I-Team: Raimondo, Taveras use hedge funds in pension investments

Rhode Island General Treasurer Gina Raimondo uses a relatively high percentage of hedge funds in her investment portfolio for the state's pension fund.

Local public employee unions have hired a former Wall Street financial expert who is critical of Raimondo's investment strategy.

"In 2008 and 2009, when we're in all these index funds that you referenced, those pensions lost $2 billion of their hard earned money that we can't recover. It's gone," Raimondo said during a taping of "10 News Conference."

However, Raimondo is not the only public official using a high percentage of hedge funds for pension investments.

While Raimondo uses about 14 percent of hedge funds, Providence Mayor Angel Taveras uses more than 17 percent.

But Taveras's pension outperformed Raimondo's last year. Raimondo had an 11 percent return on investment, while Taveras had 13.4 percent.

Peter Sullivan of the Arlen Investment Group wouldn't comment on either Raimondo or Taveras' pension strategy, but said, in general, the use of hedge funds is a good idea.

"The issue today is risk and mitigating risk is something very important, to sure that you are hedging against. And therefore use of hedge funds will help mitigating risk of bond market or equity markets," he said.

Recently, several financial experts, like Warren Buffet, have been warning about the use of a high percentage of hedge funds.

"I have been satisfied with Providence's pension fund rate of return. But the recent concern being raised in the pages of the Wall Street Journal, the Washington Post and Warren Buffett about hedge funds has caused me to examine Providence's alternative investment strategy more closely," Taveras said.

Taveras said right now, he's pleased with the high rate of return on his pension fund investment portfolio.