New Jersey’s $95 billion pension fund unveils Emerging Managers Program to diversify portfolio and create next generation of investment talent
New program kicks off with proposed investment of up to $250 million in Barings LLC to help New Jersey access smaller managers and expand market diversification
(TENTON) — The Murphy administration today formally unveiled a new Emerging Managers initiative launched by the Treasury Department’s Investments Division to further diversify the private markets portfolio for the US’s roughly $95 billion pension fund. State of New Jersey, launching the new program with the first proposed investment of up to $250 million.
“I commend the Treasury and the Investment Division for setting the wheels in motion and expanding the network to attract a wider range of diverse investment opportunities, including investment managers from communities underserved,” said Governor Phil Murphy. “We’re essentially building a farm team to build the next generation of talent – emerging managers who have the skills, but not necessarily the access, to qualify for the major leagues.”
The Division of Investment (DOI) formally presented the initiative to the National Council of Investment (SIC) at its final meeting today after being reviewed by the SIC’s Investment Policy Sub-Committee at the beginning of the month. In doing so, DOI also offered its first investment in the new program – up to $250 million in an investment vehicle managed separately by Barings Funds & Co-Investments.
Barings’ investment will broaden the pension fund’s diversification, help the division gain access to smaller managers and capture potential attractive returns in small and mid-sized growth and buyout funds. Barings has a reputation for employing an open-door policy and a proactive origination program that includes a network of connections, including members of its team who hold leadership positions in organizations focused on increasing the number of women and diverse representation in the asset management industry, such as the Toigo Foundation, Hispanic Heritage Foundation, NAIC and PEWIN.
“This platform will improve the pension fund’s exposure to a wider range of fund managers, including diverse fund managers, with the potential to improve risk-adjusted investment returns,” said State Treasurer Elizabeth Maher Muoio. “The Investment Division has a fiduciary duty to invest pension fund assets for the financial benefit of the fund’s beneficiaries – the hardworking public employees of New Jersey. I commend the Investment Division for identifying this unique opportunity, exploring it and acting on it.
The Emerging Managers program is centered around a Separately Managed Accounts (SMA) platform that will research, perform due diligence, invest and oversee allocations to emerging managers. DOI will begin by investing in large, well-established asset management firms with the right resources and expertise, selecting companies that are long-term primary investors capable of anchoring first-time funds and growing. evolve with the underlying funds throughout their development.
DOI will establish specific personalized criteria for each SMA to ensure a diverse pool of fund managers. ADMs will help identify successful emerging fund managers who fit into DOI’s broader portfolio and can “evolve” into direct relationships with the division.
“By creating an emerging manager program that targets growing businesses, there is value both in how we do business and as a strategy to create incremental returns. These managers will bring both very high quality and a fresh perspective on money management,” said Deepak Raj, chairman of the NJ State Investment Council. “This platform will enhance exposure to unique and niche opportunities that are too small for larger funds.”
The DOI calls for a target investment size of up to $250 million in each SMA, which would be allocated to approximately 10-25 underlying private equity funds.
Additionally, the DOI plans to hold an Emerging Managers Symposium later this year to engage the pool of potential talent and promote the new program to as wide a universe as possible.
“The Investment Division continually seeks to allocate capital to the best available, risk-adjusted investment opportunities. As part of this effort, we are constantly looking for ways to make improvements to our wallets,” said Shoaib Khan, acting director of the investment division. “The Emerging Managers Platform is a program dedicated to finding, selecting and investing in some of the brightest talent at an early stage in an investment company’s lifecycle to benefit our portfolio. global.”
DOI intends to gradually develop the program, starting first with private equity where the size of the universe is the largest, a track record of historical success has been built and the creation of new funds is the most abundant. Given the broader and unique offerings of emerging fund managers, most opportunities would be concentrated in the early to mid-stages of private equity, i.e. seed capital, venture capital, growth and early stage capital. replacement. DOI effectively creates a mechanism to invest in emerging managers within the various asset classes, with private equity being the first asset class and potential opportunities for other classes to follow.
Emerging manager-focused funds will allow DOI to participate in seed funds where it does not currently participate due to size, track record, and assets under management (AUM) constraints. This will help identify experienced teams, independent sponsors, and seed investments with the potential for enhanced returns. In turn, this is expected to improve exposure to lower middle market opportunities, which have historically outperformed larger capitalization funds.
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