Bill > S259

Introduced Session

This bill prohibits the State of New Jersey from investing the assets of any pension or annuity fund under the management of the Division of Investment in the Department of the Treasury in hedge funds and derivative contracts. The division has up to three years to complete the divestiture of holdings in prohibited investments that predate the enactment of this legislation. The 2008 financial meltdown has brought to light the enormous risks that investors take when they dabble in under-regulated hedge funds and derivative contracts. Hedge funds suffered debilitating losses when credit markets dried up. Since the investment strategy of many hedge funds relies on the availability of cheap credit, the credit crunch tore asunder the foundation of many highly leveraged hedge funds. The derivative market fared no better, as derivative contracts turned out to have been largely unsecured. American International Group Inc. (AIG), a major player in the scantily regulated derivatives market, did not even remotely have the financial wherewithal to meet its obligations when the assets underlying its derivative contracts soured. A massive bailout of AIG by the federal government staved off a complete collapse of the derivative market and the global financial system. Considering the horrid events of the fall of 2008, it has become abundantly clear that the fiduciary responsibility of the State of New Jersey is incompatible with investing pension and annuity funds in exceedingly risky and poorly supervised hedge funds and derivatives. This assessment holds true notwithstanding the real regulatory improvements ushered in by the ''Dodd-Frank Wall Street Reform and Consumer Protection Act'' of 2010.

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Shirley Turner (D)*, 

Introduced in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee (on 01/13/2026)

Official Document