Pension Manager: New Jersey Division of Investment
Assets Managed: $70 Billion (Jan. 31, 2012)
Private Equity Assets: $5 Billion (Jan. 31, 2012)
Private Equity Allocation: 7% (Jan. 31, 2012)
Private Equity Target Allocation: 5.5%
Chief Investment Officer: Timothy Walsh
Christine Pastore, who helped lead the $70 billion New Jersey pension system’s intrepid expansion into alternative assets, decided to step down on March 30 after seven years in the job. A spokesman for the New Jersey Division of Investment, Andrew Pratt, said the decision was her own and that the agency would have liked her to stay. “We’ll miss her,” Pratt said.
Pastore, who helped lead New Jersey’s drive last year to boost its cap on alternatives to 35 percent from 25 percent, is among the people most responsible for the recent moves by New Jersey and other large pension funds to make giant commitments of at least $1 billion to individual private equity firms as part of large separate accounts.
Overall, New Jersey’s pension system manages $8.7 billion in private equity commitments as of Jan. 31. That includes $5 billion in invested private equity capital, a 7 percent allocation that is above the system’s 5.5 percent target.
Last year, New Jersey was the second large pension fund (after the Texas Teachers Retirement System) to make such huge commitments to individual private equity firms. In New Jersey’s case, the pension system committed $1.5 billion to separate accounts from The Blackstone Group, part of a $2.5 billion allocation that the state committed to the firm in 2011.
Pastore’s thinking, and the thinking of a growing number of large pension fund managers, is that by committing such large amounts to a single manager, the pension fund can receive substantially better fees and terms. The lower the fee, the easier it is for the pension fund to meet or beat its benchmark for the asset class.
For example, in exchange for $1.5 billion in separate account commitments to Blackstone Group, New Jersey negotiated its annual management fee down to 1 percent plus a 15 percent carry charge. That is substantially better than the standard “2 and 20” fee structure that applies to most private equity commitments.
In the mid-2000s, New Jersey, aided by Pastore, expanded its private equity program with an unusually fast commitment pace. That fast pace soon came to haunt it during the financial crisis since it was quickly over-allocated to the asset class. As a result, New Jersey was unable to commit to new funds during the depths of the financial crisis, when many lucrative opportunities presented themselves. As a result, New Jersey missed some of the upturn that came in 2009 and early 2010, as private equity investments and the economy began to recover.
Nevertheless, with the appointment in 2010 of a new chief investment officer, Timothy Walsh, the state returned to the private equity table in earnest, laying the groundwork for its mega separate-account commitments in late 2011.
As for Pastore, she is thought to be examining her options, and some think she will reemerge in the private sector, where she would likely earn substantially more than she did for the state of New Jersey.