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Hedge fund fees hot topic at R.I. Investment Commission

PROVIDENCE, R.I. — Rhode Island has moved about $1 billion of its $7.6-billion state pension fund into hedge funds over the past 18 months, a move that General Treasurer Gina M. Raimondo defended against critics Wednesday in a meeting of the state Investment Commission.

For the first eight months, the state paid nearly $16 million in fees.

Facing withering criticism from recent stories by a Forbes magazine blogger accusing her of rewarding Wall Street fund managers, Raimondo and commission consultants argued that the strategy will help cushion the pension fund from a stock market crash such as the one in 2008 that cost the fund $2 billion.

Had hedge funds been in place then, says Raimondo, the state would have lost $500 million less.

Hedges in such investments as currencies, agricultural commodities and precious metals are designed to move against the stock market, and provide a better alternative to lower-yielding bonds, argued Raimondo and other commission members and consultants.

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