UPDATED: Prov Pension Fund Investment in Hedge Fund Lost 19% - Billions Are Being Pulled From Fund
Thursday, February 11, 2021
The Providence pension fund has 12% of its investments in hedge funds and the vast majority of it is in one fund — Renaissance Institutional Equities Fund. Providence’s beleaguered pension lost millions in that one investment in 2020 and now institutional investors are pulling billions from the fund.
While the S&P 500 gained more than 18.4% in 2020, Providence’s pension fund grew by just 6.4%.
The Providence pension fund is managed by Wainwright Investment Counsel, LLC
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBloomberg reports that Renaissance is being hit with significant withdrawals — redemptions — from those investors who wish to pull out of the fund.
“Clients pulled a net $1.85 billion across the three hedge [Renaissance] funds in December and requested a net $1.9 billion back in January, according to investor letters seen by Bloomberg. Investors are poised to yank another $1.65 billion this month, the letters show,” reports Bloomberg.
The Wall Street Journal reported in January that a letter from Renaissance to investors which was deemed "an unusual move for one of Wall Street’s most secretive firms" painted a dismal situation for the fund's most recent performance.
In the letter from Renaissance to investors, “The firm said losses of between 20% and 30% in 2020 for its three funds open to outside investors should have been expected at some point during the course of the funds’ histories. The letter partly blamed heightened volatility for the weak performance.”
UPDATE: When GoLocal asked Elorza if he would move to review the investment in the fledgling hedge fund and the performance of Wainwright, Elorza's office said, "The Board of Investment Commissioners actively oversees the Providence Pension Fund's management and will continue to reassess investments in any underperforming funds."
Providence's investment in Renaissance dates back to 2006 under then-Providence Mayor David Cicilline.
In early years, the fund delivered.
Michael Riley, who leads a Rhode Island-based investment firm and has been a watchdog on the Providence pension fund said, “So the Providence piece of it is, the city's single largest investment is in a hedge fund -- greater than anything the state ever did. The state is more in private equity than hedge funds — they’re different things and I hate the confusion. To me they're different animals."
“The less liquid you are — I believe I agree with [Ted] Siedle these are inappropriate investments for a pension," said Riley. "These high fee investments — alternative investments should have a limit in pension funds, and weighing of a single investment. Providence has been way beyond the norm and I have been criticizing it the entire time."
“There’s a prudent standard. And it is up to [Providence Mayor Jorge] Elorza to take action, he’s the chair of the investment board. They have been doing the wrong thing for a long time. Of course this is just on the investment side. On the cost side — it’s a mess,” added Riley.
In December in a MINDSETTER™ in GoLocal, top Wall Street whistleblower Siedle warned the at the city's pension fund was near bankruptcy and this was before the 2020 pension fund performance was reported.
"The financial condition of the City of Providence, Rhode Island certainly looks precarious. The municipality may need to seek bankruptcy protection in the near future primarily as a result of its over $1 billion in unfunded pension obligations," wrote Siedle.
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