This bill amends current New Jersey law to prohibit the investment of pension and annuity funds managed by the Division of Investment in hedge funds and derivative contracts. Specifically, it introduces new legal language that defines "hedge fund" and "derivative contract," and clarifies that these types of investments are not permissible under the law. The bill mandates that the State Investment Council and the Director of the Division of Investment must divest from any existing investments in these prohibited categories within three years of the bill's enactment. Additionally, the Director is required to report to the Legislature on the status of these investments, including any divestments made, for a period of time following the bill's effective date.

The rationale behind this legislation stems from the financial risks associated with hedge funds and derivatives, particularly highlighted by the 2008 financial crisis, which exposed the vulnerabilities of these investment vehicles. The bill emphasizes the fiduciary responsibility of the State to protect the interests of beneficiaries by avoiding investments that are deemed excessively risky and poorly regulated. By enacting this legislation, New Jersey aims to ensure that its pension and annuity funds are managed in a manner that prioritizes financial stability and accountability.

Statutes affected:
Introduced: 52:18A-89