New Jersey chair calls for allocation review

Chair of the investment council of the $70 billion State of New Jersey’s Division of Investment, Robert Grady, has called for a new asset allocation plan, pointing in particular to the fund’s cash position which sits at around 2.75 per cent. The fund has also been overweight its domestic equity allocation by about 6 per cent since the last target was set in March.

At the November board meeting, director Tim Walsh advised the division was working to reduce the fund’s cash position, and Grady said “the need to look at the fund’s cash position was particularly germane given the need to dvelop a new asset allcoaiton plan”.

At that board meeting, the fund’s consultant, Peter Kelioutis of Strategic Investment Solutions, said a new asset allocation plan would not be set at the annual meeting; rather, the council would debate approaches to ascertain what was best for the fund.

The fund’s last asset allocation change saw US equities reduced from 21.85 per cent to 18 per cent, but it has been overweight this level by about 6 per cent each month since.

Kelioutis said if a new asset allocation was recommended after the meeting, it would most likely be adopted in the Northern hemisphere spring, one year since the current plan was adopted.

The major change in March 2010, which was decreasing target allocation for US equities, was done to reflect the 2009 market rally, according to the 2010-2011 investment plan outline.

The outline acknowledged this allocation was substantially overweight relative to the 2009 ranges set for public equities, and underweight in inflation-sensitive and alternative investments. Since the new asset allocation the difference between target allocations and actual allocations have jumped from 4.53 per cent in February 2010 to 7.19 per cent in April 2010.

At the end of November, the financial year-to-date performance for the fund was 8.71 per cent, slightly outperforming its benchmark’s 8.53 per cent.