Moore: Time to Overhaul the State Investment Commission
Russell Moore GoLocal MINDSETTER™
Moore: Time to Overhaul the State Investment Commission
There certainly hasn’t been a situation with such massive financial implications since the closing of the credit unions back in 1991.
Naturally, nobody is talking about it.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOf course, there are people talking about the investment mishaps from the General Treasurer’s office and the Rhode Island Investment Commission. But that talk pales in comparison to a much smaller mistake made years ago.
Worse Than 38 Studios
The disaster that was 38 Studios has been beaten to death. Ask any Rhode Islander their opinion about Curt Schilling’s ill-fated video game companies, and you can be certain that they’ll have one. Of course, it was a disastrous decision that only a fool would have embarked upon. But at the end of the day, the loss was about $100 million. And thanks to the civil lawsuit, the state has recovered a huge chunk of those losses.
The failed hedge fund investment strategy was a much bigger loss of state dollars. As Forbes columnist, financial watchdog, and leading hedge fund critic Ted Siedle pointed out in a GoLocal column last week, the pension fund has lost 10% roughly $100 million a year by investing in hedge funds—that’s $500 million over 5 years.
Anyone who doesn’t think that this affects the state budget or their tax dollars had better think again. The state pension plan relies on three factors to pay retirees—employee contributions, investment returns, and state tax dollars. When the investment returns falter, the only place the state can turn to fill the whole is the state budget. That means our tax dollars. As Raimondo so astutely pointed out when she advocated for pension reform, that cuts into funding for social programs infrastructure upgrades, and all the other important things we expect government to do.
Five Times as Bad!
The move into hedge funds cost us at least 5 times as much as the 38 Studio’s nightmare—and that’s before we calculate the money we’ve recovered from the civil lawsuit!
But financial investments are much more mundane than video companies spearheaded by former baseball superstars.
That fact made it much easier for Raimondo to move the investments away from traditional, low fee, index fund based investments.
Meanwhile, she raised more money than any candidate in modern Rhode Island political history. We are supposed to believe that this was some sort of a coincidence. I think not.
100-Percent Correct
I called Siedle and asked him how he felt about the Rhode Island Investment Commission’s move to reduce its hedge fund allocation.
“There are not too many situations in life where you can be 100-percent right about a major issue,” said Siedle. “And that was the case here.”
But Siedle said he’s still troubled by the fact that the state is only cutting its hedge fund allotment in half, and doing so over an 18-month period.
Nevertheless, Magaziner’s move to reduce the hedge fund allotment to more traditional investments is an acknowledgement that the critics have been right all along.
Clean House
What about the folks who were wrong? Besides Raimondo and Magaziner (who should have listened to Siedle from day one, but instead chose to stick with his Raimondo, his mentor), there were plenty of others who defended hedge fund investments.
Former Rhode Island General Treasurer Roger Begin was one of those folks. He penned a letter to the editor back in 2013, criticizing Siedle and asserting that hedge funds were no more risky than traditional investments. Of course, Begin was wrong.
But he’s not the only one. In fact, the time has remove everyone from investment commission who voted for this hair-brained scheme—most of the current members. The state needs a fresh set of members to take over the commission.
It’s unfathomable that the folks who oversaw such a monumental failure should continue on the board.
Gina Raimondo CGF Campaign Donations
Beshar Family Contribution
Total Contribution: $13,500
Jacqueline G. Beshar, Co-Chairwoman of Capital Good Fund
- 9/27/2011 $1,000
- 10/3/2012 $1,000
- 3/4/2013 $1,000
Robert Beshar, Law Offices of Robert Beshar
- 12/9/2012 $1,000
- 12/15/2013 $1,000
Peter Beshar, Marsh & McLennan
- 9/15/2010 $500
- 8/22/2011 $1,000
- 9/23/2012 $500
Christine Beshar, Cravath Swaine & Moore LLP
- 12/9/2012 $1,000
- 12/15/2013 $1,000
Frederica Beshar
- 10/5/2012 $500
Scot Jones, Groov-Pin Corp. (Husband of Jacqueline G. Beshar)
- 5/9/2010 $250
- 6/4/2010 $750
- 12/05/2011 $1,000
- 10/3/2012 $1,000
- 3/25/2013 $1,000
Hower Family Contribution
Total Contributions: $10,000
Lee Hower, Co-Chairman of Capital Good Fund
- 12/16/2009 $1,000
- 3/11/2010 $1,000
- 7/7/2011 $1,000
- 3/30/2012 $1,000
- 2/16/2013 $1,000
Heather Hower, Brown University
- 12/30/2009 $1,000
- 3/11/2010 $1,000
- 7/9/2011 $1,000
- 3/30/2012 $1,000
- 2/16/2013 $1,000
Tobias Lederberg
Former Vice President of Capital Good Fund
Total Contribution: $5,000
- 12/21/2009 $1,000
- 3/30/2010 $1,000
- 9/23/2011 $1,000
- 3/31/2012 $1,000
- 3/19/2013 $1,000
Daugherty Family Contribution
Total Contribution: $4,125
William Daugherty, ANC Sports
- 6/15/2012 $1,000
- 3/24/2013 $1,000
- 11/27/2013 $1,000
Tracy Daugherty, Homemaker
- 11/29/2012 $125
- 3/24/2013 $1,000
Note: Tracy and Bill Daugherty are individual donors to CGF.
