PROVIDENCE, R.I. (WPRI) — Rhode Island’s roughly $8 billion pension fund fared better than most of its peers around the country during the first quarter as financial markets were swooning due to concerns about coronavirus, according to a new analysis of investment data.
While Rhode Island’s portfolio shrank 9.5% during the first three months of 2020, that ranked in the top 5% among 546 plans around the country, according to comparative data compiled by Investment Metrics LLC. It is also a far stronger performance than the Rhode Island plan’s 6.4% return over the last 10 years, which only ranks in the 42nd percentile nationwide.
“This is obviously very welcome news,” General Treasurer Seth Magaziner told WPRI 12, not only for current and future retirees but also “taxpayers who would be required to make up the difference.”
Magaziner, a second-term Democrat, gave much of the credit for the state’s performance to a decision made in 2016 when he implemented what he calls his “Back to Basics” investment strategy.
As part of that shift, roughly $800 million of the pension portfolio was moved into a “Crisis Protection” allocation “made up of investments that typically go up in value when everything else is going down,” Magaziner said.
The state’s investment data portal shows the Crisis Protection allocation made up 12.6% of the portfolio as of March 31, with about half of that invested in long-duration U.S. Treasury bonds.
“We didn’t know that there would be a virus, but we did know that there would be another recession one day, and we wanted to make sure that Rhode Island was prepared for it,” Magaziner said.
The pension plan’s value stood at just under $7.9 billion on March 31, but Magaziner said it has since rebounded to about $8.2 billion as markets have rallied on hopes of a quick economic recovery once the pandemic is under control.
However, that’s still down 6.6% from the pension fund’s nearly $8.8 billion value at the end of 2019.
Magaziner said there is a roughly two-year lag between when the pension fund suffers an investment loss and when that amount starts to be reflected in the annual required contributions that must be deposited out of the state budget, giving lawmakers some breathing room before they would need to deal with it.
“I think it’s highly unlikely that we’re going to need to change benefits or reform the system as a result of what we’ve experienced,” he said. “We’re holding up better than most others and holding up better than we have in prior recessions when it comes to the health of the pension fund.”
Ted Nesi (firstname.lastname@example.org) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook