The largest public pension fund in Rhode Island decided to redeem its investment from Third Point, the hedge fund managed by activist Daniel Loeb amid the ongoing criticism of the American Federation of Teachers against hedge fund managers.
Decision not political
The State Investment Commission, which manages $7 billion pension fund comprising of Rhode Island State Employees, Teachers and Municipal Employees’ retirement funds explained that its decision to pull out its investments from Third Point is not political.
The Rhode Island Investment Commission generated 49% returns from its initial investment of $50 million in Third Point two years ago. According to Gina Raimondo, treasurer of the Investment Commission, the decision to redeem the investment from Third Point despite generating high gains was based on the perception of the commission that the activist hedge fund has become too risky.
The spokesperson for Raimondo said the Investment Commission will receive its investment in March, and plans to invest it in other hedge funds.
Rhode Island’s investment in hedge funds is a major political issue. Democratic Providence Mayor Angel Talaveras who is running for governor criticized Raimondo regarding the states’ $1.15 billion investment in hedge funds.
Raimondo received recognition from the Manhattan Institute for implementing pension reforms including changes in defined-benefit plans.
American Federation of Teachers’ Watch List
Third Point is one of the hedge funds included in the watch list of American Federation of Teachers, which was considered unsympathetic to traditional pension funds. According to the organization, the hedge fund managers in the watch list including Loeb supports groups seeking to end the defined-benefit plans for teachers and other public employees.
StudentsFirst and Manhattan Institute are two of the groups identified by the American Federation of Teachers. Loeb serves as a trustee of Manhattan Institute and he also supports StudentsFirst, a supporter of charter schools opposed by the national teacher’s organization.
Last year, Loeb stated that he has never taken any position against defined-benefit plans. He added that he represents the interest of public school teachers and other government employees by earning a rate of returns higher than the pension benchmarks.