Jessica Ricci
Member of Capital Good Fund's Board of Directors
Total Contribution: $1,550
- 10/14/2010 $50
- 9/30/2011 $1,000
- 10/31/2013 $500
Citizens Bank
Total Contribution: $10,625
Edward O. Handy III
- 3/25/2010 $750
- 9/25/2010 $250
- 3/28/2012 $500
- 7/15/2013 $1,000
Maria Carlino
- 9/27/2012 $1,000
- 11/22/2013 $500
Donna Brady
- 3/17/2010 $150
- 10/5/2010 $250
- 1/20/2012 $100
- 7/15/2013 $200
- 11/7/2013 $100
Barbara C. Garrahy
- 8/24/2010 $100
- 10/5/2010 $250
- 9/12/2011 $250
- 7/9/2013 $500
Stephen P. Higginbotham
- 6/22/2010 $250
- 10/5/2010 $250
- 12/2/2013 $200
Michael Kennally
- 9/6/2010 $150
- 10/5/2010 $250
- 7/15/2013 $250
James M. Hagerty
- 5/3/2010 $250
- 6/29/2010 $150
- 10/6/2010 $250
Kenneth W. Robinson
- 10/5/2010 $250
- 7/15/2010 $500
Joseph Gleason
- 9/12/2013 $200
- 11/20/2013 $250
Kenneth B. Martin
- 7/22/2013 $250
Gregory Kirwan
- 10/4/2010 $250
Terrence W. Allen
- 10/5/2010 $250
Anthony A. Botelho
- 10/5/2010 $250
Gail Ginnetty
- 9/26/2013 $50
- 9/30/2013 $100
Peter R. Bakkala
- 6/22/2010 $125
David Grassini
- 2/6/2010 $100
Patricia E. Wegrzyn
- 8/15/2012 $100
Stephen Craven
12/31/2013 $50
Hassenfeld Family Initiatives
Total Contribution: $4,000
Alan G. Hassenfeld
- 6/23/2010 $1,000
- 8/17/2011 $1,000
- 6/5/2012 $1,000
- 9/5/2013 $1,000
Bank Rhode Island
Total Contribution: $1,375
William C. Tsonos, Bank RI
- 6/17/2010 $125
- 9/13/2011 $250
Linda Simmons, Bank RI
- 6/17/2010 $125
- 9/12/2011 $250
Emanuel E. Barrows, Bank RI
- 9/13/2011 $250
Mary E. Leach, Bank RI
- 6/17/2010 $125
Steven M. Parente, Bank RI
- 6/21/2010 $125
Robert H. Wischnowsky, Bank RI
- 6/21/2011 $125
Sovereign Bank
Total Contribution: $2,225
Kevin J. Sullivan
- 6/24/2010 $1,000
Michael Lee
- 10/27/2012 $100
- 12/31/2013 $25
TD Bank
Total Contribution: $1,575
Robert A. Kolb Jr.
- 6/16/2010 $1,000
John Conte
- 6/22/2010 $250
Rosalin Acosta
- 6/30/2010 $150
Scott H. Sanborn
- 6/22/2010 $125
Amy Beauchamp
- 9/29/2013 $50
Ariel Investments
Total Contribution: $1,000
John W. Rogers Jr.
- 9/15/2010 $1,000
New Roots Providence
Total Contribution: $325
Sabina Matos
- 3/31/2010 $25
- 6/20/2010 $25
- 9/12/2011 $250
- 12/30/2013 $25
Rockland Trust
Total Contribution: $250
William Lavelle
- 6/24/2010 $250
Social Venture Partners Rhode Island
Total Contribution: $250
Kelly Ramirez
- 6/6/2010 $100
- 12/10/2012 $25
- 9/24/2013 $25
- 9/30/2013 $100
Rhode Island Foundation
Total Contribution: $100
Carol Einhorn
- 3/31/2010 $100
