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Poll: NJ’s Private Fund Managers -- Does It Take Money to Make Money?

Are the fees paid to private hedge fund managers over the top or a smart investment to help replenish the state’s pension system?

The state-pension fund’s stakes in private equity, real estate, hedge funds, and other alternative investments are intended to diversify the overall portfolio and protect against fluctuations in the stock market. But these investments also rack up some serious fees with private managers -- $600 million in the past fiscal year. And that’s led to some serious questions about whether the state is getting good value in return for that money -- so much so that some lawmakers are calling for an independent, forensic audit.

What do you think?

  • I agree with the lawmakers. If the investments are doing as well as state pension officials say, then they should have nothing to fear or hide. And if the auditor uncovers problems with the investments or the fees, they should be willing to own up to that.

  • A full audit is unnecessary. The state should not be hiring expensive private fund managers to handle public-employee retirement assets in the first place. End these investments now even if it means sacrificing some of the gains that pension officials say the alternative investments are providing.

  • The alternative investments should be audited, but what the state really needs to do is tighten up the rules that determine which firms are picked to handle the pension system’s assets. Too many of these well-paid private fund managers are making political contributions or getting heavily involved in other causes, such as the push for more charter schools. Tighter rules are needed more than anything else to address this.

  • The bottom line is the bottom line. The $600 million was paid out at the same time the private managers made the state $3.1 billion. So while it may look bad to some, the managers are rewarded for performance, when they make money they’re making the pension system even more money. It’s best to just leave these decisions to the experts and the state officials who specialize in this area.

  • The call for an audit and cost-benefit analysis is misplaced. The real issue is the state not making its full payments into the pension system for roughly the past two decades under governors from both political parties. Gov. Chris Christie and lawmakers need to come together with the unions and have a real discussion about putting the pension system back on solid footing. Would we still care about these fees if the fund wasn’t $40 billion in debt?

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