The financially troubled Providence, R.I., pension system has placed more than 9 percent of its total investment portfolio in a Renaissance Technologies hedge fund that lost almost 20 percent last year.
At the end of January, Providence had $33 million of its total investment account of more than $361 million in the Renaissance Institutional Equities Fund, according to a report prepared by its advisor, Wainright Investment Counsel, a Rhode Island consultancy that advises the city on its pension investments. The report was presented to the city’s board of investment commissioners on January 28.
Providence’s investment in the Renaissance fund also fell 5.8 percent in January, with a trailing one-year return of 19.4 percent, according to the report.
The losses come as the municipality is facing more than $1 billion in unfunded pension obligations, according to the city’s annual report. The Comprehensive Annual Financial Report for the fiscal year that ended June 30, 2019, found that the Employee Retirement System of the City had a funded ratio of only about 26 percent — approximately $367 million in assets to cover its total $1.4 billion pension liability. The assets have declined slightly since that report was issued, in part because of the Renaissance losses.
Meanwhile, investors are pulling billions of dollars out of the Renaissance fund, among others. Investors yanked $1.85 billion of three Renaissance hedge funds in December, according to Bloomberg, which reported that they also asked to pull another $1.9 month in January and $1.65 billion in February.
Providence is invested in only one other hedge fund, run by Quellos Strategic Partners, in which it had $12.8 million. That fund gained 7.4 percent over the past year and 0.2 percent in January.
“The Board of Investment Commissioners actively oversees the Providence Penson Fund's management and will continue to reassess investments in any underperforming funds,” Ben Smith, press secretary for the City of Providence, said in a statement to Institutional Investor.
The dreadful 2020 performance of the largest Renaissance fund that is open to outside investors is in stark contrast to the gains made by its famed Medallion fund, available only to current and former partners, as Institutional Investor previously reported. In 2020, Medallion had one of its best years ever — it gained 76 percent, according to one of its investors.
The Renaissance Institutional Equities Fund fell 19.94 percent in 2020, according to HSBC’s weekly scorecard of hedge fund performance.
As the report to Providence indicates, the losses have continued. As of January 15, the Renaissance Institutional Equities Fund was the worst-performing hedge fund on HSBC’s list of the 20 best- and worst-performing hedge funds of the week. A spokesperson for Renaissance did not respond to a request for comment in time for publication.
The fund launched in July of 2005 and has had an annualized return of 7.88 percent, according to HSBC.
Providence first invested in the Renaissance fund in 2006, according to a local Providence publication, Golocalprov, which first reported the news of the city’s big investment in the hedge fund.
Providence Mayor Jorge Elorza, who oversees the city’s investments, did not respond to a request for comment in time for publication.