Christopher McDonough — director of New Jersey’s Division of Investments since 2014 — is leaving next month to become co-chief investment officer at a consulting firm, Institutional Investor has learned.
McDonough this week gave notice of his resignation from the $78 billion fund, outgoing investment committee chair Tom Byrne confirmed Friday afternoon.
The organization has not named a replacement, but insiders expect deputy director Corey Amon to get the top job in the interim.
“Chris has been really great to work with,” Byrne said by phone. “He’s a bright guy, hardworking, conscientious, a straight shooter. It’s made my volunteer oversight role all the more enjoyable. I think we all had a good run.”
McDonough has accepted the co-CIO role at Investment Performance Services, firm CEO Mitchell Green confirmed Friday. The consulting firm advises on $45 billion in client assets, primarily from Taft-Hartley plans, which invest union pensions.
IPS’s headquarters are in Savannah, Georgia, but McDonough will work out of its Newtown, Pennsylvania, office, outside of Philadelphia, Green said. McDonough is expected to begin sometime in September.
“I will get to focus on many of the things I enjoyed most about my role in New Jersey — asset allocation, investment research, manager diligence — in addition to working with clients, which I’m looking forward to,” McDonough said when reached for comment. He described IPS as a “truly impressive, client-focused business” built by professionals who are dedicated to the mission.
“Certainly I’ll miss the team here,” McDonough continued. “I had the benefit of working with a group of investors and committee members that were always working toward the same goal, even though we didn’t always agree. The performance has been strong, annualized at over 8 percent in my time here. I’m proud of what we achieved through innovative investment structures and a willingness to be early. That’s worked out well for us, both for net performance and alignment of interest.”
McDonough’s resignation comes the same week as Byrne’s exit from the board, and follows the March departure of alternatives chief Samantha Rosenstock. She spent close to three years at the pension fund. On Tuesday, Man Group announced it had hired Rosenstock to a senior investment role in its hedge fund unit, Man FRM.
[II Deep Dive: Man Group’s Hedge Fund Unit Hires NJ Pension’s Alternatives Chief]
Rosenstock has yet to be replaced.
“Turnover is a problem,” Byrne acknowledged. “Both my predecessor Bob Grady and I, and our acting vice-chair have all made that case to the front office. Compensation and the working environment are both difficult, and it makes it hard to retain top people. I also frankly think that with the new governor saying he basically wants to halt the alternatives program, it’s pretty hard to hire people into that division.”
New Jersey Governor Phil Murphy’s campaign platform called for divesting state pension assets from hedge funds and private equity, as a way to help solve its funding crisis. “These investments have cost us hundreds of millions in fees while delivering only middling results,” Murphy’s campaign website stated.
In addition to facing political pressures, New Jersey’s investment staffers are also underpaid relative to the modest standard among large U.S. public pension funds.
McDonough’s annual salary for 2018 is $200,000, according to public records, up from the $166,000 he made as deputy director in 2011. Amon, the current deputy, makes $190,000.
New Jersey Treasurer Elizabeth Maher Muoio paid tribute to McDonough when asked for comment.
“I want to thank Chris for his years of service and dedication to our Division of Investment,” she said in a statement. “He has served the division, the state, and our pensioners with distinction and professionalism and we wish him all the best in his new endeavor.”
