Riley: Lousy Pension Returns Put One More Nail in Providence Coffin
Tuesday, July 26, 2016
As July comes to a close, both the State Investment Commission and the Providence Board of Investments are reviewing the performance of the funds they manage for the fiscal year that just ended.
They can only feel relieved and not because the performance was anywhere near the targeted returns. In fact, they both LOST money for Fiscal Year 2016 but the relief is because it was so much worse a few days before year end. Brexit volatility created a huge vacuum and then a furious rally that erased a near total disaster in June. A 5% rally in the last 3 days of the fiscal year surprised everyone and the State and Providence were able to avoid massive losses that they were sitting with on June 27.
The State under Treasurer Magaziner still lost money in FY 2016 continuing his streak of never making a dime in any calendar or fiscal year as a money manager. Somehow the Providence Journal endorsed the ex-kindergarten teacher as “refreshing” in the 2014 election. Magaziner still insists on his hedge funds and a 7.5% discount rate. He still owns Point Judith Capital, Governor Raimondo’s VC fund. God only knows if Rhode Island under Magaziner or Point Judith Capital 2 will ever make a dime. Let us hope so.
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In the City of Providence, where Mayors and other officials have misled Municipal bond investors since 2006, pension assets hit a new low of $242 million, but don’t worry because Mayor Elorza will report to bond holders that the Pension assets are really $350 million or so if you count the unauthorized double secret loan to the city from the pension fund. That loan is illegal everywhere else in the U.S. but Providence enjoys the incompetence and protection of our State Attorney General and our State Auditor. The fact is the jig is up and Providence cannot have another zero year or they will be testing the $200 million mark in assets in 2017.
Maybe Brett Smiley knew something when he jumped ship because I believe a capable person like the new Budget Director Mr. Hull will see through all the shenanigans and not conspire with 3 Mayors to hide Providence public corruption and be a party to the continued misleading of municipal bond investors. I expect he will invoke receivership very soon.
Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity, and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.
Related Slideshow: Timeline - Rhode Island Pension Reform
GoLocalProv breaks down the sequence of events that have played out during Rhode Island's State Employee Pension Fund reform.
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