New Jersey drawing heat for hedge-fund foray: report

Tue Nov 25, 2008 7:27am EST

New Jersey Governor Jon Corzine (top R) presides over a meeting of his cabinet at the Statehouse inTrenton, in a file photo. REUTERS/Jeff Zelevansky

New Jersey Governor Jon Corzine (top R) presides over a meeting of his cabinet at the Statehouse inTrenton, in a file photo.

Credit: Reuters/Jeff Zelevansky

(Reuters) - New Jersey's pension fund is under fire over a series of hedge-fund investments, the Wall Street Journal said.

New Jersey made the investments last month, to funds run by BlackRock Inc (BLK.N), Canyon Capital Advisors LLC and GoldenTree Asset Management LP, as they were "facing the equivalent of margin calls," William Clark, director of the New Jersey Division of Investment, told the paper in an interview.

In effect, the funds, which had borrowed money for investments, either faced or anticipated facing demands from lenders for cash as the value of those investments fell, the paper said.

State legislators, upon learning of the investments, are questioning both the wisdom of the decisions as well as the process, according to the paper.

At $49.5 million each, the investments came just below the $50 million threshold that requires the fund to explain an investment to an oversight board before moving forward, the paper said.

Clark maintained to legislators at a public hearing on Monday that they needed to get the money to the hedge funds quickly and nothing was improper, the paper said.

He noted that hedge-fund investments are disclosed on a monthly basis at regularly scheduled board meetings, where news of two of these investments emerged last week, according to the paper.

The New Jersey pension fund said that, effective immediately, all alternative fund investments, such as in hedge funds, private equity and real estate, under $50 million will be posted right away on its website, according to the paper.

Rather than dump assets in falling or dysfunctional markets to meet cash demands, some hedge funds have turned to their deep-pocketed investors to bail them out and at the same time help those investors preserve their initial investments, even if that is at the expense of new cash, the paper said.

The New Jersey Division of Investment could not be immediately reached for comment.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Alex Richardson)

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