Outstanding Contribution Orin Kramer
Chairman
New Jersey State Investment Council
As chairman of the New Jersey State Investment Council, which oversees the division that manages New Jersey’s $67.3 billion pension fund, Orin Kramer pushed the system to invest in hedge funds and other alternatives. Appointed to the board in 2002 by then-governor James McGreevey, Kramer not only had to battle some incumbent board members, he also had to overcome objections from the longtime consultant and union officials who represented some pension beneficiaries and members of New Jersey’s in-house Division of Investment asset management team.
At the time, New Jersey desperately needed to diversify following dramatic losses in the stock market collapse of 2001. New Jersey was also unique in being the only state pension system still then running all of its money in-house. Despite a barrage of criticism, sometimes directed at him personally, Kramer and the board succeeded in modernizing the pension fund’s asset allocation, which includes a sizable investment in hedge funds. The shift of capital from equities to hedge funds has been a success, saving New Jersey more than $1 billion during the recent economic collapse.
A graduate of Yale University and Columbia University School of Law, the now 64-year-old Kramer was associate director of the White House domestic policy staff during the Carter Administration. After the White House, he worked in the financial institutions group of consulting firm McKinsey & Co. before going on to found his own consulting practice, and then, in 1992, launching his own hedge fund firm, Boston Provident Partners, which he still manages today.
Even as he succeeded in high finance, Kramer never abandoned his commitment to public policy. He has served on a number of key advisory boards, including President Bill Clinton’s Commission to Study Capital Budgeting. One of a core group of politically connected financial executives who were important early supporters of President Barack Obama, a close associate of former New Jersey governor Jon Corzine and president of the leadership council of the Robert F. Kennedy Center for Justice and Human Rights, Kramer could be forgiven for having little time left to devote to the cause of public pension funds. Instead he continues to be an advocate for the diversification benefits of hedge funds, not just for New Jersey but also for public funds generally.
Recently Kramer has been opining on the issue of how public plans account for their funding status, demonstrating that funding levels are actually lower than is commonly acknowledged. Not only do states and municipalities need to confront the true nature of their funding shortfalls but, Kramer argues, good fund management, including further diversification and a commitment to hedge funds, is one of the few hopes that defined benefit funds have to save themselves. Kramer, who has consistently spoken out to correct misperceptions about the hedge fund industry, is encouraging New Jersey to raise its hedge fund allocation.
Mindful of how the system can be abused, Kramer drafted rules prohibiting money managers seeking to do business with New Jersey from making political contributions to state officials. He has been instrumental in ensuring that New Jersey’s hedge fund investment process cannot be tainted by any form of undue influence, providing a model of corporate governance other public plans would do well to emulate.
Orin Kramer and other Hedge Fund Industry Awards winners will be honored at a gala dinner and awards ceremony at the Mandarin Oriental in New York City on Monday, June 21, 2010.
