NJ commits $300 mln to TPG Opportunities; pares back PE allocation

New Jersey’s commitment includes $100 million for TPG Opportunities Partners III (TOP) fund, as well as $200 million for a separate account that will combine two existing separate accounts with TPG. The two accounts are called Knight/TPG NPL-Residential LP and Knight/TPG NPL-Commercial LP.

The separate account will co-invest alongside TPG Opportunities Partners III, and target idiosyncratic investments such as distressed asset sales from commercial banks, medical royalties, re-performing real estate loans and mortgage servicing rights.

Key investment pros for the TPG fund include Alan Waxman, a distressed debt veteran from Goldman Sachs, and Joshua Easterly, a former managing director at Goldman Sachs. The target for TPG Opportunities Partners III is listed as $3.2 billion.

“TOP will seek top-down investment themes in dislocated sectors as well as bottom-up situational opportunities where it can exploit idiosyncratic or secular issues to structure investments with a skewed risk-adjusted return profile,” according to a memo to the pension system.

The vintage 2012 TPG Opportunities Partners II rang up a 23 percent IRR and the vintage 2009 TOP I fund recorded a 22 percent IRR, both as of June 30. 

New Jersey’s commitment comes after the Pennsylvania Public School Employees’ Retirement System in December committed up to $150 million to TPG Opportunities Partners III. An investment memo from the system said the fund could hit a first close in December. The GP was expected to kick in $90 million, the investment memo said.

New Jersey tweaks allocations

After a big run-up in the stock market, New Jersey’s $76 billion pension system is reducing its exposure to public equities, while cutting its allocation to fixed income. It’s also upping its commitment to hedge funds with low net exposure or low correlation to equity markets, and increasing its overall liquidity. The new allocations apply to the current 2013-2014 fiscal year, which ends on June 30.

“The revised asset allocation increases target cash levels to approximately one year worth of net benefit payment outflows, plus an additional cushion to fund capital calls for private equity and real estate,” according to the investment council’s executive summary for its Feb. 3 meeting prepared by consulting firm Hewitt EnnisKnupp. All of the new target allocations fall within the pension system’s long-term target ranges.

Included in the new allocation mix is a 1.5 percent drop in the target for buyout and venture capital funds to 7 percent. However, the new target is still slightly ahead of the actual allocation of 6.85 percent for the asset class as of Nov. 19. That equates to about $106 million more for buyout and venture capital funds based on the $5.3 billion value of the portfolio as of Nov. 30.

The Garden State is hiking its allocation to 4.5 percent for both its risk mitigation and absolute return hedge funds, from the earlier target of 3.5 percent. The pension system had a 2.89 percent allocation for the two asset classes as of Nov. 19. It hiked its liquidity allocation to 9.5 percent from 4.5 percent, compared with 6.1 percent as of Nov. 19.

Its income portfolio allocation will move back by 2.1 percent to 24.2 percent and its global growth portfolio allocation target will now be 56.1 percent, down 3.6 percent.