Raimondo joins Taveras in using WSJ to knock hedge funds

WSJ_pg1_9-9-2011Providence Mayor Angel Taveras made some news in June when he told a Wall Street Journal reporter he was concerned about whether the city was getting enough bank for its buck by investing roughly 15% of its pension assets in hedge funds. “To me, it’s a question of whether we can get the same performance for less risk and fewer fees,” the mayor told the newspaper.

Three months later, Treasurer Gina Raimondo – the mayor’s likely rival for the 2014 Democratic gubernatorial nomination – has offered her own criticism of hedge fund fees to a Wall Street Journal reporter in a front-page story Monday headlined: “Hedge Funds Cut Back On Fees.”

Raimondo’s comments don’t come in a vacuum, of course; she has come under heavy criticism from a Forbes.com contributor and local union leaders for shifting more than $1 billion of pension assets into hedge funds, which last year left the state with subpar investment returns.

“Hedge funds could make the case for charging a 2% management fee when they were managing much less money,” Raimondo told the paper. “But do they still need to charge that much when they are now managing billions, not millions?”

Investment fees can quickly add up. Rhode Island’s pension fund spent nearly $46 million on fees in 2011-12, while Providence’s much smaller fund spent more than $2 million, city documents show.

But the WSJ noted that not all hedge funds are created equal in Raimondo’s eyes (emphasis added):

Even some of those at the vanguard of pushing for better investor terms seem willing to pay high fees for certain big-name funds, an indication of why the shift to lower fees has been gradual. Rhode Island, for example, pays management fees of 1.5% or less for most of the funds it invests in. But it continues to pay performance fees of 25% to invest with funds run by Brevan Howard Asset Management LP and the D.E. Shaw Group, two of the best-known firms in the hedge-fund world.

“The State Investment Commission always tries to negotiate better fees whenever possible, but fees are not the only consideration,” the treasurer’s spokeswoman said in a statement. It “also looks for the best expected risk and return and value for money.”

• Related: Taveras’s 13.4% pension investment return beats Raimondo’s 11.1% (Aug. 13)

18 thoughts on “Raimondo joins Taveras in using WSJ to knock hedge funds

  1. What’s this? Hedge funds were just peachy keen, they way to go. And now this? Does this sound like an effort to shift the blame? Why? There was no trouble whatsoever with hedge fund fees, none. Now there is. Why? Might this be related to the upcoming mediation over the unlawful withholding of contractually owed COLA’s to retirees? Weren’t those COLA’s, along with more loot, handed to hedge fund cronies? Wasn’t this orchestrated from Texas by this Bob Arnold, some ENRON ‘billionaire’ who’s now going to ‘give away his two point eight billion dollar fortune’ according to the latest media reports?

    Perhaps Arnold would like to give back to Rhode Island retirees the COLA’s that were taken from them? It’s a paltry sum, as compared with the small fortunes handed over to unaccountable hedge fund cronies, isn’t it?

    And now the latest is that hedge funds have been ‘investing’ in payday loan(shark) fronts. What next? No wonder hedge funds are suddenly in bad odor and their former cheerleaders are trying to run away from them.

    • I would add 2 other reasons. She is trying to neutralize her negatives as she enters the primary campaign against Mayor Taveras and she is preparing to counter the fallout likely from Mr. Siedle’s forensic investigative report to be available in the near future. That’s also why she “dissolved” Engage RI. Make no mistake about it–this sudden change of heart is only temporary until she’s in the Governor’s seat.

      • J M Paras –

        Agree. And the moves couldn’t be more blatant. Why do they think, in this Net-centric era in which people use the reach and power of the Net to circumvent propaganda to get at the truth, that people won’t see it?

        It just defies belief, doesn’t it?

    • SteveD –

      It’s as if Al Capone suddenly began to lecture citizens about sobriety and the need to strictly obey all laws.

      What next?

  2. I think its a little misleading for people to talk about “hedge fund fees” as if they are all something that the pension fund pays when a good portion of them are determined by the performance of the fund. You can’t just separate out the amount “paid” in performance fees from the amount the fund earned like you can with management fees. The latter is a real cost while the former are not “paid” in any real sense, but its convenient for some to pretend that they are.

    I have actually been wondering if it might be smarter for the state pension fund to simply* become a hedge fund and cut out the middle men. With a decent, experienced hedge fund manager (who, to the chagrin of the financial Luddites, would need to be paid) and a firm commitment to maintain the state’s funding (probably the biggest sticking-point), the state should be able to leverage the size and presumed longevity of the portfolio (we already have a great deal of information about when the majority of investors will be withdrawing, which is a huge advantage compared to other hedge & mutual funds) to draw in some outside investors looking to ride the fund’s performance and state backing for private gain.

    Then, not only would the fund profit through assessing its own fees, but the fund itself would be larger, and larger funds tend toward better and more stable performance.

    *heh, “simply”

  3. Ted-to-Ted Chat: Last article it was “withering criticism” from a named Forbes contributor; this time its “heavy criticsm” from an unnamed Forbes contributor. Ted, how’s bout next time saying, “punky dribble” from a rogue Forbes blogger. Catchy?

