No easy way to separate politics, state investment

By Patrick Anderson
PBN Staff Writer

Rhode Island gubernatorial campaigns usually don’t spend too much time debating the merits of different hedge funds. More

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No easy way to separate politics, state investment

By Patrick Anderson
PBN Staff Writer

Posted 3/3/14

Rhode Island gubernatorial campaigns usually don’t spend too much time debating the merits of different hedge funds.

But the public-pension fights of recent years have thrown previously under-the-radar investment decisions into the spotlight in 2014.

Last month, the state Investment Commission, led by General Treasurer Gina M. Raimondo, a Democratic candidate for governor, pulled $74.3 million out of Third Point Partners, a hedge fund controlled by billionaire investor Daniel Loeb.

The move drew questions, because Third Point has been the Rhode Island pension system’s top-performing hedge fund, returning 22 percent since Raimondo added it to the portfolio in Jan. 2012.

Loeb, an outspoken supporter and financial backer of education-reform groups, has also drawn the ire of teachers’ unions opposed to his promotion of charter schools and teacher accountability.

Raimondo said the move out of Third Point was made to reduce risk and had no basis in politics, but a Wall Street Journal editorial called it a “cave in” to secure union support in a competitive Democratic primary.

Whether Loeb’s political activities played any part in the Investment Commission’s decision to leave Third Point is unclear, but at minimum the move has renewed yearlong questions about how public money is invested and whether the process has become politicized.

Last summer Providence Mayor Angel Taveras, one of Raimondo’s primary opponents, criticized the treasurer’s use of hedge funds after the issue had been raised by opponents of the state pension overhaul she led.

Taveras’ criticism followed his decision to move $11 million from the city’s pension system out of hedge funds last year, bringing the percentage in hedge funds below that of the state’s 15 percent target.

But, while Taveras said the move was made to reduce costs and risk, some questioned whether it was also part of a strategy to tie Raimondo to Wall Street and the financial industry.

The current Rhode Island system, with the treasurer leading an independent investment board, is designed to try to insulate public-investment decisions from politics, at least in part, as are, to some degree, appointed pension boards in cities and towns.

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