Taveras invests 20% in hedge funds, more than Raimondo

May 8th, 2013 at 4:20 pm by under Nesi's Notes, On the Main Site

raimondo_taveras_common_cause_2011It turns out that the Democratic gubernatorial hopeful who has the biggest chunk of pension money invested in hedge funds isn’t Treasurer Gina Raimondo – it’s Providence Mayor Angel Taveras.

Providence has invested 19.75% of its total pension assets in hedge funds, the Taveras administration disclosed Tuesday after WPRI.com requested a breakdown of its investment portfolio.

Rhode Island’s state pension system has invested somewhat less in hedge funds – 14.6% of assets as of April – under a new investment strategy implemented by Treasurer Gina Raimondo soon after she took office in 2011.

Providence’s Board of Investment Commissioners, which is chaired by the mayor and oversees the city’s pension portfolio, started investing in hedge funds on the advice of its longtime financial consultant, Boston-based Wainwright Investment Counsel, Taveras spokesman David Ortiz told WPRI.com. The investment board meets roughly once a month.

Ortiz said the city was already investing nearly 20% of its money in hedge funds when Taveras succeeded now-Congressman David Cicilline in January 2011. Raimondo, by contrast, moved to add hedge funds to the state’s portfolio a few months after she took over from Frank Caprio that same year.

“The asset mix in Providence’s pension portfolio has remained essentially static since we took office,” Ortiz said. “We relied on the advice of Wainwright. They’ve managed the city’s portfolio for many years, and the fund has performed well relative to peers.”

Providence’s pension investments earned an 11.2% return during 2012, less than the 12.5% that the state’s investments earned, according to Ortiz and the State Investment Commission. Providence expects to earn an average return of 8.25% on its investments over the long term, while the state expects to earn 7.5%.

Ortiz said the Taveras administration didn’t have information available about the amount of fees it pays to hedge funds, although city officials “asked a while ago” for Wainwright to provide details.

“We’re awaiting reply,” he said.

Raimondo’s investment strategy has come under withering criticism over the last month from Forbes.com contributor Edward Siedle, president of Benchmark Financial Services, who argued in one post that “the smart pension money would steer clear of hedge funds, not pile into them.”

Robert Walsh, executive director of the National Education Association Rhode Island teachers union and a frequent Raimondo critic, quipped recently that the treasurer’s defense of her hedge-fund strategy might as well rely on “magic beans,” tweeting: “Top corporate pension funds have 2% in hedge, not 20%+.”

Taveras is now planning to review Providence’s heavy investment in hedge funds, according to Ortiz.

“Recently, compelling questions have been raised about hedge funds and other nontraditional investments by public retirement systems,” he said. “We’ve asked Wainwright for more information about those kinds of investments in Providence’s pension fund, including the fees paid to investment managers.”

Coincidentally, Raimondo said during her 2010 campaign that Providence’s pension fund invested $1 million in Point Judith Capital, the venture capital firm she co-founded, after Wainwright approached Point Judith and then recommended the investment to the Board of Investment Commissioners.

Providence’s pension fund is significantly smaller than the state of Rhode Island’s. Their assets totaled $326.5 million and $7.2 billion, respectively, as of June 30. Following the adoption of separate overhauls pushed through by Taveras and Raimondo, the city’s pension plan is 36% funded and the state’s plan is 59% funded.

Prov_RI_pension_investments_April_2013

• Related: Raimondo puts 14% in hedge funds, 10 times US median (April 29)

(photo: Ted Nesi/WPRI)

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31 Responses to “Taveras invests 20% in hedge funds, more than Raimondo”

  1. William Berube says:

    “Coincidentally, Raimondo said during her 2010 campaign that Providence’s pension fund invested $1 million in Point Judith Capital, the venture capital firm she co-founded, after Wainwright approached Point Judith and then recommended the investment to the Board of Investment Commissioners.”

    Coincidentally!?!?!?!

