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Adam M. Downs

Fund Administrator

Laborers’ National Pension & Retirement Funds

5th Floor

905 16th Street NW

Washington, D.C. 20006-1765

Telephone: 202-737-1664

Cell: 301-332-4569

E-mail: adowns@lnipf.com <mailto:adowns@lnipf.com>


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From: Third Point Investor Relations [mailto:ir@thirdpoint.com]
Sent: Wednesday, February 5, 2014 12:12 PM
To: Adam Downs ex:116
Subject: Today's Wall Street Journal


Dear Investor:

In light of recent media reports on the State of Rhode Island's planned redemption, we thought you may be interested in reading an important analysis of the issue from today's WSJ.

Sincerely,

Investor Relations
Third Point LLC
390 Park Avenue
New York, New York 10022
Tel: 212-715-6707
Fax: 212-318-3851
Email: ir@thirdpoint.com


________________________________

The Education of Gina Raimondo

A union vendetta against Dan Loeb punishes teachers and poor kids.

Feb. 4, 2014 7:24 p.m. ET

It isn't easy being a reform Democrat these days. Witness the decision last week by Rhode Island Treasurer Gina Raimondo, heretofore a hero of pension reform, to buckle under pressure from the teachers union and dump a hedge fund run by a supporter of education choice.

In 2011 Ms. Raimondo led a successful fight to reform the Ocean State's broken pension funds, including a shift to a hybrid plan with a defined-contribution component. But now she is running for Governor, and her Democratic opponents are courting unions that want desperately to beat the apostate reformer. And, lo, last week the Rhode Island State Investment Commission she leads voted to divest state and local pension funds from Daniel Loeb's Third Point LLC.

The decision is curious because Third Point happens to be the state's top-performing hedge fund. Two years ago, the commission shuttled $50 million to Third Point in a broader push to meet the commission's target of a 7.5% return on investment. Public pension funds nationwide have been pouring into private-equity and hedge-fund investments as they chase higher yields.

Third Point yielded 24.7% over the last year while the retirement system returned 14%. Hedge funds as a class averaged 17.1%. If anything, the commission ought to be sending more money Mr. Loeb's way, and retired state workers ought to send him champagne.

So why the Raimondo heave-ho? The answer is union politics, specifically opposition by the American Federation of Teachers to education reform, especially school choice. Mr. Loeb and his wife are big donors to charter schools, which is enough by itself to earn the wrath of AFT President Randi Weingarten.

But the AFT put Mr. Loeb high atop the union's hedge-fund black list last year because he also sits on the board of the New York chapter of StudentsFirst, Michelle Rhee's education reform outfit that advocates teacher accountability in part based on student achievement. He is also a trustee of the Manhattan Institute, which favors school reform and in 2011 honored . . . Ms. Raimondo.

Mr. Loeb responded to the public union pressure last year by pledging an additional $1 million in Ms. Weingarten's honor (on top of an original $2 million) to the Success Academy Charter Schools in New York City and encouraging others to do likewise.

Ms. Weingarten hasn't forgotten, and she and her national enforcer Dan Pedrotty have been leaning on Ms. Raimondo to pull the state's pension-fund cash from Third Point. Last week she obliged. A spokeswoman for the Treasurer says politics had nothing to do with the decision, which she says was motivated by the commission's decision to reduce its "beta risk" (i.e., sensitivity to equity market moves). According to the Treasurer's office, Third Point has the "highest equity market sensitivity" among the state's hedge-fund investments.

But the commission was well aware of Third Point's beta risk when it invested in January 2012. The spokeswoman says "the circumstance were different then." That is, equities were flat, and they've since soared. Yet if the commission were purely concerned with market risk and volatility, it would be reducing its overall exposure to equities. Instead, the commission's equity exposure has modestly increased.

It's hard to avoid the conclusion that Ms. Raimondo is trying to neutralize union opposition by throwing Mr. Loeb over the side. But Ms. Raimondo is fooling herself if she thinks that divesting from Third Point will atone for her pension-reform heresy. The unions will still try to end her political career. Ms. Weingarten wants to make an example of Ms. Raimondo by showing other Democrats that favoring pension reform is politically fatal.

And she wants to make an example of Mr. Loeb to every other hedge fund that if you want union cash you'd better not support school choice or defined-contribution pension reforms. Never mind that StudentsFirst of New York's official position is that teachers should be able to choose between defined-benefit or defined-contribution plans.

The larger and sadder irony is that Rhode Island's investment is chump change in Third Point's $14 billion portfolio. Mr. Loeb doesn't need Rhode Island's money, but poor students in New York and teachers in Rhode Island need his. The teachers and public employees will now lose the benefit of the higher returns that Third Point provides for their retirement. And the poor kids will lose if other private-equity or hedge-fund owners lack Mr. Loeb's fortitude and decide to stop contributing to charter schools or reform outfits like Ms. Rhee's.

Ms. Raimondo is a politician, and politicians do what they feel they must to get elected. But her cave-in speaks volumes about what is required for a Democrat to succeed these days. Government unions run the show. Kids and rank-and-file teachers be damned.