Key Takeaways
- • Providence's $272 million pension plan, chaired by Mayor Angel Taveras, faces scrutiny over hedge fund investment practices including high fees and potential consultant conflicts of interest—issues Taveras has publicly criticized state treasurer Gina Raimondo for, despite similar practices occurring within Providence's own system.
- • In June 2013, Taveras requested detailed information from Eric Bertonazzi, the Boston-based chief investment officer at Wainwright Investment Counsel (adviser to the pension system for nearly 20 years), regarding hedge fund performance, fee structures, and the use of placement agents—signaling emerging governance concerns at the board level.
- • The pension reform debate has become a political flashpoint in a tight Rhode Island Democratic gubernatorial primary, with both state-level and municipal pension systems undertaking high-profile restructuring efforts as insolvency risks accelerated.
- • Broader Rhode Island pension reform efforts have included significant reductions in hedge fund exposure, with the state's Employees' Retirement System cutting hedge fund allocations substantially as part of systemic reform.
Summary
The intersection of pension reform and electoral politics is creating considerable tension within Rhode Island's retirement systems. Mayor Angel Taveras of Providence chairs the Board of Investment Commissioners overseeing the city's $272 million pension plan, yet has publicly criticized General Treasurer Gina Raimondo's pension reform methods—particularly around hedge fund fee structures and conflicts of interest. This rhetorical positioning masks a more complicated reality: Providence's own pension system has engaged in many of the same investment practices Taveras has attacked at the state level, according to Institutional Investor's investigation.
The governance questions surfaced explicitly at a June 2013 Board of Investment Commissioners meeting, only the third Taveras had attended since taking office in 2011. At that meeting, Taveras interrogated Eric Bertonazzi, chief investment officer of Boston-based Wainwright Investment Counsel, regarding critical operational details. Specifically, Taveras sought data on hedge fund performance relative to risk-adjusted returns, whether the pension could identify comparable investments with lower fees, and whether hedge funds had deployed placement agents or third-party marketers to secure mandates. These questions underscore legitimate fiduciary concerns about fee transparency and potential conflicts embedded in the investment advisory relationship.
Both Rhode Island and Providence undertook ambitious pension reform initiatives in recent years as actuarial pressures mounted and systems approached insolvency thresholds. However, the implementation and political consequences of these reforms have become a central campaign issue in what observers describe as a closely contested Democratic gubernatorial primary. The tension between Taveras and Raimondo reflects deeper questions about how effectively pension systems can manage hedge fund relationships, control costs, and maintain governance independence when investment advisory relationships span multiple decades.
The governance questions surfaced explicitly at a June 2013 Board of Investment Commissioners meeting, only the third Taveras had attended since taking office in 2011. At that meeting, Taveras interrogated Eric Bertonazzi, chief investment officer of Boston-based Wainwright Investment Counsel, regarding critical operational details. Specifically, Taveras sought data on hedge fund performance relative to risk-adjusted returns, whether the pension could identify comparable investments with lower fees, and whether hedge funds had deployed placement agents or third-party marketers to secure mandates. These questions underscore legitimate fiduciary concerns about fee transparency and potential conflicts embedded in the investment advisory relationship.
Both Rhode Island and Providence undertook ambitious pension reform initiatives in recent years as actuarial pressures mounted and systems approached insolvency thresholds. However, the implementation and political consequences of these reforms have become a central campaign issue in what observers describe as a closely contested Democratic gubernatorial primary. The tension between Taveras and Raimondo reflects deeper questions about how effectively pension systems can manage hedge fund relationships, control costs, and maintain governance independence when investment advisory relationships span multiple decades.
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