• Update: Raimondo fires back after Forbes.com attack – read the Q&A (April 5)
Rhode Island’s political Twittersphere lit up late Thursday after Forbes.com posted a blistering attack on Treasurer Gina Raimondo by Edward “Ted” Siedle, an outside contributor to the site, entitled “Rhode Island Public Pension ‘Reform’ Looks More Like Wall Street Feeding Frenzy.” Siedle isn’t a novice: he’s been quoted about pension management by outlets including The Wall Street Journal and The New York Times.
There’s much to dissect in Siedle’s tough critique, and Raimondo’s office will undoubtedly need to respond in the coming days. One of his points isn’t up for debate, however: the treasurer has significantly restructured the pension fund’s investment portfolio, as Raimondo herself discussed in the recent Institutional Investor cover story about her that apparently attracted Siedle’s attention.
Raimondo has continued the pension fund’s move out of domestic and international equity investments, which began under her predecessor Frank Caprio, with a corresponding 16% jump in the share of the fund invested in alternatives – private equity, real return and hedge funds. Here’s a chart showing the change:
The chart looks at 2006, before Caprio took office; 2010, Caprio’s final full year in charge; and 2012, Raimondo’s first. To put the percentages in perspective, in dollar terms the pension fund’s alternative investments jumped from $393 million on June 30, 2010, to $1.6 billion two years later.
Raimondo has said in the past that the move to an arguably more aggressive investment strategy is necessary because of the pension fund’s significant shortfall – it was about 60% funded after the 2011 overhaul, and only 48% before the new law passed. She thinks big returns are needed to fill the gap.
“In government there is a view that the status quo is safe,” Raimondo told Institutional Investor. “But when it comes to investing, doing nothing is making a decision to do something.”