New Jersey Administrative Code › Title 17 - TREASURY - GENERAL › Chapter 4A - POLICE AND FIREMEN'S RETIREMENT SYSTEM INVESTMENT RULES › Subchapter 1 - GENERAL PROVISIONS › Section 17:4A-1.2 - Definitions

Current through Register Vol. 56, No. 14, July 15, 2024
The following words and terms, when used in this chapter,
				  shall have the following meanings, unless the context clearly indicates
				  otherwise:
"Absolute return strategy" means an investment strategy with
				  the goal of achieving positive returns with less correlation than
				  long-term-only strategies to traditional performance benchmarks.
"Bank loans" mean loans that are originated by commercial
				  and/or investment banks or other lending syndicates. Bank loans are typically
				  comprised of loans to corporations and tend to be the most senior debt in the
				  corporate debt structure.
"Board" means the Board of Trustees of the Police and
				  Firemen's Retirement System of New Jersey, established pursuant to
				  N.J.S.A.
				  43:16A-13.a.
"Bridge financing" means interim financing used by entities
				  until a long-term financing option can be arranged. Bridge financing typically
				  comes in the form of a debt obligation or equity investment.
"Cash collateral" means cash and cash equivalents delivered
				  by a borrower to secure its obligations under a securities lending
				  agreement.
"Cash equivalents" mean United States treasury obligations,
				  irrevocable bank letters of credit, or any other security that can be converted
				  immediately to cash.
"Certificates of deposit" mean debt instruments issued by a
				  bank or trust company, or by a wholly owned subsidiary or branch of a bank or
				  trust company.
"Chief Investment Officer" means the employed full-time
				  in-house investment advisor selected by the Board of Trustees of the Police and
				  Firemen's Retirement System of New Jersey, pursuant to
				  N.J.S.A.
				  43:16A-13.a(21).
"Closed-end global, regional, or country funds" mean funds
				  that invest in underlying securities that concentrate on a specific industry,
				  geographic market, or sector.
"Co-investment" means an investment by two parties (usually
				  the limited partner and the general partner of a fund) alongside each other. If
				  a limited partner in a fund has co-investment rights, it can invest directly in
				  a company that is also an investment of the fund. The limited partner,
				  therefore, ends up with two separate stakes in the company--one indirectly
				  through the fund; one directly in the company. Co-investment may also include
				  multiple like-minded institutional investors investing in a specific company or
				  portfolio.
"Collateralized notes and mortgages" mean securities fully
				  collateralized by mortgage-backed securities, credit card receivables,
				  automobile loans, home equity loans, bank loans, or other forms of receivables
				  originated in the United States, but does not include investments made pursuant
				  to N.J.A.C. 17:4A-10, Private Credit Investments, 18, Real Assets, 24, Private
				  Equity, or 26, Absolute Return Strategy Investments.
"Commercial paper" means secured or unsecured short-term debt
				  issued by a company.
"Commingled funds" means all open-end and closed-end pooled
				  investment vehicles. A commingled fund may be organized as a group trust,
				  partnership, limited liability company, corporation, insurance company separate
				  account, or other multiple ownership entity. An investment in a commingled fund
				  may take the form of an investment in the fund or in the trustee, general
				  partner, or other managing member of such fund.
"Commodity-linked investments" mean equity or debt
				  investments from which all, or a portion, of the return is linked to the price
				  of a particular commodity or equity security, or to an index of such prices.
				  These include commodity-indexed deposits, loans, debt issues, and derivative
				  products, such as forwards, futures, options, and swaps. In these transactions,
				  the interest, principal, or both, or payment streams in the case of swaps, are
				  linked to the price of a commodity.
"Commodity-related investments" mean equity or debt
				  investments in the exploration, production, processing, transportation,
				  storage, or trading of commodities, or other similar activities.
"Common pension fund" means a common trust fund established
				  by the Director of the Division of Investment pursuant to
				  N.J.S.A.
				  52:18A-90.1.
"Common stock" means shares of stock, other than preferred
				  stock, representing ownership in a corporation or other form of legal
				  entity.
"Control" means the power to exercise a controlling influence
				  over the management or policies of an investment management firm or political
				  action committee.
"Convertible debt issue" means a debt obligation of any
				  corporation or other form of legal entity that is convertible into the common
				  stock of the entity.
"Convertible preferred stock" means preferred stock of any
				  corporation or other form of legal entity that is convertible into the common
				  stock of the entity.
"Core real estate" means investments in existing, stabilized
				  (meaning at least 80 percent occupied), well-leased assets.
