William Clark

New Jersey Investment Council Chairman Orin Kramer says the state's pension fund - under attack by Republicans for losing $118 in a Lehman Brothers investment - lost less over the last year than the funds of the 30 other states who make the information available on the Internet.

Kramer made the argument in a letter to state Sen. Joseph Pennacchio (R-Montville), who has been a vocal critic of the State Investment Council's decision to invest in Lehman shortly before it collapsed.  It was a response to a letter Pennacchio wrote to State Division of Investment Director William Clark to question why the state would not reveal which in-state companies the fund invested in as part of the two-year-old NB/NJ Custom Investment Fund program. 

In an interview with PolitickerNJ.com, Kramer said that the ranking is vindication of his strategy to diversify the state's holdings - a strategy that the Lehman investment ultimately came out of -- and that politicizing the council will jeopardize its future performance.

"The portfolio diversification that made that possible has been under political attack," said Kramer.  "When people make the pension system a political football, seeing that kind of ranking again becomes harder and harder to achieve." 

Although the state's pension fund lost 14.2%, or $10.9 billion, between June, 2008 and June, 2009, the average for the other states was 18.8%.  North Carolina tied New Jersey, also losing 14.2%. 

The state is currently suing Lehman Brothers' former executives and directors, alleging that the company misrepresented its financial position when the state made its $182 million investment in Lehman shares. 

"An irony about Lehman Brothers is that a major source of New Jersey's outperformance arose from underweighting financial services companies.  For every investor, some decisions produce atrocious outcomes," wrote Kramer in his letter to Pennacchio.  "While the State believes it was misled in making that decision, Lehman was obviously one of those atrocious outcomes."

New Jersey State Investment Council Chairman Orin Kramer

Hedge fund manager Orin Kramer, who heads the New Jersey Investment Council, wants to set the record straight: the state pension fund’s losses would have been worse if he hadn’t begun diversifying its portfolio six years ago.

Kramer disputed a report that appeared on PolitickerNJ.com last week that contended he presided over the loss of $25 billion from New Jersey’s pension fund.  Upon taking the post in 2002, Kramer said that he recognized the need to for the state’s multi-billion dollar fund to diversify its holdings.  New Jersey, he said, stood alone in the proportion of stocks to other assets that its pension fund held.

“The reason that I joined the council is because New Jersey had the most undiversified, equity-heavy portfolio of any major comparable institutional fund in the country,” said Kramer.  “Compared to every major endowment, corporate pension fund and public pension fund, New Jersey was uniquely undiversified and heavily dependent on equities.”