Labor group complains about New Jersey investments

A labor group filed an ethics complaint Friday claiming it was improper that the man who oversees investments of New Jersey's pension funds was also involved in Gov. Chris Christie's re-election campaign.

The New Jersey AFL-CIO is asking the state Ethics Commission to look into State Investment Council chairman Robert Grady, who holds that unpaid position in addition to serving as managing director at Denver-based Cheyenne Capital, a private equity fund.

Christie appointed Grady to the position in 2010.

Citing an article in the International Business Times, the group says the state has increased the amount of investments in hedge funds with what it calls "substantial fees" for investment advisers who contributed to Christie's campaign and the state Republican party.

The group says prohibitions against using investment managers who have donated to politicians were lifted earlier this year.

Christie spokesman Kevin Roberts calls the filing "a cheap political stunt based on shoddy, distorted reporting."

Christopher Santarelli, a spokeswoman for the state treasury department, said it is state employees who decide who will manage pension fund money, not the investment council.

He also said that the state's use of alternative investments including hedge funds and bank plans is in line with peers. He said the strategy helped minimize losses in 2008 and 2009, when stock prices fell sharply.

Grady, who lives in Jackson, Wyoming, told The Associated Press that he was cleared by the state treasury department's ethics officer before he participated as a policy adviser to Christie's re-election campaign. He says that no pension investment decisions were discussed with campaign officials.

In his letter Friday to the Ethics Commission, New Jersey AFL-CIO president Charles Wowkanech says he wants a probe of whether fees paid to fund managers have hurt public workers' pension funds. Christie's administration says the funds have performed well and that the long-term sustainability is at risk because of the structure of the pension system, not the investment strategy.

"There is a direct cost to the State's residents by virtue of these decisions to put more and more pension money into politically connected private equity firms," Wowkanech wrote.

Tom Byrne, a former New Jersey Democratic State Committee chairman who serves on the investment council, said he believes the criticism is unfounded. He said that the funds in question have performed well and that a rule originally proposed by Grady that requires fund managers demonstrate performance in the top 25 percent of their niche has insulated their selection from politics.

"My interpretation of this is that there are people in the labor movement who are frustrated with this governor and the decades-long underfunding of the pension system, so they're just lobbing some grenades," he said. "I don't think it's justified by the facts and circumstances at all."

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