Bill Text: NJ A4363 | 2010-2011 | Regular Session | Introduced
Bill Title: Authorizes Director of the Division of Investment to establish a program to invest a portion of State pension funds into New Jersey businesses in the form of venture capital.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2011-11-28 - Introduced, Referred to Assembly Commerce and Economic Development Committee [A4363 Detail]
Download: New_Jersey-2010-A4363-Introduced.html
Sponsored by:
Assemblyman ALBERT COUTINHO
District 29 (Essex and Union)
SYNOPSIS
Authorizes Director of the Division of Investment to establish a program to invest a portion of State pension funds into New Jersey businesses in the form of venture capital.
CURRENT VERSION OF TEXT
As introduced.
An Act authorizing the Director of the Division of Investment to establish a program to invest a portion of State pension funds into New Jersey businesses in the form of venture capital, amending P.L.1950, c.270.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 11 of P.L.1950, c.270 (C.52:18A-89) is amended to read as follows:
11. a. Limitations, conditions and restrictions contained in any law concerning the kind or nature of investment of any of the moneys of any of the funds or accounts referred to herein shall continue in full force and effect; provided, however, that subject to any acceptance required, or limitation or restriction contained herein: the Director of the Division of Investment shall at all times have authority to invest and reinvest any such moneys in investments as defined in subsection c. of this section and, for or on behalf of any such fund or account, to sell or exchange any such investments.
b. In investing and reinvesting any and all money and property committed to the director's investment discretion from any source whatsoever, and in acquiring, retaining, selling, exchanging and managing investments, the Director of the Division of Investment shall exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In making each investment, the director may, depending on the nature and objectives of the portfolio, consider the whole portfolio, provided that, in making each investment, the director shall act with the reasonable expectation that the return on each investment shall be commensurate with the risk associated with each investment. The director shall be under a duty to manage and invest the portfolio solely in the interests of the beneficiaries of the portfolio and for the exclusive purpose of providing financial benefits to the beneficiaries of the portfolio.
c. For the purposes of this section, "investments" means and includes property of every nature, real, personal and mixed, tangible and intangible, and specifically includes, solely by way of description and not by way of limitation, bonds, debentures and other corporate obligations, direct and indirect investments in equity real estate, mortgages and other direct or indirect interests in real estate or investments secured by real estate, capital stocks, common stocks, preferred stocks, diversified pools of venture capital, including but not limited to investment made pursuant to subsection d. of this section, which otherwise could be made consistent with the standard of care required by subsection b. of this section, common trust funds as defined in and regulated by sections 36 through 46 of P.L.1948, c.67 (C.17:9A-36 through 17:9A-46), repurchase agreements, securities loan transactions secured by cash, securities issued by the United States government or its agencies, or irrevocable bank letters of credit, whether directly or through a bank or similar financial institution acting as agent or trustee, mutual funds, and any other security issued by an investment company or investment trust, whether managed or not by third parties, registered under the "Investment Company Act of 1940," 15 U.S.C. s.80a-1 et seq.
No investment that is otherwise permissible under this subsection shall be considered to be unlawful solely because the investment is made indirectly or through a partnership, trust, or other legal entity.
d. The Director of the Division of Investment is authorized to establish a program to invest monies from the funds, for which the director has investment authority pursuant to section 1 of P.L.1959, c.17 (C.52:18A-88.1), into venture capital of New Jersey businesses. The director's authority granted pursuant to this section may only be exercised if it is undertaken in accordance with the director's fiduciary duties, including but not limited to subsection b. of this section, and does not jeopardize federal income tax status of the funds or the contributions made to the funds in accordance with the federal Internal Revenue Code of 1986, including but not limited to sections 401 and 414 of the federal Internal Revenue Code of 1986 (26 U.S.C. ss.401, 414). The director shall limit the scope of the program and maximum amount of investment that may be placed into venture capital of New Jersey businesses so as to benefit the whole portfolio with a reasonable expectation of return that is commensurate with the risk associated with each investment.
In accordance with section 1 of P.L.1959, c.17 (C.52:18A-88.1), the program authorized in this subsection shall be approved for investment by regulation of the State Investment Council.
As used in this subsection:
"New Jersey business" means a privately owned business entity that has its headquarters in this State and a significant percentage of its employees in this State as determined by the director.
"Venture capital" means investment in the form of equity in a New Jersey business during its early or expansion stages for the purposes of starting-up, expanding, seed capital, research and development, introduction of a product or process into the marketplace, or similar capital needs.
(cf: P.L.1997, c.26, s.26)
2. This act shall take effect immediately.
STATEMENT
This bill authorizes the Director of the Division of Investment to use a portion of the assets in the public employee retirement funds to make venture capital investments in New Jersey businesses. In so doing, the director must exercise the director's fiduciary duties, which include the requirement that any investment be made for the exclusive purpose of providing financial benefits to the beneficiaries of the funds, that the expected returns are commensurate with the risks associated with the investment, and that the investments do not jeopardize the tax-exempt status of the retirement funds under federal law.
The bill does not grant new authority to place pension fund resources as venture capital in New Jersey businesses. It instead clarifies and makes explicit the currently implied authority for such investments. The "New Jersey Directed Investment Fund," which is designed to invest a fraction of the State's pension funds in New Jersey businesses, was set up in 2007 in accordance with the existing implicit statutory authority for such investments.