"Covered call options" mean call options, including
				  index-based call options, sold on common stocks held in the pertinent
				  portfolio, except that index-based call options may be sold and subsequently
				  repurchased if substantially all of the underlying securities contained in the
				  index correspond to securities eligible for investment by, and are actually
				  held in, the pertinent portfolio.
"Credit default swap transactions" mean agreements between
				  two parties, whereby one party makes periodic payments to the other party and
				  receives the promise of a payoff if a third-party defaults. The former party
				  receives credit protection and is said to be the "buyer" while the other party
				  provides credit protection and is said to be the "seller." The risk of default
				  is transferred from the buyer of the swap to the seller of the swap.
"Credit structured products" mean investments whose cash flow
				  characteristics depend upon a pool of collateral, one or more securities,
				  indices, or similar strategies designed to replicate the return of a basket of
				  securities, or that have embedded forwards or options or securities where the
				  investment return is contingent on, or sensitive to, changes in the value of
				  underlying assets, indices, interest rates, or cash flows.
"Currency swap transactions" mean agreements between two
				  parties that involve the exchange of principal and interest in one currency for
				  the same in another currency.
"Debtor-in-possession financings" mean financing arranged by
				  an entity while in a bankruptcy reorganization process.
"Direct investment" means the purchase of an interest in a
				  company or venture directly, rather than through an investment vehicle.
"Director" means the Director of the Division of
				  Investment.
"Division of Investment" means the Division of Investment,
				  Department of the Treasury of the State of New Jersey.
"Equity investments" mean common stock, convertible and
				  non-convertible preferred stock, rights, convertible debt issues, or any other
				  security representing an ownership interest in a corporation, bank, master
				  limited partnership, limited liability company, limited liability partnership,
				  or other form of legal entity. Equity investments may also include investments
				  in exchange-traded funds and closed-end global, regional, or country funds.
				  Equity investments do not include investments made pursuant to N.J.A.C.
				  17:4A-10, Private Credit Investments, 18, Real Assets, 24, Private Equity, or
				  26, Absolute Return Strategy Investments.
"Equity swap transactions" mean agreements between two
				  parties to exchange cash flows while still holding the original assets. The two
				  sets of nominally equal cash flows are exchanged pursuant to the terms of the
				  swap and may involve an equity-based cash flow that is traded for a
				  fixed-income cash flow.
"Exchange-traded funds" mean funds that invest in underlying
				  securities that track a predetermined index or strategy, a commodity, or a
				  basket of assets, and whose shares can be traded like shares of common
				  stock.
"Foreign currency transactions" mean agreements between two
				  parties to exchange two currencies at a specific time in the future. Foreign
				  currency transactions include both spot and forward contracts.
"Forward contracts" mean agreements to sell or buy a
				  specified amount of a specified foreign currency at a rate fixed at the time of
				  the transaction, but with delivery at a specified future time. These contracts
				  take place on a date after the date that a spot contract settles. Forward
				  exchange contracts may involve the purchase or sale of foreign currency.
"Funds-of-funds" mean funds set up to distribute investments
				  among a selection of fund managers, who in turn, invest the capital
				  directly.
"Futures contract" means an agreement between a buyer and a
				  seller that is based on a referenced item, such as financial indices or
				  interest rates, or a financial instrument, such as equity or fixed income
				  securities, physical commodities, or currencies. Futures contracts may call for
				  physical delivery of a specified quantity of the underlying asset at a
				  specified price (futures or strike price) and date, or be settled in cash.
				  Prices are determined by competitive bids on the applicable exchange. The terms
				  of the contract are standardized and the applicable exchange is the
				  counterparty to each cleared transaction.
"Global collateralized notes" mean securities collateralized
				  by loans, receivables, claims, or any other assets.
"Global debt obligations" mean debt issued by any
				  corporation, bank, trust, master limited partnership, limited liability
				  company, or other form of legal entity, but does not include investments made
				  pursuant to N.J.A.C. 17:4A-10, Private Credit Investments, 18, Real Assets, 24,
				  Private Equity, or 26, Absolute Return Strategy Investments.
"Government agency obligations" mean debt obligations of any
				  United States governmental agency that are not explicitly guaranteed by the
				  full faith and credit of the United States government.
"Hedging" means combining a long position in an asset
				  denominated in a currency other than United States dollars with a short
				  position in the international currency in which the asset is denominated in
				  order to offset fluctuations in the value of the underlying asset attributable
				  to international currency fluctuations.
"High yield debt" means a debt obligation with a lower credit
				  rating than investment-grade debt.