  2. doug in south county says:

    This just sounds more like “reform” for the benefit of the financial industry and a few politicians at the expense of those who are paying the freight hoping to see a benefit at the end of their work years. Seidle on WPRO today tells it like it is. We need to know how much these people are making off our backs while cutting our benefits to line their own pockets.

  3. Tiverton says:

    The picture is getting clearer….We are going too see a Republican Governor .

  4. George Sutton says:

    Alternative investments = hedge funds + venture capital. And in that case, Providence is 20% and RI is 25% – or am I missing something Ted?

    1. Ted Nesi says:

      Hedge funds and private equity combined: Providence 21%, RI 22%.

    2. Keith Fernandes says:

      So where’s the fire George? Ted just gave you those numbers. Both comparable Because your very next post went after Raimundo. So what is your agenda?

  5. George Sutton says:

    Has Gina Raimondo answered these questions yet? What is she hiding?
    There is a petition from 87 Rhode Islanders who are demanding that she
    do it.

    http://www.change.org/petitions/treasurer-gina-raimondo-answer-these-questions-on-transparency-honesty-regarding-pension-reform

  6. Ed says:

    This is Rhode Island, someone knows a guy that gets overcompensated by the taxpayers. Does this sound familiar? It is done by our elected officals and public sector union employees. Rhode Island needs sunshine laws! There needs to be full disclosure of all the states business. Even though public sector employee think otherwise, government works for the taxpayers not the other way around.
    My problem is elminate the pension system and give 401Ks next only offer index funds. The fees are lower and they perform as well as the market. Hold the public sector employees responsible for their own retirement just like people who work in the private sector. Talking about the private sector it is time to privatize most public sector jobs. There are fire fighting companies that can do the same job most likely for less than the taxpayers are paying. In MASS the fire departments don’t have ambulances any more they have been outsourced. It is more cost effective without cutting the service. I want to see an open bidding process. It has to be open to all companies not just Rhode Island based companies. The perception of Rhode Island is the state is home to criminals.

    1. Cosmo says:

      Ed I’m with you 100% but it will never happen. Even the pension reform that was enacted only got done because the GA finally figured out they might face a total taxpayer revolt otherwise. And even then they did only the minimum necessary. The demoncrats and public employee unions still have this state in a choke hold and that will never change. As for open bidding, even if that happened you know it would be corrupted in short order. Every contract would just by coincidence of course be granted to a friend of a friend or family of a politician or union boss.

    2. SteveD says:

      Ed, if you want fire fighters making $12 an hour, go for it. As a matter of fact, more and more “private” fire departments are being let go by municipalities. It sounds great in the beginning, but like all for profit companies, it soon looses its luster. Highly republican Scottsdale AZ, switched about 7 years ago. Why? They didn’t answer to anyone. If profits were down? Just shut down an engine or ladder. If vacation period? No worries close a couple of stations down, who cares if someone dies? It’s all about the profit. Same goes for private ambulance, I would have no problem, except you have no control of whose coming to your house. And by the way, if someone needs transport to dialysis, your heart attack may have to wait. Defined pensions were designed for police and fire. These men and woman are not going to work till 70. As far as teachers and other workers? I’m open to that. The fees of 401K’s are also very high.

      1. Ed says:

        Steve that is all most Rhode Island public sector employees are worth, including public school teachers. Rhode Island is the perfect example of what happens when there is no competition. You have no clue about investing or fees on 401K’s you stay with companies that only work with index funds.

      2. SteveD says:

        Ed, I am a retired fire captain, city of providence. Thanks for the compliment. Now the truth about 401K Many cities in red states already had a switch over to a 401k pension. Guess what Ed? They are spending more than in the defined benefit pensions. Many are considering switching back. If 401K’s are so great, tell me why every investment newsletter, the Wall st journal, and other well respected news outlets are saying, there is no way people are going to retire with 401K’s. They are not even close to giving people a decent retirement. Plus without a disposable income, business’ suffer. We need good retirement packages, so people will, well retire and free up a job for a younger person. The way we are going now, most people will be working until death.

