NJ Pension Fund Posts 15% Gain, But First Quarter Returns Lag

The New Jersey state pension fund, which serves more than 800,000 public workers, recorded investment returns of nearly 15% during the fiscal year that ended on June 30. Preliminary estimates reviewed on Wednesday by the New Jersey State Investment Council indicate that this performance exceeded the fund's assumed rate of return by 7.82 percentage points. The gains were part of a four-year streak where net returns surpassed the 7% benchmark, following increases of approximately 11% in both 2025 and 2024, and 9% in 2023.

Deepak Raj, the chair of the investment council, described the results as a "very good job" for state officials. He noted that the strong performance provides comfort in an "exceptionally volatile environment." The fund's diversified portfolio contributed to the positive outcome, with every asset class generating net positive returns. Emerging markets led the gains at 39.53%, while U.S. equity rose by 23.20% and international developed market equity increased by 21.61%.

Despite the strong close to the previous year, the start of the current fiscal year has been slower. Returns totaled less than 1% through the end of September. State officials attributed the dip to unfavorable market conditions and the uncertainty often associated with upcoming midterm elections. They noted that it is still early in the fiscal year, which began on July 1.

The investment council also faced continued public pressure to divest from specific holdings. Numerous members of the public testified during a lengthy comment period, urging the fund to drop investments in Israeli bonds and Palantir. Critics cited human rights concerns, pointing to Israel's actions in Gaza and the West Bank, as well as Palantir's role in federal immigration enforcement under President Donald Trump. Abdul Rehman Khan, a law professor at Seton Hall University, argued that states have historically stepped up when international bodies failed, stating, "We are not mandated to invest in Israel."

State government officials continue to fully fund the annual employer obligation, a practice that now totals more than $7 billion when including legally required contributions from the New Jersey Lottery. Governor Mikie Sherrill worked with the Legislature to maintain this funding in her first year in office, extending a streak that began under former Governor Phil Murphy. This approach reversed a decades-long practice of underfunding contributions.

State Treasurer Aaron Binder said in a statement that the strong results and the commitment to full payments represent a major step in stabilizing the fund. He emphasized that these measures help protect the pensions of public workers. The Division of Investment and outside professionals manage the fund's assets, while the investment council formulates policies governing those investments without handling day-to-day operations.

The improved fiscal management has been recognized by credit rating agencies. KBRA, a New York-based firm, raised New Jersey's debt grade to AA- in the summer. The analysts cited the state's "increasingly well-established track record of full actuarial pension funding" as a key factor. This is the highest grade KBRA has assigned to New Jersey since it began issuing such ratings in 2015. Sherrill called the upgrade "great news for New Jersey."