PFRS UPDATE
Investing in the new PFRS is underway
As we navigate toward the new management of
the Police and Fire Retirement System (PFRS), let’s
follow the money.
The new PFRS Trustee Board is up and running,
and I have been elected vice chairman. I am also the
chair of the investment committee, so this initial re-
port will provide some data about the current state
of our pension funding.
We have learned more about the breakdown of
JAMES
the New Jersey Division of Investments, which is re-
KOMPANY sponsible for managing the assets of the five active
unions: PFRS, the Public Employees’ Retirement
System (PERS), the Judicial Retirement System (JRS), the State Po-
lice Retirement System (SPRS) and the Teachers’ Pension Annuity
Fund.
These funds are comingled in one general fund under the Divi-
sion of Investments, which has approximately $78 billion under its
umbrella. The PFRS portion is about one-third of that, or approxi-
mately $26 billion.
We have until July 5, when we officially take over management
to assume control of that portfolio. Assets for PFRS will be allocat-
ed into a separate pension fund. We will have an identical portfolio
holding the same securities that Division of Investments holds for
the remaining four funds.
But we will have complete autonomy over our investments.
When we take control of the ship, we can choose to stay status quo
with the current investment philosophy. It will make sense to main-
tain the status quo while we set our investment policy and assess
our ability to buy and sell.
Our portfolio consists of 75 percent domestic and international
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NEW JERSEY COPS
■ MARCH 2019
equities and fixed-income products. The remaining 25 percent is
private equity and private credit funds and real estate ventures. Pri-
or to 2018, we were 100 percent vested in fixed-income securities.
Since then, we have completely diversified, adding real estate ven-
tures, hedge funds and cash positions.
As far as performance, for fiscal year 2018, the pension fund re-
turn was 9.06 percent. From 2004 to 2018, the performance was
7.59. The fund has been creeping up three-quarters of a percent
each year.
On July 5, the investment committee for the new PFRS Trustee
Board will begin determining where we are going with our invest-
ments. Before we get there, we will hire a chief investment officer
(CIO). We’ve been vetting candidates using a search firm. The CIO
will act on our recommendations to implement our investment
strategy.
Beyond the investment committee, the management and poli-
cy committee with fellow PBA member Ray Heck as chair is busy
working to hire an executive director for the new PFRS. This is the
person who will captain the entire ship as the new PFRS is designed
to run under Chapter 55.
Another key hire for us will be the board secretary. As Ray not-
ed when we spoke to the membership at the PBA Mini Convention
earlier this month, this will be the person who keeps us moving,
much like the city clerk in a municipality.
Our meetings continue and we will keep you posted. Initially, we
described this endeavor as building a house from the ground up.
As Ray pointed out, we are learning that it is like building the Taj
Mahal.
Stay tuned.