Privatize State Pensions

From the Star Ledger:

State acts to 'privatize' pension funds

State officials yesterday adopted a plan to shift billions of dollars in state pension money to private investment managers and set a course to reduce the funds' heavy reliance on the stock market.

"What we are doing today arguably constitutes the most extensive readjustment of any pension program in any state in a single year," said Orin Kramer, chairman of New Jersey's State Investment Council and an architect of the new strategy. The council, a volunteer board that manages the pension funds, approved the move 7-1.

The sweeping changes in the $72.6 billion fund will cut the state's U.S. stock holdings by more than $16 billion in favor of larger holdings in toll roads, hedge funds and international stocks. The pension funds bankroll retirement pay for hundreds of thousands of teachers, police officers, firefighters and public employees.

Separately, the strategy will shift $18 billion of the portfolio's holdings into the hands of private managers, who are expected to earn fees of about $221 million a year for managing the state's funds.
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The new strategy will generate a windfall for professional money managers, who are slated to collect about $221 million annually when the new investment plan is in place. Currently, the state pays about $6 million a year in administrative costs to the in-house staff that manages the stock portfolio.