"Interest rate swap transactions" mean agreements between two
				  parties where one stream of future interest payments is exchanged for another
				  according to a prearranged formula. Interest rate swap transactions often
				  exchange a fixed payment for a floating payment that is linked to an interest
				  rate.
"International government and agency obligations" mean direct
				  debt obligations of a sovereign government or its political subdivisions, debt
				  obligations of agencies of a sovereign government that are unconditionally
				  guaranteed as to principal and interest by the sovereign government's full
				  faith and credit, and debt obligations of international agencies or financial
				  institutions that are backed, but not necessarily guaranteed, by the collective
				  credit of multiple sovereign governments, but does not include investments made
				  pursuant to N.J.A.C. 17:4A-10, Private Credit Investments, 18, Real Assets, 24,
				  Private Equity, or 26, Absolute Return Strategy Investments.
"Investment committee" means the investment committee
				  established by the Board pursuant to
				  N.J.S.A.
				  43:16A-13(e).
"Investment management firm" means one or more natural
				  persons, corporations, partnerships, or other entities, incorporated or
				  unincorporated, that provide investment management services.
"Investment management professional" means:
1. Any person associated with an investment
				management firm who is primarily engaged in the provision of investment
				management services;
2. Any person
				associated with an investment management firm involved in client development or
				the solicitation of business from pension fund clients, including pension fund
				clients other than the PFRSNJ;
3.
				Any person associated with an investment management firm who is a supervisor of
				any person described at paragraphs 1 or 2 above, up through and including, the
				chief executive officer or similarly situated official; or
4. Any person associated with an investment
				management firm, its parent company, or any other entity that controls the
				investment management firm, who is a member of the executive or management
				committee of such firm or controlling entity, or similarly situated officials,
				if any.
"Investment management services" mean:
1. The business of making or recommending
				investment management decisions for, or on behalf of, the PFRSNJ;
2. The business of advising or managing a
				separate entity that makes or recommends investment management decisions for,
				or on behalf of, the PFRSNJ, including as general partner, investment manager,
				or similar entity of an investment vehicle; or
3. The provision of financial advisory or
				investment consulting services to the PFRSNJ.
"Investment vehicle" means an investment in which the PFRSNJ
				  invests directly pursuant to N.J.A.C. 17:4A-10, Private Credit Investments, 18,
				  Real Assets, 24, Private Equity, or 26, Absolute Return Strategy
				  Investments.
"Joint venture" means a contractual agreement joining two or
				  more parties for the purpose of executing a particular undertaking. All parties
				  agree to share in the profits and losses of the enterprise.
"Mezzanine debt" means subordinated debt that may include
				  embedded equity instruments.
"Money market funds" mean mutual funds that invest in
				  short-term debt instruments and seek to maintain a stable share price of one
				  dollar.
"Mortgage-backed pass-through securities" mean pass-through
				  securities that are fully collateralized by residential or commercial mortgage
				  securities and are issued by a sponsor deemed by the Board to be based in the
				  United States, but does not include investments made pursuant to N.J.A.C.
				  17:4A-10, Private Credit Investments, 18, Real Assets, 24, Private Equity, or
				  26, Absolute Return Strategy Investments. In determining whether a sponsor is
				  based in the United States, the factors to be considered include, but are not
				  limited to, the sponsor's country of incorporation, its main equity trading
				  market, its shareholder base, the geographical distribution of its operations,
				  the location of its headquarters, and the country in which investors consider
				  the sponsor to be most appropriately classified.
"Mortgage-backed securities" mean asset-backed securities
				  that represent a right to receive a portion of the cash flows from mortgage
				  loans. Residential mortgage-backed securities are typically secured by
				  single-family or two-to-four-family real estate. Commercial mortgage-backed
				  securities are typically secured by commercial and multi-family properties,
				  such as apartment buildings, hotels, schools, retail, or office properties,
				  industrial properties, and other commercial sites.
"Mortgage-backed senior debt securities" mean senior debt
				  securities that are fully collateralized by mortgage securities, but does not
				  include investments made pursuant to N.J.A.C. 17:4A-10, Private Credit
				  Investments, 18, Real Assets, 24, Private Equity, or 26, Absolute Return
				  Strategy Investments.
"Non-convertible preferred stock" means shares of stock that
				  provide a dividend that is paid before any dividends are paid to holders of
				  common stock and confer additional rights above and beyond those conferred by
				  common stock; the shares are not convertible into common stock of the issuing
				  entity. Non-convertible preferred stocks do not include investments made
				  pursuant to N.J.A.C. 17:4A-10, Private Credit Investments, 18, Real Assets, 24,
				  Private Equity, or 26, Absolute Return Strategy Investments.
