PROVIDENCE, R.I. (WPRI) – A proposal to raise the annual fee of the firm that advises Providence on its pension fund investments from $165,000 to $265,000 has cleared its first hurdle after winning support from the city’s investment board.
The Board of Investment Commissioners, which is chaired by Mayor Jorge Elorza, voted 6-0 to send the revised contract for Wainwright Investment Counsel, LLC to the city’s Board of Contract and Supply. Only Councilman John Igliozzi was absent from the meeting.
If the Board of Contract and Supply approves the contract, it will be sent to the City Council for final approval.
Wainwright’s work for the city was met with praise from Elorza, city treasurer James Lombardi and finance director Lawrence Mancini, who all suggested the firm is thorough when responding to their inquiries.
“On behalf of the residents of Providence, on behalf of city as a whole, thank you for your service to the city of Providence,” Elorza told representatives from the firm after the vote.
Wainwright has been the city’s investment advisor for more than 20 years, but hasn’t seen a raise since 2006. The increase would equate to approximately .04% of the pension fund’s average market value, which was approximately $270 million in 2016. If approved, the fee would be retroactive to Jan. 1.
In its request to the city, Wainwright said it has “generated superior returns relative to its peers while providing the board with an unsurpassed level of service.”
A chart attached to the request shows the average three-year return on pension fund investments is 6.23%, the average five-year return is 10%, the seven-year return is 9.7%, and the 10-year return is 6.4%. The firm said Providence has outperformed 97% of its peers over 10 years.
Wainwright also said the Providence fund “does extremely well despite being compared to other plans that are much larger in assets and as such, not only have the ability to invest in a wider set of investment choices, but can also operate with a lower fee structure.”
Although Wainwright manages the city’s investments, the company is not responsible for the policy and budgetary decisions Providence officials have made when it comes to funding the pension system.
In its monthly performance update to the board, Wainwright said the total market value of the city’s pension fund was $278.1 million as of April 30, with an 11% rate of return compared to the same point last year. The city’s annual assumed rate of return is 8%.
One of the biggest challenges the fund faces is that payments to retirees significantly outpace contributions from the city. In 2017, for example, the city has contributed $16.3 million to the fund, but $30 million has been withdrawn. Since 2005, the city has contributed $662.6 million, but withdrawals topped $911 million.
The city’s pension system was 25.28% funded as of June 30, with an unfunded liability of $985 million, according to an independent audit of the city’s finances.