A Black-owned investment firm last week sued New Jersey, alleging pension fund investors took its ideas and hired an industry giant instead because of bias against minority- and women-owned companies.
Newark-based Blueprint Capital Advisors, started in 2015, said in its federal lawsuit that it began discussions then with the N.J. Division of Investment about using alternative investments and paying lower fees. But instead the state hired BlackRock Inc., the world’s biggest asset manager.
The lawsuit alleges a state official, Christopher McDonough, told Blueprint cofounder Jacob Walthour that the investment board making such decisions was “not a fan of investing with women- and minority-owned firms.” It says Blueprint was forced to accept handling a smaller amount of pension investment. (Of the $1.2 billion in assets it oversees, $175 million is from New Jersey.) The suit — which also names BlackRock, a firm that consulted on the deal and several individuals as defendants — doesn’t specify an amount of money sought in damages.
The state Department of the Treasury said it not only doesn’t discriminate against minority- and women-owned businesses and fund managers, it has programs to reach out to them. “There is no factual basis for Blueprint’s allegations and the claims of racial discrimination, retaliation and misappropriation of proprietary information are without merit,” it said in a statement.
BlackRock said it doesn’t tolerate biased or unethical conduct, and a review by it and an outside law firm “found nothing inconsistent with our standards nor anything suggesting any wrongdoing by BlackRock.”
The state and the rest of the defendants said they will fight the lawsuit vigorously. With its pension system among the most deeply indebted in the nation, state government needs to try to avoid even a modest settlement payment.
Blueprint filed the lawsuit regarding events from four years ago in the midst of a current national focus on the treatment of Blacks by law enforcement. State Sen. Ron Rice, a Democrat who resides in Newark, said what happened to Blueprint and Walthour “appears to be a modern-day lynching.”
The events in question occurred during the administration of former Gov. Chris Christie.
The Division of Investment officials involved at that time, including McDonough, left early in the Murphy administration in 2018 because it was turning away from alternative investments. In his gubernatorial campaign, Murphy had said pension investments in hedge funds and private equity “have cost us hundreds of millions in fees while delivering only middling results.”
Murphy seems to be at little risk of blame regarding the lawsuit’s claims. If it prevailed, though, the state’s period of alternative investments might take a bite out of state finances one more time.