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Riley: Caprio Track Record Good, Seth Magaziner Claims Questioned

Tuesday, July 22, 2014

 

The 2014 Rhode Island Treasurer race analysis continues with this edition, which is devoted to each of the three candidates claims about their investment track record. We will compare those claims with reality. Understanding investments and risk is very important for individuals and for fiduciaries charged with managing money for beneficiaries. The General Treasurer is expected to be both a fiduciary and well-versed investment professional. Aside from understanding applicable Accounting Standards, investment track record and experience can be a critically important metric for voters to use when comparing candidates.

The RI Treasurer serves a vitally important role of managing taxpayers dollars used to fund government promises to government employees. In Rhode Island, we are deeply underfunded. While the treasurer has many other functions, including monitoring Credit Agency concerns as well as scrutinizing the status of the 39 municipalities funding effect on State finances, the most important function is managing the risk and returns of the pension assets for both the retires and the taxpayers who have to pay for any underfunding or the General Treasurer’s investment mistakes. As a fiduciary and elected official, the Rhode Island treasurer needs to clearly spell out the condition of plan assets and liabilities. The plans need to be accurately accounted for and funded and distributed.

Almonte Understands Accounting

Thousands of Government employees and hundreds of thousand s of taxpayers are owed complete accuracy and transparency. Unfortunately, this race has started with the notion of “fiduciary” clearly in Jeopardy and possibly under attack. Last week we pointed out that only one candidate, Ernie Almonte, knew and understood current accounting standards. Both Magaziner and Caprio displayed a woeful understanding of GASB 68 and its effects on their job and the State of Rhode Island. It is critical to understand GASB and particularly GASB 68.

How About Investment Track Record?

This week is about clarifying the Candidates’ investment track records real and or stated. We will then try to document those claims and point out what is the truth. Fiduciary standards do not allow for lying and misrepresenting the facts. As we shall see there are some real problems with truth among these candidates.

Caprio discussed his record and it’s a matter of public record. Mr. Almonte claims “years of investment experience” but I have been unable to uncover it. Seth Magaziner has made huge claims including, “As an investment professional I’ve taken on the Wall Street Banks and the predatory lenders and at the same time I’ve made strong investment returns for my clients. I look forward to doing the same for the state.”

Tale of the Tape

In the slideshow below, I compare the 3 candidates on 7 critical criteria.

In addition to the slides below, I’ve built a spreadsheet that would be relatively informative and useful if either Almonte or Magaziner had any track record of managing money. Without that and before a deep dive into 2007-2010 investment decisions, I can tell you that Frank Caprio record as Treasurer is good. He outperformed the benchmark (policy) portfolio on both a calendar and fiscal basis.  If $10,000 were invested, on either Jan 1 2007 when Frank entered office or on July 1, 2007 when he really took over, as cash into the Rhode Island Pension plan the asset allocations would have produced $10,470 using fiscal year calculations or $10,581 using a calendar year. Both the policy benchmark and the RI pension plan under Caprio significantly outperformed the S$ P 500 which was down between 11% and 13%.

The funded ratio for Caprio was 56.2% in 2007 and 58.8% in 2011 when he left. While neither is very good and among the worse in the U.S. many other plans worsened over the 2007 to 2011 period.

We will get into some of the specific return claims of the candidates and discuss their accuracy or spin. The biggest problem I have now with return analysis is that Magaziner has not released the data on funds he’s managed. If he has not actually managed money then he should consider dropping from the race after all the claims he made in the debate. I am willing to wait one more week for proof that he has actually managed money, as he has repeatedly claimed. We want to check his claim that “his investment record is the best of anyone in this race, bar none. “

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: RI Treasurer Candidates: Tale of the Tape

Below are GoLocalProv MINDSETTER™ Michael Riley's notes comparing and contrasting Ernie Almonte, Frank Caprio, and Seh Magaziner, candidates for State Treasurer.

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Years of Financial Exp.

Almonte (pictured): ? At least 25 years accounting

Caprio: 7 years Treasurer and 3 years at Chatham Capital

Magaziner: 4 years- 2 as a summer intern at Point Judith capital and 2 at Trillium asset management as an “analyst.”

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Age/Years in Office

Almonte

Age 57?

Former Auditor General RI (1994-2010)

14 years CPA Private firm

3 years owner  Almonte Group LLC

Caprio (pictured)

Age 48

RI General Treasurer 2007-2010

16 years R I general assembly

Magaziner

Age 30

No Political Offices held

2 years VP at Trillium Asset Management

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Years Managing Money

Almonte: Unclear if any

Caprio: 4 years as Treasurer part of team

Magaziner (pictured): Trillium Asset Management unclear

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Designations and Degrees

CPA, CFA, MBA, etc.

Almonte

CPA,CFE,CGFM,CITP

Bryant(accounting)

Bryant MST

Harvard(HKS)

Caprio

JD Suffolk Law

Harvard (economics)

Magaziner 

Brown University

Yale University MBA

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Relevant Financial Exp.

Almonte

Tons of impressive accounting achievements and experience.

No apparent track record for managing money.

Caprio 

Rhode Island General Treasurer 2006 -2010

Chatham Capital 2011-2014

Magaziner

It’s not at all clear When Seth joined Trillium and what his role is or was.

It’s also not clear he ever managed assets as is his claim.

Waiting for candidate response*

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Rate of Return on Assets

Almonte: No record.

Caprio: We use both 2007 full year as the first year and 2008 fiscal year as the first year and those track records for treasurer.

It’s unclear he has any track record at Chattam.

Magaziner: No record (see previous slide)

He claims 30% returns and claims to outperform benchmarks. My data shows Laura McGonagle as fund manger.

 
 

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