A ‘new’ public pension: NJ’s $32B police & fire fund becomes independent
The Police & Firemen's Retirement System of N.J. – the nation’s largest police and fire pension plan – has finalized the transfer of assets from the N.J. Division of Investment, enabling the fund to manage investments independently.
A large pension plan in New Jersey is moving forward with its plan to withdraw from the state’s public fund management system and invest approximately $1.4 billion in private markets in 2025.
The Police and Fireman’s Retirement System of New Jersey (PFRSNJ) announced on April 4 that it had completed its split from the New Jersey Division of Investments (DOI). The retirement system is nation’s largest police and fire pension plan in the U.S., with a value of approximately $32 billion.
According to reporting from the Wall Street Journal, the pension group initially plans to invest $500 million in private equity, $500 million in private credit, and $300 million in real estate. It will earmark another $170 million for infrastructure. The change will take place over a period of months.
“For the last decade, we have been fighting to protect the pensions of the brave men and women that serve as police officers and firefighters in New Jersey, and the final transfer of assets marks the culmination of those efforts” said Ed Donnelly, PFRSNJ Chairman. “This is a seminal moment for our members who have rightly demanded that the pension system they pay into is transparent, accountable, conflict-free, and high-performing. That is how the PFRSNJ is built to operate, a member-first pension system.”
A troubled history
Public pensions have been a source of controversy in New Jersey, where former Governor Chris Christie froze pension cost-of-living increases for public retirees in 2011. In addition, the chief investment officer of PFRSNJ resigned in March 2022 after possible ERISA violations were found concerning some public pensions. Making improvements to the public pension system were a big part of Gov. Phil Murphy’s state budget address in February.
Previously, Murphy had signed a bill in 2018 transferring reasonability for PFRSNJ fund assets from the DOI to a newly formed board of trustees with PFRSNJ.
Police and firefighter union representatives had argued that they could do a better job of managing investments for their members and retirees. For its part, the police and firefighters fund credited DOI for the recent transition.
“Reaching this significant milestone was only possible thanks to our close partnership with the Division of Investments, which has shared in our mission to do what’s right for firefighters, police officers and municipalities,” said Donnelly. “Our collaboration with DOI helped to make this a seamless transition. Taking the time to do this prudently ensured that both PFRSNJ and the other plans were protected throughout this process.”
An article in Yahoo! Finance noted that many states are struggling with under-funded pension plans. “Volatile markets, risky investment portfolios, and unfunded liabilities that are still substantial in many states are among the other challenges confronting pension-fund managers throughout the nation,” the article said.
Some good news
The state pension fund received some good news last fall, when state officials announced that that the New Jersey Pension Fund had recorded a net gain of 9.1% for the 2023 fiscal year, beating the benchmark return of 8.4%.
Related: 3M to freeze pension plans in 2028: Will other companies follow suit?
By comparison, the state fund lost a net -7.9% in fiscal 2022, an article in Pensions and Investments said.
According to an October article in NJ Spotlight News, the change represented a large increase in overall market value. “The surge in market value also coincided with state government’s relatively recent return to funding full employer pension contributions in the annual budget, a practice that allowed the fund to maximize the upswing in investment returns during the 2023 fiscal year,” the article said.