Riley: Providences Wainwright Caught in Renaissance Hedge Fund Lie
Tuesday, November 04, 2014
Renaissance Institutional Equity Fund is currently the largest holding of Providence Pension fund. The original investment decision was made in 2006 by the Investment commission headed by Mayor David Cicilline. The pitch was made By Eric Bertonazzi of Wainwright investment Counsel. Wainwright Investment Counsel was hired in 1995 by Buddy Cianci. There appears to have never been an RFP or open bidding process for the Adviser. It's not even clear who can hire the adviser of if there is any cap on fees or a process to audit this position. Providence and Treasurer Lombardi are non responsive to questions.
The job of the investment commission is to prudently manage all aspects of the retirement plan. As such, commission members rely on suggestions from the Investment adviser. Few have focused on the process of how an adviser is hired and how he is paid. Can Providence pay their adviser any amount they want? Can the adviser receive pay from providence and also get paid by his recommended fund for example, Renaissance Technologies. We may never know because Providence does not audit this. The State does not allow their adviser, Cliffwater, to receive payments from investment managers Cliffwater recommends. Providence officials won’t answer that question. As far as we know, they have no policy.
Renaissance and Wainwright pitch 2006
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTWainwright and Bertonazi have been advising Providence pensions and investment commissioners for 20 years. In 2006 Wainwright enthusiastically recommended that Providence step up their hedge fund allocation and specifically invest in a fund that promised to earn 600 basis points (6%) above the return of the Standard and Poors 500 index. They proposed to achieve these returns at half to 2/3 the risk (volatility) of the well know diversified index. So as an example if the Market (S&P500) rose 7% in a year with a volatility of returns of 18% Renaissance promised 13% returns (7+6) and the returns would vary by only 12%. This is the holy grail of investment higher returns that the market with less risk. What’s not to like. Here’s the pitch made to Cicilline, Myrth York et al as they “bought in” hook line and sinker. The “pitch” is a must read especially when you consider Wainwrights role in promoting Bernie Madoff investments to pension funds and other clients. Wainwright ultimately paid millions in out of court settlements and lost most of their municipal pension advisory roles in Massachusetts where they are based.
“the Fund has achieved its goals during the time of Providence‘s investment”
Wainwright Investment Counsel , Eric Bertonazzi
September, 2014
I’ve written quite a bit about the odd happenings in Providence pensions specifically the role of a huge investment in Renaissance. They received national attention in July and were forced to appear before a Senate Panel investigating their role in $ 8 billion dollars in Tax evasion. Apparently some board members wanted some answers and the last Investment commission meeting Wainwright spent some time reviewing the investment in Renaissance. (Remember, we still don’t know if Eric is paid by both Renaissance and the pension plan). Here is the review just presented to the board and Angel Taveras. Read as Eric lies through his teeth to the hapless commission. Did the city look into what was promised in 2006 or just take tainted Wainwrights word for it? The discussion can be found in the minutes of September 25, 2014. Amazingly, Wainwright presented the performance results for Renaissance to the commission with the Following statement “the Fund has achieved its goals during the time of Providence‘s investment” he then proceeds to show conclusively they have not achieved what they promised when hired by Cicilline in 2006.
Facts reveal another Providence lie
Wainwright and Renaissance promised S&P 500 plus 600 basis points.
Clearly Wainwright s choice as hedgefund hasn't even come close to its 2006 promise, yet remains Providence largest investment and last month Wainwright had the gall to say Renaissance has performed as promised. AN OUTRIGHT LIE. Grounds for firing Wainwright and liquidating Renaissance. It is also grounds for liquidating the Investment Commission and Treasurer Lombardi.
http://providenceri.iqm2.com/Citizens/Default.aspx September 25 report click audio/video
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.
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