New Jersey officials yesterday announced that the state’s cash management fund for its pension systems will invest $700 million in Citi and Merrill Lynch & Co.
The $81.3 billion fund, which invests on behalf of the state’s seven retirement systems, will buy $400 million and $300 million of convertible preferred shares from Citi and Merrill, respectively, according to a statement released by the state’s Division of Investment. The department chose the investments as a way to further tap into the financial services marketplace.
“In both cases, the investments provide for a significant current yield and the opportunity to benefit from potential appreciation in the underlying common stock of these firms,” according to the prepared statement. “The timing of these investments coincides with the division’s view that opportunities have now emerged within the financial services sector that appear attractive from a long-term perspective.”
Citi yesterday announced a nearly $10 billion net loss during the final quarter of 2007, or $1.99 per share, with the company’s exposure to the subprime housing market as one factor in the earnings drop, according to a Citi press release.
Merrill will release its fourth-quarter earnings tomorrow. The company yesterday announced its plans to sell $6.6 billion of convertible preferred stock in private placements to long-term investors.
While this is the pension fund’s first direct purchase with the companies, it has invested in both firms in the past through the market. Prior to yesterday’s announcement, the division had $12.94 million of common shares of Citi, at a market value of $365.5 million, and $1.4 million common shares of Merrill, at a market value of $69.9 million, according to Susan Burrows Farber, the division’s chief administrative officer.
New Jersey’s pension fund had “strong absolute and relative performance” during calendar year 2007, with the department to release last year’s performance results later this week.