn’t officially take office until January, he recently sent a memo to Governor Corzine which outlined 14 “urgent action items” for the state budget. For a firm seeking investments from the state’s $68 billion pension fund, Item Number 11 might read like a death knell:
“Freeze the retention of all new outside professionals, manager selections, and new contracts for managing alternative investments with respect to New Jersey’s pension funds.”
In other words, no new PE commitments. There’s no explicit reasoning given, other than to say it’s part of a plan to “address weak revenue collections” and “prevent the crisis from worsening and budget hole we are in from deepening.” New Jersey currently has a 13% allocation to alternative investments, a basket that includes infrastructure, private equity, commodities, hedge funds and real estate.
In response to Christie’s moves, Corzine’s office told the AP that “the Governor will review the details of the letter and take appropriate action with this fiscal principle in mind.”
But one source close to the situation told peHUB no changes have been implemented to the fund’s commitment process at this point. Moreover, neither Christie nor Corzine technically have the ability to prevent the State Investment Council from making particular types of investments, save for stacking the board with like-minded appointees (council members are named on a staggered basis).
Private Equity Online reported that, according to a source within the Treasury Department, the freeze is “temporary” and meant to allow a review of the plan’s alternative investment program.
UPDATE: New Jersey has provided a statement on the matter: “We received a list of 14 requests from the incoming administration on ways to mitigate the fiscal problems facing the state, including restrictions on alternatives engagements. We are reviewing all of these requests and working cooperatively with the transition team.”
Read the letter below:
“URGENT ACTIONS WITH RESPECT TO THE STATE BUDGET”
Photo credit: New Jersey Star-Ledger