Walsh Legacy: Innovation In New Jersey

As head of the New Jersey Division of Investment, Walsh was best known for ramping up the state’s exposure to alternative assets such as private equity and hedge funds. One of his first acts was to re-start fresh commitments to private equity and other alternatives after a two-year hiatus following the 2008 recession (Walsh called that interregnum “a mistake” in a 2011 interview with Buyouts). He then pushed through a rise in the cap on such alternatives to 38 percent of the overall portfolio, up from 28 percent. 

Meanwhile, Walsh drove hard to keep a lid on fees for the state’s private equity program. As part of that effort, Walsh launched, in late 2011, a $1.5 billion separate account with The Blackstone Group, a multi-faceted account that lowered annual management fees to just 1 percent and fees on carried interest to just 15 percent.

Overall, New Jersey has $6.2 billion in invested private equity capital, which includes buyouts, venture and debt related private equity, as of June 30, 2013.  Its private equity target is 7.7 percent, which includes debt-related private equity, which for New Jersey is counted separately.

“Tim will be sorely missed,” said Robert Grady, the State Investment Council chairman, in a statement. “The beneficiaries of the pension system and the citizens of New Jersey owe Tim Walsh a debt of gratitude. For the last three years, with Tim’s skillful leadership, New Jersey has outperformed both its benchmarks and its peers,” he said, adding that the pension’s average annual investment return under Walsh was 11.11 percent, or 106 basis points better than the fund’s benchmark.

Grady will be leading the search for a replacement and hopes that individual will be installed at the start of 2014. In the meantime, Christopher McDonough, the deputy director of the Division of Investments, will be the acting chief investment officer. McDonough joined the division in 2011, having served previously as the chief investment officer for the Philadelphia Board of Pensions and Retirement.

Walsh was unavailable for comment, but discussions about why Walsh departed for the private sector after just three years on the job may veer toward compensation. As a public employee, Walsh earned just $192,000 in 2011, according to the Division of Investment. That is far lower than most comparable jobs in the private sector. And just last year, New Jersey lost its veteran head of alternative investments, Christine Pastore, who eventually joined Vista Equity Partners as the firm’s head of investor relations.

Walsh joined the New Jersey Division of Investment from the Indiana State Teachers’ Retirement System, where he oversaw $8.5 billion in assets. That system has since been folded into the Indiana Public Retirement System.