ted siedle – RI Future

August 9, 2016

Hedge funds continue to hamper RI pension fund

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Click on the image to learn more about the Rhode Island Retired Teachers' Association. — Click on the image to learn more about the Rhode Island Retired Teachers’ Association.

Rhode Island’s pension fund lost money for the second straight year because of the hedge fund gamble Governor Gina Raimondo made when she restructured the system as the state’s general treasurer in late 2011.

“This is precisely what we predicted four years ago,” public pension expert Ted Siedle told Jim Hummel on WPRO recently.

The pension fund fell 5.9 percent – or $466 million – thanks in large part to a 6.94 percent decline in hedge fund assets.

Along with switching from a defined benefit-type pension to a defined contribution-style plan, the investment in hedge funds was the most controversial component of Raimondo’s plan to overhaul the state pension system. Siedle told Hummel, “The gamble has not paid off. It has been a massively costly gamble for taxpayers.”

According to Siedle, investments in hedge funds have cost Rhode Island $2 billion since Raimondo revamped the pension plan in late 2011, or $4,000 per taxpayer. Meanwhile, California, the largest public pension plan in the US, has stopped investing in hedge funds and New Jersey has taken $9 billion out of hedge funds. “But in your state,” Siedle said, “the losses continue to mount because of this reckless gamble that Gina Raimondo began and Seth Magaziner has continued.”

Siedle said the continued investment in hedge funds could have more to do with campaign contributions than pension solvency.

“This is a politically motivated decision to invest in hedge funds,” Siedle told Hummel. “This is about campaign contributions, this is about politics. This is not about investment theory or investment philosophy. You’ve got terrible performance but massive political donations. You figure it out.”

May 9, 2016

New York and California divested pensions from hedge funds, can RI?

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California, the state Gov. Gina Raimondo was visiting for a fundraiser to promote her pension policies, and New York have recently divested from high-risk, high-cost hedge funds like those the Rhode Island fund invests in.

One New York City official in an April 14 Reuters story said of hedge fund managers, “Let them sell their summer homes and jets, and return those fees to their investors.”

The board of the New York City Employees Retirement System (NYCERS) voted to leave blue chip firms such as Brevan Howard and D.E. Shaw after their consultants said they can reach their targeted investment returns with less risky funds. The move by the fund, which had $51.2 billion in assets as of Jan. 31, follows a similar actions by the California Public Employees’ Retirement System (Calpers), the nation’s largest public pension fund, and public pensions in Illinois. “Hedges have underperformed, costing us millions,” New York City’s Public Advocate Letitia James told board members in prepared remarks… NYCERS had $1.7 billion invested in hedge funds at the end of the second quarter 2015, according to its financial report. That amounted to 2.8 percent of total assets and was the smallest portion of its ‘alternative investments’ portfolio, which included $8.1 billion in private equity.

This begs the question: when will General Treasurer Seth Magaziner do likewise?

To help me parse through this further, Ted Siedle, who is now working on his third forensic audit of the pension, this time dealing with the real estate investment portfolio, sat down with me for an interview. He compared the pension scheme to “nothing Buddy Cianci would have ever dreamed of.”

Click the player below to listen to my full interview with Siedle

“My sense is that, from some some comments I have seen attributed to Seth Magaziner, is that he is preparing to distance himself from at least the Governor’s hedge fund gamble with pension assets. So it appears that he is moving from a ‘stay-the-course and incrementally fire poor performing hedge fund managers and replace them with promising hedge fund managers and make the case that the good outweighs the bad’, moving to an approach where he says either he will abandon the hedge fund strategy altogether or, going forward, or he will jettison perhaps half of the hedge funds and keep the remaining.

Siedle added, “But I think he’s making noises like he may make a bolder move to distance himself from the investment strategies that the Governor implemented. I think that Magaziner is heading in a better direction. I am not hearing a clear indication that his predecessor was wrong about anything and his predecessor was wrong… The massive benefit cuts and the massive investment in speculative hedge funds, high-risk high-cost hedge funds and private equity funds, was a foreseeable disaster, it was foreseen by me, I wrote about it before the strategy had been even fully implemented. Warren Buffett warned this was something that should not be done.”

Projected savings from pension cuts could soon be evaporated by poorly performing hedge funds, Siedle said.

“The benefits were cut to save $2 billion over the next twenty years. Within four or five years … the pension’s lost probably about $2 billion. So all of the projected savings have been, I suspect … will have been eliminated by foreseeable losses. So this has been probably the most disastrous investment decision ever made in the history of Rhode Island.”