      3. Ed says:

        So you are one of the workfare reciepents that was getting 6% cola on your pension. Too bad you never learned as most Rhode Islander to plan for their future and have to have other take care of you. Take responsiblity and plan for your own life don’t be dependent on the government for any thing you are part of the problem you were never part of the solution. What happened in Scottsdale sounds like a Rhode Island contract. A sweetheart deal for someones idiot relative.

      4. SteveD says:

        Ed, I am not getting 6% I was getting 3%. I paid 10% of my salary every week. Your anti union hatred is showing. I try to add some clarity to a conversation, but you only insult. I have a degree in organic chemistry, and could have made a lot more. And yes I opted out. I will not let anyone go back on a contract! I do not speak to ignorant people. You will hear no more from me.

      5. Ed says:

        Steve PRIVATE SECTOR UNIONS ARE ACCEPTABLE public sector unions represent the worst of the worst. When this next contract is over all public sector employees should be let go their contract has ended. No one has a job guaranteed for life. Rates change skills change, time to hire new people, if the present people want to apply at what the new contract is offered so be it. Hire the best not what has been done and percieved how Rhode Island civil service hires, just scum that knows someone.

  7. Keith Fernandes says:

    I’m still trying to figure out what the problem is when the returns being generated are fine? Adverse times call for action, this is what both of them are doing to fund their plans. And they are succeeding. I would prefer a hybrid or straight 401k plan going forward, but if that is not palatable to everyone involved, then give these folks a break. They are trying to do something to fix a problem NOT created by them, while a lot of people (especially on these message boards of Projo, WPRI and GoLocal) only seek to try to distract. Makes me wonder what the agenda’s are when you post hiding behind pseudonyms.

    1. Cosmo says:

      There is no problem, that’s the point. As for agenda, the union folks on here are not exactly subtle, you don’t need their names to figure out their agenda.

    2. SteveD says:

      Hey Keith, the problem is……The money managers are getting kickbacks for putting funds in risky investments. GET IT! In fact Ted Siedle said yesterday, the fees are equal or greater than the stealing of the COLA. GET IT! I guess to the uneducated that is just fine, but to people that can see through the smoke screen that is Raimondo,Tavares et-al, we want answers. Gina and Angel are saying they are saving the pension, when in reality, they just shifted the money from the retirees to the Wall St vultures. GET IT YET???????????????????????? Stephen DeNinno captain providence fire. There make you feel better?

      1. SteveD says:

        Retired by the way, and while I’m at it, had my COLA and health care that we negotiated stolen away from us. I could not even invest in an IRA, until the Roth which was too late. No SS and all the lawyers are saying, the COLA will never come back, because who is in charge of whether they put the money in? Thats right the city.

      2. Ed says:

        Steve I don’t agree with kickbacks but public sector unions have been getting kick backs for years. I am not orginally from Rhode Island but as a population Rhode Islanders are the most fiscally ignornant people in the country. You people have no clue about money. Why could you not have an IRA when they first started in 1981 everyone could have opened an IRA in that year? Why could you not contribute to a non deductible IRA in 1986? You could not deduct the contribution but the aftertax dollars could be taken out without double taxation that is more than people get on their dividend stocks. Please answer why you could not save $2000 per year in one of these vehicle prior to 1997 when the Roth IRA started? How many of your brethern are landscapers a really lose term for lawn boy. Was that compensation done on the books or under the table? If they were paying taxes they could have opened Keogh Accounts and invest 25% of the part time salary in that account for retirement. Then there were the SEP-IRA the SIMPLE IRA. Under President Reagan for people who were motivated to save for retirement their were plenty of tools.

