State Investment Commission's pension strategy draws criticism

Rhode Island General Treasurer Gina Raimondo told NBC 10 on Wednesday that she's making no apologies for shifting $1 billion of the state's pension funds into hedge funds, saying the millions of dollars paid to money managers are worth it.

"Bring down the risk, don't sacrifice the net return. And if you pay a little more fees to do that, but you net returns that are still strong, that's exactly what we want to do," she said at a monthly meeting of the State Investment Commission.

The commission, which is a 10-member volunteer body that is chaired by Raimondo, handles the investments of the state's pension system and the state's general fund.

But Forbes Magazine writer Ted Seidle disputes the strategy.

He said Raimondo is a part of a new breed of so-called reformers who are only enriching Wall Street money managers.

"The way to reform public pension funds is to dramatically increase the use of high-risk, high-cost speculative investment. Does that make any sense to you?" Seidle said.

Seidle quotes from a hedge fund prospectus that warned, "you may lose all or a portion of an investment in the fund."

Marcia Reback, who also serves on the commission, said it's hard to tell who's right.

"The proof of the pudding is in the tasting. It's all guesswork how these are going to play out," she said.

Thousands of retired state workers and teachers will be depending on the choice.