New Jersey Public Employees’ Pension Fund Posts Surprisingly Strong Gains Despite Volatile Fiscal Year

New Jersey’s public employees’ pension fund gained more than $5 billion in market value in the fiscal year ended June 30, bringing its total value to about $91.4 billion as it continued to rebound after heavy losses in 2022.

That represents a 9.1% gain on investments, outperforming the funds’ benchmark and its long-term expected rate of return, according to a report from the New Jersey Department of the Treasury’s Division of Investment.

While that figure is still about $7 billion below the high point reached in 2021, when post-pandemic gains took the fund to nearly $100 billion, it marks a strong year for New York’s investment managers. Jersey who continue to guide the fund despite historical volatility in the capital markets. global.

Capital markets have been quite volatile and continue to fluctuate, Shoaib Khan, director of the investment division, told the National Investment Council in a virtual meeting on Wednesday.

New Jersey’s pension fund supports the retirement of more than 815,000 active and retired state and local government employees, and it has long been among the worst funded in the country.

Democratic Gov. Phil Murphy’s administration, with help from state lawmakers, has made significant progress in returning the system to full funding.

The last two state budgets called for full payouts to the pension fund of about $7 billion a year, the first time in a quarter century. And the state’s current $54.3 billion spending plan, signed by Murphy in late June, includes another full payment of $7.1 billion.

That helped New Jersey rack up a string of credit rating improvements over the past year and put the state on track to fully fund the retirement system. But investment managers continue to face economic challenges that threaten to dampen recent gains in market value, including the lingering threat of an economic recession.

Peeling back the onion a bit, there are a number of concerns, Khan said, referring to the rapidly changing geopolitical landscape and the Federal Reserve’s fight against inflation, among others. factors, which cast a shadow over global financial markets.

Investment managers have put the fund in a strong position to withstand near-term market turmoil, thanks to tactical decisions made in early 2022, when Russian President Vladimir Putin invaded Ukraine and the inflation rate annual rate in the United States began to climb towards 40%. high year.

The financial storm clouds that gathered in January and February last year prompted fund managers to take a more defensive stance and increase the amount of their liquidity, according to Khan.

As of June 30, the fund’s liquidity was nearly five percentage points higher than normal at the end of the financial year, giving the fund the flexibility to avoid actual losses and take advantage of new investment opportunities as soon as possible. let them introduce themselves.

Overweighting cash is simply a response to the environment we are in and its tactics, Khan said.

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Derek Hall can be reached at Follow him on Twitter @dereknhall.

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