The New Jersey Division of Investments is seeking to invest USD500 million or more in commodity-linked notes. The USD67.5 billion division is also scouring the market for active commodity managers.
The fund wants exposure to commodities for diversification, to hedge against inflation, and because it expects global growth, driven by emerging market countries, to cause demand for commodities to increase over the next several years. It held off making investments last year because it expected a global soft landing to cause commodity prices to level off in the near term, said Tom Vincz, spokesman. The division decided against entering total-return swaps to get commodity exposure because it would take several months to execute customized International Swaps and Derivatives Association agreements with dealers.
Issuers of most commodity-linked notes must have a minimum credit rating of A from both Moody's Investors Service and Standard & Poor's. Liquidity and pricing will also be important.
