Rhode Island Lost 9.5% But Performed Better Than Benchmarks

The state treasurer attributed an allocation into Treasuries and quant strategies for offsetting losses.

Losses from the coronavirus amounting to $901 million at the Rhode Island pension fund were partly offset by a risk mitigation allocation into Treasuries and quantitative strategies. 

The state retirement system plunged 9.5% in its third quarter ending in March, according to a Wednesday release. The fund is worth $7.9 billion, as of March 31, down from $8.8 billion at the end of last year. 

That’s a poor showing. But the pension fund still beat a benchmark portfolio of 60-40 stocks and bonds, which lost 12% over the same time period. It also beat global equity indexes, which plummeted 21%. 

The state treasurer attributed the relatively better performance to gains in its “crisis protection” strategy, which gained 15% over the same time period. He implemented the strategy in 2016 with a $787 million allocation.

“While the recent stress in the markets has impacted all investment funds, including the Rhode Island pension fund, the good news is that we’ve been preparing for this for some time,” state Treasurer Seth Magaziner said in a webcast

The crisis protection strategy, which accounts for 12% of the total portfolio, has an allocation split evenly between long-duration United States Treasury bonds and systematic trend-following managers.

The allocation is overseen by managers Aspect Capital, Crabel Capital, and Credit Suisse, which use algorithmic trading to chase trends in bonds, equity, and currency markets. 

The fund has a 52% asset allocation into growth equities, including global equities and private credit. It has allocated 9% into income generating assets, such as opportunistic debt.

It also has 38% allocated into what it calls stability asset classes, which includes the 12% allocation to crisis protection.

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