  4. gina will never win a democratic primary!!!!!….she needs to leave the party…she does not represent the working class people of the state….she broke the state’s contract with the retirees….she hangs around with hedge fund billionaires…she wins kudos from right wing think tanks…she gives these hedge fund 25% fees…are you for real???? Wait until the state looses it’s court fight with the retirees….maybe she can get the hedge funds to kick in the millions that the state is going to have to come up with…to change the pension system for unvested workers was legally permissible…. but to steal the COLAs from existing retirees and give them nothing….is robbery…and don’t you believe what she says…you will never get a COLA in your lifetime!!!!Bye Bye gina….even if you have 2 million in your war chest…you better run as a republican.

  5. I used to think Ms. Raimondo was a Republican who just called herself a Dem because she’s in RI. But, now that I see her effort to shift Blame (obama’s game plan for 5 years) proves she is a Dem. after all.

  6. The bottom line to the “Cook the Books No Truth in Numbers rich bi**** Raimondo is that she lost potential votes when she decided to pay the high fees to hedge fund investors as she took away the pensions and colas from hard working people in this state. So the flip flopper sees how Mayor Taveras is gaining in popularity on how he dealt with it in Providence and she wants to jump on his bandwagon… She is a true fraud…she is as Democrat and middle class as her pal billionaire Bloomberg of NY is…She thinks this tactic of joining her rival will help her become governor….hahahahahahahahahahaha what a joke that is and SHE is!

    • Her benefactor and cheerleader Mayor Napoleon Sawed-off – he who codifies food fetishes into law and who tries to disarm Americans yet who coerces Bermuda officials into letting his Praetorian Guards carry when he’s down the island – just got his tail caught in a big, fat, wringer washer out in Colorado.

      He threw other peoples’ money at a bunch of leftist gun-grabbers in yet another blatant attempt to void the Bill of Rights. Coloradans didn’t appreciate the mayor’s meddling, and they recalled his two anti-gun stooges, one of whom gasses off in creepy manner about ‘cleansing this sicknes (of guns?) from our souls.”

      If the massive rebuke to Bloomberg is any indication, then his protégé here has a task ahead.

  7. Recent statistics on income inequality in the US offer a stark display of what Gina R. and her supporters (big money supporters that is ) are all about. In the 2012 tax year the income of people in the top 1/100th of one percent, ie, those earning approximately 32 million dollars a year increased approximately 32 percent or 7 point something million dollars in one year. Furthermore, those in the top one percent saw their incomes increase on average approximately 19 percent, ie, those incomes per year are in the ten million dollar a year level. Feeling left out . Not to worry. The top five percent received more- that’s right – more than 100percent of all income increases statistically. So when Gina Raimondo raises over 2 million dollars from Engage Ri and other outside Rhode Island billionaires the picture of who supports her becomes clearer. She will do what the big money wants.

  8. CA CHING, CA CHING, CA CHING! YEAH, IT MUST BE THAT TIME OF YEAR AGAIN! My Union Boss down at the Town Hall emailed me yesterday and.
    Told me that this article was hitting the Papers today, and He told Me.
    to make it Look like I was Working till this Blows Over in a week. I
    know the routine! In a week, I’ll be back to my usual activity of.
    Collecting A Paycheck for Doing Nothing! Hey, Private Sector.
    Workers; You really gotta Pony Up more Taxes! I need at least a 10 %.
    raise! My Cabin Cruiser at the Dock behind my Vacation House in.
    Florida needs a New Engine. My wife has been after me for a new car.
    She wants a BMW X6 G-Power Typhoon S! I told her I can’t afford that.
    car. So then she says she will accept a Mercedes-Benz CL-Class and.
    Nothing else! I also got Private School Tuition of $ 40,000.00 due.
    in September. I got Credit Card Expenses coming out my AXX! That
    new 3000 sq ft extension on my house raised my property taxes $ 15,000.
    The maid and the housekeeper want raises. The gardener also wants a.
    raise. You see Bunky; It ain’t easy in the Public Sector! So come
    on Private Sector Worker; Pony Up and Pay More Taxes so I can afford to.
    live here! You See; Life Is Not Fair, and the DemoRats will take.
    care of Everything! HAPPY DAYS ARE HERE AGAIN!

    • Eating dog food….good name for you….look at history…unions gave us a middle class…and because they protect a worker’s rights to a decent wage, health care benefits, decent working conditions, no child labor, women’s equality in the work force….you want to undermine and repudiate what they have done…read a history book and see what struggles union workers have fought through over the years…so you have it tough and a lousy job…you want all of us to share in your misfortune…meanwhile the rich and famous (gina and her friends) take all the wealth in this country and let their workers eat crumbs….dog food you are an intellectual disgrace….look at germany, sweden, norway…their economies are booming and their workers have all of these protections…why don’t you go to Mississippi and work at wal-mart..they could use people…dogs like you!!!!!!

    • I know you worked real hard on that, and you think it’s clever and hilarious, but it’s just dopey. I’d tell you not to quit your day job, but I have a feeling that’s not a problem…..

  9. Its awesome that Mr. Nesi gives public sector employees a place to vent. I would hate to think of what might happen if these people didn’t have some place to vent.

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