      3. SteveD says:

        Ed you are truly ignorant. I have saved my whole life. In fact I am worth probably 3 million dollars. But a contract is a contract. What idiot would invest in an IRA that is not tax deductible? Municipal pensioners were not allowed to open a tax deductible IRA. So I invested in muni bonds Puerto Rico has some great opportunities. Sorry those are only open to investors with over a million to invest. By the way I got on in 1979 not 81. P.S. your idea of contracts ending, what a joke. Who would work for a city or town knowing they will get fired in 3 years. Dope! People like you is why we need unions period.

      4. Ed says:

        Steven you don’t make sense. In 1981 everyone could contribute to a IRA. How could you employer stop you from contributing? Please answer that question. All you had to do was walk into a bank, brokerage firm, fill out the application and write a check for usually $500. Even if you started in 1979 you could have still contribitued on your own in an IRA in 1981. The maximum was $2K a year. You should have been able to come up with $2K unless you were living payday to payday. If you are making over $35K in 1986 and you wanted more money for your retirement you saved what you could. You filled and out an form 8606 and kept them until you started withdrawing the money. The percentage you put in after tax dollars was returned without beign taxable. Too bad you never worked in the private sector many times there are set contracts that are for a certain time. They do not have to be renewed. I will give you an example Rhode Island State Police are not guaranteed a job for life. What makes you think city public sector employees are so special? The only people who could work for cities and towns in Rhode Island are losers like you who have never been a productive member of society. You say you are worth $3million dollars. Is that before are the loans are paid off on triple deckers that are in your name that banks own. I think you know your pension is not secure. Many Rhode Island cities and towns are going to take chapter 9. Rhode Island is expecting a $50million dollar shortfall in tax revenue. That type of money will come fro the cuts in state aid the cities will have no choice but to take chapter 9. Puerto Rico bonds were great in the 80′s and 90′s triple B rated and back by the fed. There are better investment for the long term that you can average 14% a year. Stay with ETF in the S&P 500.

  8. Lucy L says:

    Ted Siedle was in town today and on the Cianci Pgm. He said that the total percentage the state invests in “alternative investments” is 26%.

    1. Tiverton says:

      Sorry I missed it… I do not listen to felons/ fiction radio….

      Enjoy your kool-aid Lucy

      1. Lucy L says:

        Yesterday Siedle reported that the Auditor General of RI is requiring the Treasurer to disclose all fees/payments paid for hedge funds after an audit of the fiscal year ending June 2012. This was also reported in ProJo this morning.

      2. Tiverton says:

        I’m not doubting this guy Siedle, I just do not listen to talk/ fiction radio…… Deadbeat hosts that have more ( personal ones as well ) problems then a math book, they have personal agendas, callers who they allow to spew lies…. I listened at one time, then I realized I was becoming cynical, bitter, and angry at the world, like them.

  9. William Berube says:

    The real problem is not how much the pension fund is making with its investments, but how much it is paying out in fees for these hedge funds and all other alternative investments. If the fund is paying out as much in fees as it is bringing in, the only people making money from Treasurer Raimondo’s pension reform are the investors.

  10. George Sutton says:

    Where do you get 22% Ted?

  11. Floridian says:

    There is a huge difference between Raimondo and Taveras: Providence’s investments have been handled by the same firm for decades. It’s pretty clear that Taveras doesn’t have a lot of hedge fund manager friends. If he did he would have a heck of a lot more money in his campaign account.

  12. William Berube says:

    I agree. I’m not at all happy with the way he treated his own cities retirees and workers… they were treated horribly, no two ways about it, but thwse hedge funds and other alternative investments were already a part of the Providence pension fund when Mayor Tavaras took office. I would be curious to know when the pension system began going against conventional wisdom and started loading up on these investments, and also who pushed for them, and have those parties benefited financially from the changes that were made?

  13. [...] Now that we know both Gina Raimondo and Angel Taveras have hedge funds managing big chunks of Rhode Island’s biggest and second-biggest public [...]