By Muskan Arora
CIO Shoaib Khan looks
to the late David Swensen, former CIO of Yale University Endowment for
inspiration, with a holistic approach toward portfolio construction and management
when running the $70 billion New Jersey Pension Plan.
Utilizing his experience in managing capital
through previous financial crisis, CIO Khan implemented the “cautiously
optimistic barbell approach”, meaning the fund was able to maintain a certain
overweight in the level of cash which has reduced the risk profile of the
portfolio whilst providing liquidity.
Unlike most pensions,
NJ pension fund did not have a denominator effect in any of its asset classes.
Further, the system reported a return of 10.74% for the fiscal year 2024, with
a cash equivalent holding of approximately 9% in fiscal year 2024.
This has opened a way
to bringing in new investment managers on the roster, with a ticket size of
approx. $150m to $350m for each allocation.
With the most
exposure to private equity within its alternative investments at 10.6%, the CIO
recently approved six additional commitments in their recent meeting.
Further, through its
venture capital sleeve, the CIO is bullish towards investing in new start-ups
and new technologies that are currently in the developmental stage.
Please Click Here to Register Now!
To make
cost-effective private equity deals, the CIO will typically go into an SMA or a
commingled fund and then create a sidecar for co-investments.
“That allows to bring
down fees, but at the same time, we’re also to hopefully investing and sizing
up to the higher conviction names and the higher conviction positions in that
portfolio,” said CIO Khan.
By maintaining an
allocation to U.S. public equities that is near its long term target, the plan
has kept up with the market. However, the CIO has a watchful eye on avoiding “a
prolonged issue of holding on to zombie companies on the private side”.
“With increasing use
of continuation vehicles by general partners in private equity, what you don’t
want to see is that companies that shouldn’t continue to be invested in, things
that should be excited, that timeline on those types of situations shouldn’t be
extended,” said the CIO.
The pension plan also
has an emerging managers program to capture broad opportunities across the
market.
“Going forward, the
more diversification by these sorts of factors we have in a portfolio, I think
the less impact we will see from cyclical factors like the drying up of M&A
and IPO activities. As a lot of the smaller, the mid-level or mid-size opportunities,
exit opportunities, aren’t always reliant upon the IPO or aren’t relying on the
M&A activity to pick up,” added the CIO.
Trip to India
Khan recently took a trip to India to scout opportunities within the local market and to get an
insight into the government’s “drawing board”.
Visiting New Delhi,
Bangalore and Mumbai, the CIO believes that the country is “well positioned to
benefit from the changes that are occurring in the global supply chain level”.
One major focus of
the Indian government remains towards the development of infrastructure, as the New Jersey CIO plans to increase its allocation to emerging markets in the coming years.
“That has to be the
foundation because if you’re going to grow the supply line, the manufacturing and
all of the things that come with that and really go from one stage to the next
and the next from there, you need a strong infrastructure,” said the CIO in an
exclusive interview with Markets Group.
