New York Times columnist questions Raimondo's pension investment strategy

Oct 20, 2013

The disputes over State General Treasurer Gina Raimondo’s pension investment strategy rages on. The latest  salvo comes from Gretchen Morgenson, the respected financial columnist for the New York Times.

In today’s edition (Sunday Oct. 20) Morgenson raises many of the points that others, including Rhode Island organized labor leaders and Rolling Stone magazine have mentioned. But it won’t be as easy for Raimondo, who declined a request from Morgenson for an interview, to swat this one away. That’s because Morgenson isn’t a labor union financed opponent of Raimondo.  Or a polemical latter-day Hunter S. Thompson wannabe writing for a magazine better known for its coverage of the music scene than high finance.

Morgenson is a Pulitzer-winning financial writer who has long covered Wall Street for the Times. Her column, entitled ``How to Pay Millions and Lag Behind the Market’’ examines Raimondo’s strategy of shifting pension investments from traditional sources, such as stocks and bonds, to hedge funds.

``In less than two years, he Rhode Island pension system has ramped up its investments in hedge funds, private equity and venture capital from zero to almost $2 billion, or one-quarter  of its assets under management,’’ writes Morgenson. ``But this mix of investments hasn’t outperformed the fund’s peers…’’

Former State Treasurer Frank Caprio made that point in a recent interview with RI Public Radio. But because he has announced his candidacy for treasurer and has obvious political motivations, some have questioned his credibility.

No serious observer questions Morgenson’s credentials.

The Times columnist also touched on the secrecy and high fees involved with hedge funds. ``Unfortunately the hedge funds held by the state have underperformed the overall stock market so far this year. As of August31, the most recent data available, the R.I. State Investment Commission said its 10 hedge funds investing in stocks returned an average of 8.73 percent.’’ Morgenson noted that this return did not come near to matching the 16.15 percent return of the Standard & Poor’s 500-stock index during this period.

``When the investments that retirees in any state are relying on involve high costs, opacity and conflicts, that can only increase the hazards,’’ writes Morgenson.