"Non-core real estate" means investments in value-added or
				  opportunistic strategies, including direct property investment with lease-up,
				  development, or redevelopment risk. Non-core real estate includes
				  recapitalizations across capital structures and property types and access to
				  niche markets.
"Operational cash" means funds that have not been allocated
				  for investment by the Board, but have instead been reserved for payment of
				  benefits and administrative expenses.
"Opportunistic credit" means primary and secondary
				  opportunities in performing, stressed, and distressed public and private
				  securities. This includes senior loans, high yield debt, debtor-in-possession
				  financings, and bridge financings, as well as post-reorganization
				  equity.
"Opportunistic investments" mean investments that have one or
				  more readily identifiable attributes that are sufficiently different from those
				  of other asset classes permitted pursuant to this chapter, so as to be outside
				  the scope of such asset classes.
"Payment" means any gift, subscription, loan, advance, or
				  deposit of money or anything of value.
"PFRSNJ" means the Police and Firemen's Retirement System of
				  New Jersey established pursuant to
				  N.J.S.A.
				  43:16A-2.
"PFRSNJ-managed fund assets" mean PFRSNJ assets under the
				  control and management of the Board, excluding the PFRSNJ proportionate
				  interest in the common pension funds.
"PFRSNJ proportionate" means the percentage calculated by
				  dividing the PFRSNJ's then-outstanding units of participation in a common
				  pension fund by the total number of then-outstanding units of participation in
				  the same common pension fund.
"Political contribution" means any gift, subscription, loan,
				  advance, or deposit of money or anything of value made:
1. For the purpose of influencing any
				election for State office;
2. For
				the purpose of influencing any election for local office by a person who is
				also a State official or an employee or advisor of either the State or a State
				official;
3. For payment of debt
				incurred in connection with any such election; or
4. For transition or inaugural expenses
				incurred by the successful candidate in any such election.
"Political party" means any political party or political
				  committee organized in the State, including, without limitation, State
				  legislative leadership committees, county committees, and independent
				  committees. The term "political party" does not include a Federal or national
				  campaign committee or a non-State political committee, even if such Federal or
				  national or non-State political committee makes payments or contributions to
				  which this subchapter would otherwise apply.
"Post-reorganization equity" means equity issued by an entity
				  as part of a bankruptcy, reorganization, or other similar restructuring.
"Preferred stock" means shares of stock that provide a
				  dividend that is paid before any dividends are paid to holders of common stock
				  and additional rights above and beyond those conferred by common stock.
"Private credit investments" mean investments in
				  opportunistic credit, global collateralized notes, bank loans, mezzanine debt,
				  credit structured products, commercial and residential mortgage-backed
				  securities, commercial and residential whole loans, and other similar
				  strategies, including through equity participation.
"Private equity" means investments generally made through
				  limited partnerships or other limited liability vehicles that, in turn,
				  generally invest in the equity or debt of companies or entire business units or
				  investment in the debt of equity of a trustee, general partner, or managing
				  member of a fund, but does not include public securities or investments made
				  pursuant to N.J.A.C. 17:4A-10, Private Credit Investments, 18, Real Assets, or
				  26, Absolute Return Strategy Investments.
"Private placement" means a negotiated sale in which the
				  securities are sold directly to institutional or private investors, rather than
				  through a public offering registered with the U.S. Securities and Exchange
				  Commission or applicable foreign regulatory body. A private placement includes
				  the sale of securities pursuant to Section 4(2), Regulation D, Regulation S, or
				  Rule 144A pursuant to the Securities Act of 1933, as amended. Private placement
				  does not include investments made pursuant to N.J.A.C. 17:4A-10, Private Credit
				  Investments, 18, Real Assets, 24, Private Equity, or 26, Absolute Return
				  Strategy Investments.
"Public authority" means any state or any political
				  subdivision thereof, any authority, department, district, or commission, or any
				  agency or instrumentality of any of the foregoing, or any agency or
				  instrumentality of the Federal government, or a commission or other public body
				  created by an Act of Congress or pursuant to a compact between any two or more
				  states.
"Public authority revenue obligations" mean any bonds or
				  other interest-bearing obligations of a public authority, the principal and
				  interest of which are by their terms payable from a specified revenue source,
				  but does not include investments made pursuant to N.J.A.C. 17:4A-10, Private
				  Credit Investments, 18, Real Assets, 24, Private Equity, or 26, Absolute Return
				  Strategy Investments.
"Put options" mean put options, including index-based put
				  options, purchased or written for securities, assets, or foreign currencies
				  permissible for investment.
