AFSCME Info Request on Money Managers’ Fees Blocked By Raimondo

Tuesday, April 16, 2013
Kate Nagle, GoLocalProv News Contributor

AFSCME questioning accessibility to obtaining info on pension management fees, and basis points in particular.
A leading national organization representing municipal employees was blocked in its effort to obtain information on investment managers' fees in basis points from the Office of General Treasurer Gina Raimondo

"If I were a Rhode Island taxpayer, I would be absolutely appalled," said Steven Kreisberg, Director of Collective Bargaining for the American Federation of State, County, and Municipal Employees (AFSCME), regarding a letter he received from the General Treasurer's Office. 

AFSCME requested information on ERSRI (Employees' Retirement System of Rhode Island) money management fees as part of an Access to Public Records request.  AFSCME asked for ERSRI Investment Performance Reports, and fees paid both in dollars - and basis points -- to investment managers.  

Raimondo's office responded to the first two requests in a letter found here; however, regarding "basis points", Deputy Treasurer and General Counsel Mark Dingley said that the office would "need to perform substantial research and analysis in order to comply with [AFSCME's] request to produce all documents showing management fees in basis points."

Treasurer's Office Says 100 Hours Needed to Obtain Information

"I would estimate that search and retrieval will require one hundred (100) hours at Fifteen Dollars ($15.00) per hour with the first hour free. See R.I. General Law 38-2-4(b). If you would like us to perform this retrieval effort, kindly provide pre-payment of One Thousand Four Hundred Eighty-Five Dollars ($1,485.00)," Dingley wrote. 

He added, "Please be advised that payment does not guarantee that the records you have requested constitute public records (in whole or in part, i.e., redacted), but only authorizes this office to conduct its search and retrieval to determine if responsive records exist, and if so, whether said records are public records."

AFSCME Responds

AFSCME's Kreisberg had strong words in response to the letter he received from the General Treasurer's Office. 

"That language was clearly written for a desired outcome, and that was that was to deter us from following up on the request," said Kreisberg.  "These are public records -- and they want to gouge us to get them, if at all?  I don't think so." 

"What concerns me here is that this is a continuation of the ratcheting up of opaque investments not on the market, and we're not seeing exactly what's being paid to the fund managers who are orchestrating this," Kreisberg continued.  "These types of records, including basis points, are generally widely available.  What's happening here is that we're being told what these funds are worth -- by the people who are managing the funds.  And this is not a good place to be."

The General Treasurer's Office did not respond to a request for comment.

Forbes Blogger Ted Siedle Weighs In

Forbes Magazine "financial watchdog" and blogger Edward "Ted" Siedle, who recently wrote "Rhode Island Pension 'Reform' Looks More Like a Feeding Frenzy", had the following to say about the AFSCME situation. 

"In my experience, hedge funds -- and their managers -- know exactly what they're charging, and what their management fees are in basis points.  These numbers should be readily available," said Siedle.  "For a public office to ask that kind of money for public records, while legal, is pretty much unheard of." 

He continues, "AFSCME's clearly got a valid ask here. They represent to the tune of 12,000 retirees in Rhode Island, yes?  They are entitled, and expected, to tell their participants where that money -- their money -- is going.  I don't understand how you can run a $7 billion pension fund and not have an idea of what's being spent on its management."

Siedle recently posed the following 22 questions to General Treasurer Raimondo, but said he so far has not gotten a response. "I've even asked if they will, at some point, respond, to which I've gotten no response," said Siedle.  The list of Siedle's questions to the General Treasurer's Office is as follows:

*Has the number of money managers hired by the pension increased in the past three years? If so, please indicate the number of managers by year.

*How many of the pension’s managers are not registered with the U.S. Securities and Exchange Commission? Please name the managers that are not SEC-registered.

*Have the money management fees paid by the pension increased in the past three years? If so, please disclose how much the total fees were each year from 2009 through today, including any performance or incentive fees and other fees.

*Has the number of money managers hired by the pension who are entitled to performance fees under their contracts with the pension increased? How many managers have performance fees? How much are the performance fees related to each of these managers, both in percentage and dollar terms?

*Have any of the investment managers hired by the pension in the past 10 years paid any placement fees? If so, please disclose all placement fees paid, by whom and to whom.

*Please disclose any investigations that have been undertaken to determine whether any of the investment managers hired within the past 10 years paid placement agent fees.

*Please disclose any correspondence, studies or reports related to the payment of placement fees by the pension managers, including any potential inquiries from the SEC, in the past 10 years.

*Which of the offering documents related to the hedge, venture capital and private equity funds in which the pension invests clearly indicate that these investments are highly speculative, illiquid and involve a high degree of risk? Do all the hedge, venture and private equity fund offering documents include such disclosure?

*What was the investment performance of Point Judith II fund at the time the pension committed $5 million? Did the Point Judith II fund have any investment performance history when the pension invested? Did the Point Judith II offering documents indicate this investment was highly speculative, illiquid and involved a high degree of risk?

*What are the fees, including performance or incentive fees, related to the Point Judith II fund? In dollars, how much in fees has the pension paid to the manager of Point Judith II? Please provide the performance information related to the Point Judith LL fund through today.

*Has the performance of Point Judith II and valuation of its assets been verified by any independent third party?

*Does the pension rely upon the general partners of alternative investment funds to estimate the value of the partnership investments in which invests?

*Are the general partners of alternative investment funds subject to a conflict of interest in valuing partnership assets?

*What safeguards does the pension employ to ensure that general partner valuations of partnership portfolios are accurate?

*How significant, in percentage and dollar terms, is the difference between the values the investment managers report to the pension regarding alternative investments and the liquidation values the pension might actually receive in a forced liquidation?

*Does the pension invest in any hedge fund of funds? If not, why is the pension comparing performance of its hedge funds against a hedge fund-of-fund benchmark which involves additional layers of fees and is easier to beat?

*Do any of the contributors to Engage Rhode Island have any financial relationship, direct or indirect, with any of the investment managers of the pension? For example, do any contributors to Engage Rhode Island have assets managed by, or an ownership interest in, any of the pension’s managers or any fund managed by these managers?

*Have you reviewed any potential conflicts of interest at Cliffwater, your hedge fund consultant? If so, please provide a copy of this conflict of interest review.

*Cliffwater’s SEC filings indicate that it actually manages money, as opposed to merely making recommendations, for some clients. Does Cliffwater actually manage, on a discretionary basis, any of the pension’s assets?

*Cliffwater’s SEC filings indicate that it receives compensation from some of the investment managers it recommends to clients. Has Cliffwater received compensation from any of the managers handling pension assets? Please provide any documentation related to such a review.

*Are all managers hired by the pension through a Request for Proposals? If not, which managers were hired without an RFP being issued?