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New Jersey's pension fund rose 6.31% during the month of December, though the plan, like many across the U.S., ended the year sharply down from 2007 levels.

The fund, with an estimated portfolio value of $63.9 billion, rose $3.3 billion for the final month of the year, thanks to strong results from its domestic bond, international stock and domestic stock portfolios, the state's director of the division of investment told the plan's investment council Thursday. For the full year, New Jersey's pension fund is down an estimated 17.47%, a level that still managed to beat its benchmark of negative 20.11%.

New Jersey had made large purchases in investment-grade corporate bonds in October through December, and that portfolio delivered a nearly 11% return for December, according to Director William G Clark's report to the state's investment council. The plan's international equity portfolio rose 8% and its domestic equity portfolio rose 2%, outperforming their benchmarks for the month.

Clark said in his report to the council that the fund was a net buyer of $30 million in U.S. equities in December, primarily in small and mid-cap exchange traded funds and convertible bonds and preferred stock. Those purchases were partially offset by sales of stocks in the financial and technology sectors, including sales of Prudential Financial Inc. (PRU), Wells Fargo & Co. (WFC), Merrill Lynch & Co. (MER), Bank of America Corp. (BAC), Intel Corp. (INTC) and General Electric Co (GE). The fund shifted to buying long-term corporate bonds in lieu of owning the underlying stocks, with purchases that included Alcoa Inc. (AA), Cameron Corp. (CAM) and Sprint Nextel Corp. (S).

It made net purchases of about $198.2 million in domestic fixed income in December, including British Telecom, Cameron Corp., Northrop Grumman Corp. (NOC), Procter & Gamble Co. (PG), Transocean Ltd. (TRIG) and Weatherford International Ltd. (WFT). The purchases were partially offset by sales of Ginnie Mae-backed mortgage securities.

The plan also funded $157.9 million in alternative investments during December, according to Clark's report. The state is planning to slow its new commitments to private equity, real estate and hedge funds, and focus more on credit-related investments within private equity and real estate. It's also shifting to purchasing interests in existing alternative investment partnerships in the secondary market, on the theory that institutional investors will be forced to sell these portions of their portfolios to raise cash and rebalance.

-By Lynn Cowan, Dow Jones Newswires; 301-270-0323; lynn.cowan@dowjones.com

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