State Sen. Bill Baroni (R-Hamilton) says that the State Investment Council's investment of hundreds of millions of dollars in pension funds related to a company whose founder started a hedge fund that Governor Corzine invests in demonstrates at least "the perception of politics" in how the state chooses to invest.
Baroni pointed to three funds the state invests with related to Texas Pacific Group (TPG), which shares an address with TPG-Axon, a hedge fund Corzine personally invests in. Republicans insist the two funds are related, though Corzine and spokesmen for TPG and TPG-Axon say they're administered completely separately.
"People can make all kinds of arguments about this fund that name and their offices are right next to each other but they don't know each other. That may work on Wall Street, but that does not work on Broad Street in Hamilton," said Baroni in a conference call with reporters.
Baroni said that the investment is an effect of a policy shift that the State Investment Council undertook in 2005, in which they have hired more outside money managers to invest state funds. It's a policy of diversification that the leaders of the council champion, though Baroni argued that it "opened up the door to the perception of politics."
"That door has now been kicked in," said Baroni, who represents the legislative district with the most public workers in the state.
Republican gubernatorial nominee Christopher Christie emphasized Baroni's point in a later statement.
"It's one thing for Jon Corzine to gamble with his own personal wealth, but it's another to put at risk New Jersey taxpayer dollars by turning them over to his casino license holding partners at TPG," he said. "Corzine's conflicts concerning TPG continue to become deeper and more obvious. He should divest his interest immediately and start telling the truth about the nature and extent of his holdings."
But Corzine had no input on the decision to invest in TPG private equity funds, according to State Investment Council Chairman Orin Kramer. Rather, as with all investments, the actual decisions were made by staffers who are not political appointees.
"Public employees who work in the division made those decisions. They selected those managers. I would stand behind them, but if others want to criticize them, that's their prerogative," said Kramer.
Kramer, who has long argued that the state's pension fund would be in much worse shape had he not ushered in the new policy Baroni railed against, said that more than 20 other states invest their pension funds with TPG.
"New Jersey is the only place where people try to criticize the principle of portfolio diversification. New Jersey's uniquely undiversified portfolio has cost the state many billions of dollars. The council's view is that we can't let politics stand in the way of reducing portfolio risk," he said. "We have begun moving more toward the norm of what every other major institutional fund in America does. There is no endowment, no corporate fund, no major public fund with the investment theory that these people are espousing."
Baroni and Christie put the amount of state pension funds invested with TPG at $565 million, but Department of Treasury spokesman Tom Vincz said the actual number is less than half of that: $260 million. The state invests $3.6 billion in private equity funds for its pensions.
"TPG is one of the largest and most successful private equity investment firms in the world, and they count many other state pension funds, corporate pension funds, endowments and foundations as investors," said Vincz. "These commitments and investments are made following a scrupulous due diligence process conducted by Division of Investment employees, which culminates with a presentation of the investments to the State Investment Council for review."
The State Investment Council implemented its current investment policy in 2005, before Corzine took office.