New Jersey starts fund of funds

New Jersey may have lost The Sopranos, but it has gained a new investment tool aimed at boosting businesses in the Garden State.

The state has committed $100 million to the New Jersey Direct Investment Fund (NJDIF), a $105 million fund of funds launched to satisfy the twin goals of achieving high returns for New Jersey’s pension fund and promoting economic growth.

Commitments from the fund are required to go to companies with headquarters or significant operations in New Jersey, or to companies willing to move to the state or expand operations there.

The investment came from the state’s $82 billion pension fund. Lehman Brothers is serving as general partner and contributed $5 million to the fund.

NJDIF is earmarked for small to mid-cap buyouts, growth equity and venture capital funds, as well as direct investments in companies issuing securities outside of a public offering. The program took roughly a year to plan and was born from discussions between the investment council and the state’s Economic Development Authority, which was looking to trumpet the low interest rates and tax incentives available for New Jersey-based companies. The investment division was already familiar with Lehman Brothers, having invested in the firm’s venture capital fund of funds in 2006.

William Clark, director of the New Jersey Division of Investment, acknowledges that the results of other in-state economically targeted investment funds have been mixed. But he says he’s confident New Jersey can make it work. He cited the California Public Employees’ Retirement System, which in 2001 launched a similar program, and which took some time to find its footing.

New Jersey currently has $4.8 billion committed to private equity and $1.3 billion invested. Its average annual investment commitments run between $1.8 billion and $2.5 billion. —Joshua Payne