Proposed Investment in Visium Balanced Fund

Memorandum to: State Investment Council
From: Timothy Walsh, Director
Subject: Proposed Investment in Visium Balanced Fund, L.P.

The New Jersey Division of Investment (“Division”) is proposing an investment of up to $150 million in Visium Balanced Fund, L.P. (“Visium” or “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:

  • Specialized Health Care Expertise: The firm’s specialized sector focused research gives them an edge over generalist funds that invest in the healthcare space. Visium has six portfolio management teams for the Fund responsible for pharmaceuticals, biotech, medical services and medical devices sub-sectors. The Division will look to leverage relationship to generate investment ideas for internally managed portfolios.
  • Market Neutral Exposure: The Fund is managed with a market neutral exposure (+/-10%), making it a good complement to the long-biased orientation of a number of the managers in the equity-oriented hedge fund portfolio.
  • Experienced Portfolio Manager with Large Team: Visium was founded in November 2005 by Dr. Jacob Gottlieb along with the healthcare team which spun out of Balyansy Asset Management. Dr. Gottlieb has 14 years experience in the investment industry, a medical degree from NYC Medical School and a BA from Brown University. Visium has 75 employees, 49 of which are investment professionals. Thirty of the investment professionals are dedicated to the Fund. The senior members of the investment team have worked together for an average of six years.
  • Attractive Return Profile: 10.93% annualized return with 9.74% SD from inception through March 2012. The Fund ranks in the top quartile since inception among equity long/short managers on an absolute return and risk adjusted return basis.

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 Visium Balanced Fund, L.P Fund will be considered an equity oriented 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 May 16, 2012. 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 May 24, 2012 meeting.

Source: State of New Jersey State Investment Council