He said, “So what I would submit a responsible, courageous State Treasurer would do would to be to call out that this was a horrific mistake, but I’m not hearing that. I’m hearing a distancing but not a mature, responsible response.”

To further clarify what Siedle feels about Magaziner’s time on the job, just look to his recent writings for Forbes:

At 31, Magaziner—lacking any meaningful investment experience—somehow convinced voters in 2014 that he could competently oversee the massively underfunded, embattled $7 billion state pension. Talk about chutzpah—a kid whose personal income the year before assuming office was reportedly approximately $5,183 (yet he somehow loaned his campaign $550,000)… Not only has Magaziner failed to follow through on his transparency promises, despite five years of dismal hedge fund performance at the pension he oversees, he remains committed to Governor Raimondo’s secretive, costly deal with Wall Street.

March 6, 2016March 7, 2016

Raimondo’s pension plan has cost up to $2 billion so far

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When Gina Raimondo told voters that the public pension fund was in trouble, she promised to save taxpayers $4 billion over the next 25 years. But after reviewing the more recent audit by Ted Ted Siedle, it is apparent that promise has not come true and instead up to half of that promised savings has gone into the pocket of Wall Street.

Describing Raimondo’s investment strategy as “flawed”, he writes:

In other words, during the former Treasurer’s tenure, gambling in [high-risk and hedge fund-based] alternative investments cost [Employee Retirement System of Rhode Island] ERSRI stakeholders almost $1 million a day. Total preventable underperformance losses identified in this report amount to nearly $2 billion. Ironically, thanks to Raimondo’s “pension reform” the sustainability of ERSRI is more precarious than ever. [Emphasis in original]

What’s more, all the warnings were presented in the mainstream press and other venues well in advance. But rather than acknowledge these problems and save what remains in the pension, current Treasurer Seth Magaziner has soldiered on, refusing to cooperate with Siedle’s investigations and doing serious harm to public disclosure laws in the process. Make no mistake, the history books are going to mark Raimondo and Magaziner alongside the Patriot Act as the most damaging things to happen to the public’s right to know in the past century.

The fact we have yet to hear from the local level of checks and balances that are supposed to be created in offices like the Attorney General or the General Assembly only suggests either a lack of willingness or knowledge that they might be implicated also when the axe falls. How one can say nothing knowing that we are in the midst of the greatest financial crisis in Rhode Island history?

Of course, who in the non-government sector is in on the scam? According to Siedle, the real estate portfolio of the pension, which he is going to be auditing next, is performing abysmally. Could that portfolio be linked to certain local property magnates who are known to be political power players also?

Until Siedle and the feds come forward with further information we will not know.

December 3, 2013December 3, 2013

Podcast: Smiley announces, Siedle accuses, Ahlquist educates, Sheldon highlights health care

Tuesday Dec 3, 2013
North Kingstown, RI – Good morning, Ocean State. This is Bob Plain, editor and publisher of the RI Future blog podcasting to you from The Hideaway on the banks of the Mattatuxet River behind the Shady Lea Mill in North Kingstown, Rhode Island.

It’s Tuesday, December 3rd, the day Detroit will, or won’t, officially file for bankruptcy protection … and, in local news, Brett Smiley is formally announcing he’s running for mayor of the Capital City today. Check out the About page on his website and you’ll see there is little doubt he sees himself as the progressive in the crowded field for mayor…

Brett will be joining Mark Gray and I for our first roundtable podcast on Thursday afternoon … if you’d like to join us, or have a question for Brett, reach out on twitter and/or Facebook….

And speaking of being mayor and running for office, current Providence Mayor Angel Taveras is scheduled to join the URI Honors Colloquium tonight on great public schools tonight … more on this developing story later this morning. The URI Honors Colloquium has already hosted such education experts as Diane Ravitch and Henry Giroux, and us progressives are sure looking forward to hearing what Mayor Taveras adds to this ongoing debate….

UPDATE: According to the Honors Colloquium, Taveras’ appearance has been canceled for tonight. “the Mayor expresses his sincere apologies for not being able to attend,” said his communications director, David Ortiz. “He had a scheduling conflict.”

Pension detective Ted Siedle is petitioning the Securities and Exchange Commission to investigate pension fund investments overseen by General Treasurer Gina Raimondo. Siedle says that some investment agreements essentially allow hedge fund managers to “steal from the state” by hiding information from the public that they are expressively allowed to share with other investors.