"Put spreads" mean the purchase of put options on particular
				  underlying securities, assets, or foreign currencies permissible for
				  investment, with the simultaneous writing of put options on the same underlying
				  securities, assets, or currencies, at a lower strike price.
"Real assets" mean equity or debt investments in real estate,
				  infrastructure, energy, utilities, water, timber, agriculture, metals, mining
				  and royalty trusts, and commodity-related and commodity-linked investments.
				  Real assets include investments in products, services, and technology related
				  to the above categories.
"Real estate" includes core real estate and non-core real
				  estate.
"Repurchase agreements" mean agreements between parties
				  whereby one party sells another a security at a specified price with a
				  commitment to repurchase the security at a later date at a specified
				  price.
"Royalty trusts" mean investments that generate an income
				  stream for investors; these primarily include natural resource assets and
				  pharmaceuticals and medical devices.
"Securities lending agent" means a third-party engaged to
				  effect securities lending transactions on behalf of the PFRSNJ.
"Securities lending agreement" means a legal contract between
				  a borrower and the PFRSNJ (or a securities lending agent on behalf of the
				  PFRSNJ) that governs the contractual obligations of the parties.
"Securities lending transactions" mean arrangements whereby
				  securities are loaned to a borrower in exchange for cash collateral. Ownership
				  of the securities is transferred temporarily to the borrower.
"Senior loan" means a debt financing obligation that holds
				  legal claims above other junior debt obligations. Senior loans may include
				  embedded equity instruments.
"Separate account" means an investment vehicle with a sole
				  investor that is unaffiliated with the investment vehicle's sponsor or manager.
				  An investment in a separate account may take the form of an investment in the
				  investment vehicle or in the trustee, general partner, or other managing member
				  of such investment vehicle.
"Spot contracts" mean agreements to sell or buy a specified
				  amount of a specified foreign currency at a rate fixed at the time of the
				  transaction but with settlement (payment and delivery) on the spot date. The
				  settlement cycle of spot contracts is generally related to the settlement cycle
				  of the related security transaction.
"State and municipal general obligations" mean debt
				  obligations of any state or any municipal or political subdivision thereof that
				  are backed by the full faith and credit of the obligor, but does not include
				  investments made pursuant to N.J.A.C. 17:4A-10, Private Credit Investments, 18,
				  Real Assets, 24, Private Equity, or 26, Absolute Return Strategy
				  Investments.
"State of New Jersey Cash Management Fund" means the common
				  trust fund established pursuant to, and subject to, the provisions at N.J.A.C.
				  17:16.
"State official" means any person (including any election or
				  political action committee for such person) who was, at the time of the
				  political contribution, an incumbent, candidate, or successful candidate for
				  Governor or for a seat in the Legislature. Communication with a State official
				  includes communication with the employees and advisors of such official.
"Supervisor" means a person who has supervisory
				  responsibility (whether or not related to investment management activities) for
				  an investment management professional.
"Swap transactions" mean agreements between two parties to
				  exchange securities or cash flows in the future, according to a prearranged
				  formula. Swap transactions may include equity swap transactions, currency swap
				  transactions, interest rate swap transactions, and credit default swap
				  transactions.
"Third-party solicitor" means a third-party placement agent
				  or lobbyist who solicits investment management business through direct or
				  indirect communication with a State officer, employee, or official on behalf of
				  an investment management firm, but does not include any person whose sole basis
				  of compensation from the investment management firm is the actual provision of
				  legal, accounting, engineering, real estate, or other professional advice,
				  services, or assistance. The term "third-party solicitor," when used with
				  respect to a particular investment management firm, shall not include a person
				  that directly or indirectly through one or more intermediaries, controls, or is
				  controlled by, or is under common control with, the investment management firm;
				  a third-party placement agent or lobbyist who solicits clients other than the
				  PFRSNJ to engage that investment management firm to provide investment
				  management services; or a third-party placement agent or lobbyist who solicits
				  the PFRSNJ on behalf of another investment management firm.
"Total PFRSNJ fund assets" mean PFRSNJ-managed fund assets
				  together with the PFRSNJ proportionate interest in the common pension
				  funds.
"Transient cash" means funds created by transactional
				  activity in a portfolio and that is expected to be reinvested shortly after
				  receipt.
"Treasurer" means the Treasurer of the State of New
				  Jersey
"United States Treasury obligations" mean debt obligations of
				  the United States Treasury or debt obligations of any other United States
				  governmental agency that are explicitly guaranteed by the full faith and credit
				  of the United States government.