PROVIDENCE, R.I. (WPRI) – Democratic general-treasurer candidate Seth Magaziner’s former boss is strongly defending his ex-employee’s investment credentials after they came under heavy criticism from his rival Frank Caprio.
In a new TV attack ad, Caprio’s campaign takes issue with Magaziner’s claim during a July 11 WPRI 12 debate that he’s “made strong investment returns for my clients.” The ad says Magaziner has “no licenses to manage money or any earned credentials” and is taking credit for the work of “real portfolio managers with real credentials.”
“I was absolutely appalled and disgusted for a number of reasons, one of which is Seth is obviously qualified as an investment professional – otherwise I wouldn’t have hired him,” Trillium Asset Management CEO Matthew Patsky told WPRI.com, highlighting Magaziner’s M.B.A. from the Yale School of Management and his B.A. from Brown University.
Patsky argued that Caprio either “knowingly put out a bunch of statements that he knew were false, or you really shouldn’t have somebody overseeing the investment portfolio of the state who doesn’t know the basic structure of the industry and how it’s structured.”
In a follow-up email, Caprio spokeswoman Patti Doyle stood by the criticism. Magaziner “is not licensed to have an investment record or to have clients,” she said. “As to the record of his firm, it belongs to the firm and to those who actually made investment decisions, not to a junior person who studies two of 10 sectors of the stock market.”
Evan England, Magaziner’s campaign manager, said the candidate “had direct personal oversight for over $100 million in investment positions in the Energy, Banking, and Diversified Financial industries. As the CEO of Trillium will confirm, the performance in sectors Seth oversaw was strong and a major contributor to the firm’s outperformance.”
Both sides are debating what Magaziner did during his three-and-a-half years at Trillium, a Boston-based investment management company that currently has more than $1.6 billion in assets under management. According to Magaziner’s LinkedIn profile, he rose from portfolio associate to investment analyst to vice president during his tenure at Trillium.
“The implication that I would have hired somebody who isn’t qualified annoys me,” Patsky said. “The implication that Seth actually didn’t play a role in our investment returns is annoying, because of course he did – he was a very critical part of our investment team.”
Patsky confirmed that Magaziner had “primary responsibility” for the three large industries cited by England. The CEO cited two examples of Magaziner’s contributions at Trillium: his decision to move the firm’s investments “in a big way” into more regional banks than large banks, and his push to invest more money in Citigroup Inc., as well as his leadership in a campaign to convince Citi to divest some of its noncore operations.
“In our review cycle that began at the end of 2012 and the beginning of 2013, when I sat with all of our investment professionals, I was using Seth as a model,” Patsky recalled. “I said, ‘This is what we need. We need you to understand the big picture.'”
“I can tell you he delivered consistent outperformance in his stock selection. … He added meaningfully to our performance,” Patsky said.
Doyle said that while Magaziner’s efforts may have been “important to the results of portfolio managers who actually manage money, it hardly entitles one to claim any ‘track record’ at all.” She added: “Mr. Patsky knows this and Mr. Magaziner should know it.” She noted there is no record of Magaziner’s own investment history certified under Global Investment Performance Standards (GIPS).
“If Mr. Magaziner wants to get the credit for published investment returns at Trillium he would have to have investment credentials and lead one of the investment strategies like all the portfolio managers at the firm,” Doyle said.
In response, Patsky said: “We were a team, so to just try to throw stuff at him where it says, ‘I don’t see you were a portfolio manager’ – that’s not how we operate.” Magaziner was one of 10 professionals who were part of Trillium’s Investment Management Committee, which decides how its money should be invested, he said.
“If I were [Magaziner] I would have used the word ‘we’ … but that’s only because I look at it as being part of a team, not slicing and dicing winning picks,” Patsky said. “But he did have the winning picks.”
Doyle replied: “We stand by our ad. We think if you describe Mr. Magaziner’s role in his firm and cite his claims of credit for returns to any substantial investment professional, you’ll find they themselves are ‘appalled’ by the self-aggrandizement of a junior person.”
The Caprio campaign and Patsky also sharply disagreed over whether Magaziner should have had a license or professional credential from the Chartered Financial Analyst (CFA) Program if he was making significant investment decisions.
Trillium is registered with and regulated by the U.S. Securities and Exchange Commission as a firm, and there are no licenses for individuals in asset-management companies such as Trillium, according to Patsky. Magaziner was a CFA member and in the process of getting credentialed, but had not yet taken the Level 2 exam at the time he departed, Patsky said.
Patsky suggested contacting the office of Mass. Secretary of State William Galvin, which oversees investment registrations in the Bay State, for confirmation that Magaziner was not required to register there during his time at Trillium. Galvin’s office did not respond to inquiries about the issue Monday.
Caprio’s campaign acknowledged that Caprio also does not have an investment license or CFA credential, but noted he served as chairman of the State Investment Commission (SIC) for four years during his previous tenure as treasurer and has been a managing director at Chatham Capital, which provides mezzanine loans to businesses, for the past three years.
“Frank has not claimed to have individually managed deals at Chatham Capital,” Doyle said. “He was part of a team that collectively did the work of the firm. The track record of Chatham Capital is excellent, but like virtually all investment professionals, Frank does not claim the track record of the firm as his own.”
“Frank chaired the SIC, and with it, supervised the state’s investments with the help of its consultants and money managers, and produced very competitive results during a period of great upheaval in the global markets,” Doyle said. “State treasurers need not be money managers themselves, and need no investment licenses to do their work.”
Patsky said he encouraged Magaziner to run for treasurer when his former employee first told him he was considering doing so while he was still at Trillium.
“I’ve always been upset at how few good, qualified, solid people run for public office and run for the right reasons, and I just sort of looked at him and said, ‘You’d be fantastic; I mean, the state of Rhode Island would be lucky to have you, and so as much as we would hate to see you move on, if you’re really committed to this, go for it,'” he said.
Caprio and Magaziner are facing off in the Sept. 9 Democratic primary. The winner will face Ernie Almonte, who was originally running in the Democratic primary as well but made a last-minute decision to run as an independent instead. There is no Republican candidate.