May 9 (Bloomberg) — No other U.S. pension, endowment or foundation manager has invested as heavily in emerging-market ETFs as the New Jersey Pension Fund, a $3.2 billion gamble at its height. Now the state's reversing course.

The $76.8 billion fund, the 12th largest public pension manager in the U.S., has cut its holding of developing-nation exchange-traded funds to less than $1.8 billion, according to filings through March 31 compiled by Bloomberg. The fund's managers had boosted the position from just $115 million in 2009 to over $3 billion by the end of 2012.

New Jersey is souring on the trade just as the market is showing signs of rebounding following the worst annual performance relative to developed equities since 1998. The MSCI emerging-markets index has gained 10 percent from a five-month low reached Feb. 5 as demand picks up for riskier assets after an economic slowdown in China and a reduction in U.S. monetary stimulus shook investor confidence at the start of the year.