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NJ loses appetite for secondaries funds

The New Jersey Division of Investment hasn’t invested in a secondaries fund since 2008 and has no plans to in the near future.

The amount of capital raised globally for secondaries is keeping the New Jersey Division of Investment from committing to secondaries funds, Secondaries Investor has learned. It believes fund managers are forced to pay premium prices in order to deploy surplus capital, according to sources familiar with the $77 billion institutional investor’s thinking.

New Jersey declined to comment.

The institution hasn’t invested in a secondaries fund since 2008, when it committed $77.5 million to Partners Group Secondary 2008, according to documents from the State Investment Council’s meeting last week. That same year, New Jersey committed $100 million to Neuberger Berman’s Secondary Opportunities Fund II, which closed on $1.8 billion. New Jersey also has two 2006-vintage secondaries funds in its portfolio: Partners Group Secondary 2006 and Lexington Capital Partners VI.

Six years later, while New Jersey is clearly keen to use the secondaries market directly as a form of active portfolio management, it isn’t planning to commit to other secondaries funds.

New Jersey hasn’t re-upped with its existing secondaries fund managers either. Neuberger Berman closed its latest secondaries fund on its $2 billion hard-cap at the end of last year and Lexington is in market targeting $8 billion for its eighth fund. New Jersey is said to have talked to Neuberger Berman and will likely talk to Lexington, but will be biased toward its plans to not commit.

For now, New Jersey will rely on the four secondaries funds in its portfolio and other vehicles and separate accounts that are set up to make other types of investments including co-investments and secondaries. New Jersey currently has an $800 million separate account with BlackRock Private Equity and a $200 million separate account with Neuberger Berman, according to PEI’s Research and Analytics division.