Proposed Investment in Arden Institutional Advisors, LP

Memorandum to: State Investment Council
From: Timothy Walsh, Director
Subject: Proposed Investment in Arden Institutional Advisors, LP

The New Jersey Division of Investment (the “Division”) is proposing an addition up to $150 million to our investment in Arden Institutional Advisors, LP Fund. This memorandum is presented to the State Investment Council (the “Council”) pursuant to N.J.A.C. 17:16-69.9.

The Division is recommending this investment for a number of reasons. The Pension Fund is $800 million underweight in absolute return hedge funds and this add-on investment will move the allocation closer to target in a segment of the portfolio that should benefit from the current macro driven environment. The proposed portfolio will be managed by a very seasoned portfolio manager – Shakil Riaz, who joined Arden in 2009 after 15 years of managing an internal hedge fund of funds for J.P. Morgan’s proprietary capital. The customized account provides the Division with access to closed top tier Global Macro managers and access to funds with improved liquidity. Also, the Division has the ability to review all proposed additions and redemptions within the portfolio. This will allow us to structure the portfolio in a manner that will complement the direct investment portfolio. A report of the Investment Policy Committee (“IPC”) summarizing the details of the proposed investment is attached.

Division Staff and its hedge fund consultant, Cliffwater LLC, undertook extensive due diligence on the proposed investment in accordance with the Division’s Alternative Investment Due Diligence Procedures. As part of its due diligence process, staff determined that the fund has not engaged a third-party solicitor (a “placement agent”) in connection with New Jersey’s potential investment.

We will work with representatives of the Division of Law and outside counsel to review and negotiate specific terms of the legal documents to govern the investment. In addition, the proposed investment must comply with the Council’s regulation governing political contributions (N.J.A.C. 17:16-4).

Please note that the investment is authorized pursuant to Articles 69 and 100 of the Council’s regulations. The Arden Institutional Advisors, LP will be considered a multi-strategy hedge fund investment, as defined under N.J.A.C. 17:16-100.1.

A formal written due diligence report for the proposed investment was sent to each member of the IPC and a meeting of the Committee was held on November 22, 2011. In addition to the formal written due diligence report, all other information obtained by the Division on the investment was made available to the IPC.

We look forward to discussing the proposed investment at the Council’s December 8, 2011 meeting.

Source: State of New Jersey State Investment Council