The fund posted a return of 4.3% for the quarter, bringing its total market value to $87.5 billion, which was still more than $7 billion below where it stood just one year ago, according to a report from the New Jersey Treasury Department’s Division of Investment.
“Investors seem to be looking for optimism in the market, so we have seen a rebound,” Division of Investment Director Shoaib Khan told the State Investment Council during a virtual meeting Wednesday.
New Jersey’s pension fund supports the retirement of more than 815,000 active and retired state and local government workers, and it has long been among the worst-funded in the nation.
Gov. Phil Murphy’s administration, along with the help of state lawmakers, has made significant strides in bringing the system back to full funding.
The last two state budgets included full payments to the pension fund of roughly $7 billion each year, the first time that’s been done in a quarter century. The Democratic governor’s latest budget proposal, a massive $53.1 billion spending plan, includes another full payment of $7.1 billion.
Investment losses over the past year have eaten away at much of those gains, however. After rising to nearly $100 billion by the end of 2021, the fund lost about 14% on investments last year and closed out 2022 with a market value of $83.7 billion.
Mounting headwinds early in 2022 prompted fund managers to unload equities and increase the amount of cash on hand, something Khan reiterated at Wednesday’s meeting. The strategy likely prevented even heavier losses, and the increase in cash positions the fund to capitalize when markets begin to settle down and recover.
The latest returns mark a positive shift, but investment managers continue to face several hurdles, including persistent high inflation and rising interest rates, as a possible recession looms over capital markets worldwide.
“We continue to see volatile markets,” Khan said, adding that “regional banking risks are certainly the newer concerns.”
The collapse of Silicon Valley Bank, a California-based financial institution that in March became the second-largest bank failure in U.S. history, sent shockwaves through the global financial system and has continued to be a concern for policymakers and investors.
“Also there’s the concern of a recession, which is at the top of the list,” Khan said. “Caution is still warranted.”
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