Rhode Island Pension Plan Holds Down Losses Thanks to Treasuries, Algorithms

Although the first quarter was a wipe-out for plans, a surge in a special-strategy segment of the portfolio limited the damage in the smallest state.

A risk mitigation allocation of long duration US Treasuries and algorithmic trading helped the Rhode Island pension system outdo 95% of all US public pension plans in the first quarter of 2020.

While the Rhode Island plan was in the red, endemic among pension plans in the year’s first period, the crisis protection section of the portfolio limited its losses.

Rhode Island lost 9.6% in the first quarter. But a 15.1% jump in its crisis protection strategy, which counts for one-tenth of its $7.9 billion portfolio, helped place Rhode Island among the nation’s best-performing public pension plans during the coronavirus crisis, according to a report from Investment Metrics. The state fund came in 28th place out of 546 public pension plans.

“The new data indicating that Rhode Island is performing better than most other pension plans during the COVID-19 crisis is welcome news,” Rhode Island Treasurer Seth Magaziner said in a statement.

The top fifth percentile of pension plans lost 9.6% in the first quarter of 2020, according to the report. Plans on median lost 13.8% and plans in the 95th percentile lost 16.7%.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

A fund spokesperson said the allocation was created in 2016 after pension leaders, remembering the losses from previous recessions, sought strategies to limit declines in a market downturn.

In 2008, during the last recession, the Rhode Island pension plan slid to roughly $6 billion, an approximately $2 billion decline from about $8.5 billion before the crisis. At the time, about 87% of the fund was correlated to public equities, according to a spokesperson.

The spokesperson said the retirement system plans to maintain the crisis protection allocation, calling it an all-seasons allocation for growth and stability. Rhode Island is the smallest state in area, although it is the seventh least populous.