Transparent Treasury Initiative

By State Treasurer Seth Magaziner

At the Rhode Island Treasury, responsible stewardship of the state’s investments is the most important responsibility of our office and we must be accountable to the public we serve. Our office oversees more than $15 billion of public funds, most notably the $8 billion Employees Retirement System, and the public has a right to know where its money is invested and how it is performing.

Last month, we launched our Transparent Treasury initiative, a series of new policies and tools that will allow Rhode Islanders to access information about how their public dollars are managed.

Under Transparent Treasury, money managers who seek to do business with Rhode Island must publicly disclose information about performance, fees, expenses and liquidity. While this new policy might seem like an obvious step for us to take, it is among the first of its kind in the country, and we also believe it to be the most wide-ranging.

There are other states that promote a level of transparency for their pension plans, but Rhode Island is distinct in that we now require fund-by-fund disclosure not only of management and performance fees, but also investment-related expenses.

The basic fees structure charged by most fund managers includes a flat management fee on the amount of capital invested, and a performance fee based on the fund manager’s performance. Rhode Island has already been one of the few states fully reporting management and performance fees for the past three years, but management and performance fees are not the only way that investment managers charge states like Rhode Island. It is common for fund managers to separately charge what are called “investment-
related fund expenses”, which can include reimbursement for legal, auditing, trading commissions, and other costs that fund managers incur. These so-called “hidden fees” have come under great scrutiny in the media lately due to their opaque nature.

In the 2014 fiscal year, investment related fund expenses charged to the Rhode Island pension system added up to more than $5 million. As part of the new transparency initiative, we will begin reporting these fund expenses at an aggregate level immediately and on a fund-by-fund basis later this year. This has never been done in Rhode Island, and to the best of our knowledge is not being done in any other state. As a matter of policy, funds that do not agree to fully report all management fees, performance fees and fund expenses will not receive investment dollars from our office.

As proud as I am of our new policy on fee and expense disclosure, there are several other exciting aspects of our Transparent Treasury initiative also worth noting. We have launched a new investment information center on, as well as a new data portal that offers unprecedented access to state treasury information. The investment information center includes interactive graphics that show the allocation and performance of state funds going back more than three decades. It also displays information on each of the state’s fund managers including written descriptions of their strategies, along with information on the performance and cost.

I encourage all Rhode Islanders to spend some time looking at the new investment information center and data portal on our website, and I hope that these new sources of information will ignite a productive dialogue for how we can better serve the public in the future.

Another important part of the Transparent Treasury initiative is a new set of policies and procedures for how our office contracts with  external vendors like legal firms and IT consultants. Too often in Rhode Island, the awarding of state contracts is opaque and subjective. Existing contracts are extended repeatedly with no competitive bidding process.

Under my administration, as a matter of policy, all contracts that are due to expire during my term in office will be put out for competitive bid. We have posted a calendar on the Treasury website of when we anticipate putting out these RFPs, we will use objective scoring systems to evaluate bids, and we will publish the scoring results online.

Those of us tasked with oversight of public dollars must never lose sight of our role as public servants. In the coming months and years our office will continue to work hard to be a leader in implementing best practices for transparency and accountability in public finance. When all Rhode Islanders are able to know and understand how their public funds are being managed, we will have truly achieved a “transparent treasury.”

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