Raimondo’s office responded by calling the accusation a political attack. Yes, it is true, the retirees whose savings Raimondo slashed definitely have a political interest in her not becoming governor … the more pointed question she should respond to: do some state investment agreements allow managers to share information with other investors while shielding it from the citizens of Rhode Island. Because all of Rhode Island may not want the person who negotiated that deal to be our next governor…

Seidle told the Providence Journal: “What I have done for Rhode Island is to draw attention to the other side of the balance sheet, the other side of the income statement, which is how much has been paid to Wall Street.”

Steve Ahlquist offers a good government reason why Rhode Island should NOT have a Constitutional Convention in 2015. In an RI Future post published this morning, he says “Con-Con” delegates are elected for the singular purpose of amending the state Constitution, and thus aren’t accountable to any future voters.

“This is the wrong way to effect change,” writes Ahlquist. “Right now, the General Assembly can be held accountable by voters: If you don’t like the way they are behaving, you can remove them from office by voting for their opponents in the next election. The Con-Con delegates, on the other hand, have no such accountability. Delegates, unconcerned with being re-elected, can suffer no penalty for failing voters. Delegate candidates could conceivably run as moderates and then work to effect radical changes once elected.”

Senator Sheldon Whitehouse held a summit on health care yesterday and said Rhode Island is proving to be a stellar example to the rest of the nation in how to deliver better and more efficient benefits to people in the 21st Century. Similarly, a new report says the Ocean State is poised to be a national leader in solar power … in other words, Little Rhody shines when it comes to health care and renewable energy sectors of the economy … that’s called being well-situated for the future. Go Rhody!

A 38-year-old truck driver was ordered to pay the Koch bros company $180,000 because he participated in an organized hack on the right-wingers site … Koch Industries is located in Wichita, Kansas and so was his trial. The website was down for 15 minutes and the company said it lost $5,000 as a result…

On this day in 1886, textile workers in Fall River fought for and won … a 10-hour work day.

And in 1910 … the International Workers of the World, also known as the Wobblies, organized their first loggers union … speaking of organized labor in the timber industry, if you’ve never read Ken Kesey’s classic “Sometimes A Great Notion,” it’s a fantastic parable on team work and the dangers of thinking you’re above it. This is one of my favorite and most disturbing movie scenes of all-time:

Publisher Andres Shifflin has died … he founded The New Press after being fired from a Random House-owned company for not making enough money. He published the leftists works of Noam Chomsky and Studs Terkeland said his firing was essentially corporate censorship.

And one-hit wonder reggae singer Junior Mervin died yesterday … he wrote “Police and Thieves,” about senseless street violence … it became a hit for punk band The Clash, and turns out it’s just as relevant the 21st century United States as it was to 20th century Jaimaca and London.

April 10, 2013April 10, 2013

Two Teds On Pension Reform Beat

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Their named may be similar but their coverage of Gina Raimondo is not.

New Ted (Siedle, of Forbes) wrote a post on Thursday saying Raimondo is recklessly investing Rhode Island’s pension fund. Old Ted (Nesi, of WPRI), to borrow a phrase, fired back on Friday. New Ted has since posted twice to accuse Old Ted of having a soft spot for Raimondo and – much more pointedly – accusing her of having a soft spot for Wall Street.

From Forbes.com on Saturday:

The fees related to conservative investing range from 1 basis point (one one-hundreth of a percent) to about half a percent. The high-risk alternative investments you have steered the pension into charge exponentially greater fees—fees of about 2% plus 20% of profits or more. Do the math and you’ll agree, the fees the pension will pay have skyrocketed. Mushroomed. Ballooned. Soared.

That’s good for your Wall Street pals, no-so-good for workers participating in the pension. It’s a little difficult to reconcile your opinion that the state’s pension system can’t afford to pay workers the benefits they were promised but, on the other hand, it can afford to pay Wall Street’s wildest gamblers one hundred times greater fees than it has in the past.

Tell Rhode Islanders precisely how much the fees have increased under your leadership (or give me copies of the money management contracts so I can) and let’s see how they feel about it.

Then yesterday:

Raimondo’s overhaul or reform of the state pension will, in the years to come—long after she’s moved on to higher political office, turn out to be disastrous for taxpayers and state workers, in my opinion. Hail Mary passes and other high risk gambles rarely succeed and, even if they do, are not appropriate for pensions thousands of state workers depend upon for retirement security.

New Ted publicly offered 22 questions for Raimondo to answer about how she has managed the state’s the money. Anyone want to bet her answers, or at least political statements tangentially related to these questions, will appear on Old Ted’s blog?