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New Jersey goes big with Och-Ziff, commits to TPG and RRJ

  • New Jersey’s Och-Ziff account grows to $2.8 bln
  • $77 bln pension rolls $125 mln into new TPG RE fund
  • Pension backs RRJ for $150 mln

The New Jersey Division of Investment will move forward with more than $1 billion of commitments involving separate accounts for private equity, credit and real estate strategies, State Investment Council chairman Tom Byrne said at the council’s May 27 meeting.

The commitments – which are subject to legal negotiations – include $900 million for a series of separate accounts and commingled funds managed by Och-Ziff Capital Management, according to state documents. New Jersey will allocate up to $500 million to Och-Ziff’s credit funds, $200 million to real estate funds and $200 million to private real assets and private equity funds.

The new commitments will increase the size of New Jersey’s existing account with Och-Ziff to $2.8 billion, Division of Investment Director Chris McDonough said after the meeting.

The Division’s longstanding relationship with Och-Ziff contributed to its ability to secure favorable terms on the new commitments, according to New Jersey documents and investment staff who spoke at the meeting. New Jersey will pay an annual management fee equal to 0.75 percent of the Och-Ziff platform’s net asset value. The firm will take 20 percent of the carry over a 6 percent return hurdle.

The Division of Investment, which manages roughly $77 billion of state pension assets, also will roll $125 million of its existing TPG Capital separate account into the firm’s latest real estate fund, TPG Real Estate Partners II, Byrne said.

New Jersey committed $350 million to the TPG/NJ Partnership separate account in 2013. TPG had drawn down approximately $112 million of the account as of Feb. 28, according to state documents.

Finally, New Jersey will also move forward with a $150 million commitment to RRJ Capital, a Hong Kong-based private equity firm targeting $4.5 billion for its third flagship fund.

RRJ’s debut fund netted a 15.72 percent internal rate of return as of Dec. 31, according to New Jersey documents. Fund II netted a 25.26 percent IRR as of the same date.

New Jersey had an 8 percent allocation to buyout and venture capital strategies as of Feb. 28, according to pension documents. The portfolio is valued at $6.2 billion.

Separately, the New Jersey pension system is exploring the possibility of exiting its commitment to a fund managed by JLL Partners that owns payday lender ACE Cash Express, Buyouts previously reported.