New Jersey’s CIO: System ‘hasn’t missed a beat’ in PE investment despite turnover

Even while expanding its recruitment search for senior investment staff, New Jersey Division of Investment’s Shoaib Khan says there is no rush to fill vacant posts and that pacing into private assets has continued uninterrupted.

Khan, the system’s director and CIO, told Buyouts that New Jersey “hasn’t missed a beat” in its capital deployment after losing key personnel and needing to fill top roles across private equity, real estate and real assets. The system also started advertising in early July that it was looking to hire four additional senior portfolio managers to strengthen its investment teams.

New Jersey has had a several-year run of turnover among its private markets staff, Buyouts previously reported. The most high-profile departures came last year when the system lost Dana Johns, who led the pension’s PE portfolio for more than two years, and heads of the real estate and real assets programs, Buyouts also reported.

Khan told Buyouts that the roughly $85 billion system, which oversees assets for seven public pension plans, has grown significantly – by $10 billion over the past year – and maintained vintage-year diversification throughout those developments.

“We have some turnover here and there, just like every other organization in the landscape,” Khan said. “But that doesn’t mean that just because a person has moved on or that we haven’t filled up the role that we stop. … Just because an asset class head leaves and we have a vacancy, it doesn’t mean that we’re not presenting new investments.”

For its July 29 meeting, the system’s staff was slated to present five new potential investments, according to Khan. Three of those commitments were to private equity funds. Khan did not disclose further details on those bets.

Khan suggested those potential investments exemplify how the system continues to deploy capital at a consistent pace when opportunities arise, particularly as the system remains below allocation targets across its private asset buckets.

The system has an 11 percent target for private equity versus a 9 percent actual allocation. That under-weighted position is not a new development for the system and has stretched on for several years, according to a Buyouts report.

Khan signaled that the system’s new senior investment staff could help work through a robust pipeline of commitments during a steady ramp-up to allocation goals.

“All of those asset classes that we are recruiting for at this point based on our asset allocation targets are below their target,” he said. “So, we know that we are going to be adding more allocations and more investments in each of those asset classes. Therefore, strengthening the team makes a lot of sense from our perspective.”

Khan also articulated that the system is not stressed about quickly closing gaps and that it values the opportunity to have dry powder and be selective.

The selection of new investment staff leadership is also not a matter Khan said he feels comfortable rushing. The priority, he said, is finding the right executives with the knowledge and skill sets for the posts.

“If investment had stopped, for whatever reason, we might feel some pressure [to fill those roles quickly], but that just doesn’t happen,” he said. “It just hasn’t happened in the past. It’s not happening today, and I doubt that it would happen. That’s the beauty of a team structure.”

The structure that Khan alludes to, his five-year tenure as CIO at the system, and the involvement of many team members in monitoring and discussions with GPs, is helping ensure long-term relationship stability is not fracturing between the system and its fund managers as it waits to fill vacancies in key roles.

Still, the system’s staff are “having to do more work” in lieu of having senior leaders of asset class teams and to keep up with the portfolio’s growth, Khan admitted.

For that reason, he’s not keen on diminishing the importance of these roles to the system’s future.

“It’d be nice to get somebody on board as quickly as possible because that would alleviate some of the work,” he said. “But at the end of the day, the work gets done. We continue to source, we continue the diligence, and we are bringing things into the pipeline.”