Treasurer James Diossa

In this episode, Rhode Island General Treasurer James Diossa shares insights into the state’s investment approach, innovative housing programs, cybersecurity priorities, and the excitement surrounding the upcoming FIFA World Cup events. This conversation offers a detailed look at how state leadership balances risk, supports communities, and leverages global events for local economic growth.

Main topics:

• The state’s investment strategy and private credit risks
• The Rhode Island Anchor Mortgage Program for first-time homebuyers
• Cybersecurity measures protecting state and pension data
• Rhode Island’s preparation for the World Cup and its economic impact
• The importance of balancing risk and opportunity in public investments

Key insights:

• Rhode Island’s pension fund has grown from $10 billion to over $13 billion, with an emphasis on maintaining stability and disciplined risk management.
• Private credit exposure has remained steady at 3% for a decade, reflecting cautious risk tolerance aligned with the fund’s long-term goals.
• The Rhode Island Anchor Mortgage Program has helped hundreds of first-time buyers with affordable, fixed-rate mortgages, revitalizing communities.
• Cybersecurity is a top priority, with dedicated staff and annual assessments, especially as financial systems become more vulnerable to emerging threats and AI-based vulnerabilities.
• The World Cup is expected to boost local tourism and business activity, with multiple events across Rhode Island planned to celebrate the global tournament.

Timestamps:

00:00 - Welcome back and last appearance recap
00:17 - Overview of Rhode Island’s current financial standing
00:31 - Investment strategy and fund growth
01:12 - Focus on pension member experience and cybersecurity
01:38 - Challenges and opportunities in private credit investments
02:25 - Maintaining a steady private credit allocation over the years
03:22 - Balancing higher return ambitions with risk tolerance
03:45 - Strategies for achieving funded status targets
05:13 - The importance of disciplined risk management and fiduciary responsibility
05:43 - Rhode Island Anchor Mortgage Program details and community impact
06:12 - How the program supports first-time homebuyers
08:09 - The critical role of cybersecurity and recent advancements
09:14 - State’s cybersecurity efforts and annual assessments
10:25 - Rhode Island’s FIFA World Cup bid and event planning
11:12 - Economic impact and community engagement during the World Cup
12:08 - Key events, watch parties, and international team visits
13:34 - Final thoughts on summer events and local economic boost

Resources & Links:

• Rhode Island Treasurer’s Office
• Rhode Island Anchor Mortgage Program
• Moody’s Credit Ratings
• FIFA World Cup 2026

Connect with James Diossa:

• LinkedIn
• Twitter

Transcript

Bill Bartholomew 0:00

Rhode Island General Treasurer James Diosa. Welcome back to Bartholomewtown. Yeah, good to see you. Good to be on. It's been a minute. We were just kind of noting that. And I think the last time you were on the show may have been the debate that you had against Republican candidate James Lathrop that we did live on the radio. That was that feels at once like it was just pretty pretty much a couple of days a couple of weeks ago, a couple of days ago, whatever. And that feels like a lifetime ago, which leads me to the the question right out of the gate. What's it like to be general treasurer?

James Diossa 0:31

You know what? We've we've hit the road uh uh you know pretty fast running, and we made incredible progress. You know, when I came into office, we had a fund of about $10 billion. We're now over $13 billion. We've been able to implement some really important creative uh ideas that has helped people, like our Rhode Island Anchor Mortgage Program, which I'm sure we'll talk about. Uh but more importantly for me is just ensuring that we're getting the best returns on our fund and that we're giving our our members, our pensioneers the best uh member sh member experience. And so that's always been top of mind and uh and always uh dealing with the issue of the day. Um one of those was cybersecurity, and so we've been very focused about safeguarding our information and putting in the best tools to protect us for that. But I'm sure we'll we'll continue uh diving deeper into some of these topics.

Bill Bartholomew 1:28

And no question about it, because those are front and front of mind for a lot of people, right out of the gate, just in terms of one of your major roles is obviously overseeing the pension system to simplify it. And uh we've seen a pivot towards alternative investments, private credit specifically, in our pension system. Trying to frame this out in as simple a way as possible, but also ask a very direct question. With private question, but private credit right now, you read about it every day on a layman's level as a very vulnerable space at minimum that almost is starting to feel susceptible to collapse depending on what and who you read. How much of Rhode Island's pension system right now is in a s is in a scenario where it is a fairly reliable investment structure versus, as you said, some of those creative ideas and some of that new approach to investing that we see with alternative investments and private credit.

James Diossa 2:26

You know, it was it became very evident in the headlines that uh private credit was uh a rising concern. And you hear leaders in the fining industries like Jamie Diming talking about uh his concerns around private credits. But you know, we we really got into the uh private credit fund exposure about 10 years ago. Uh we started with a 3% uh allocation. Ten years later, we're still at 3%. Um and and and one of the things that we did is, again, when you see these types of headlines is you know, we just review uh the information, we feel we're strong, solid. And we had a very open discussion with our State Investment Commission, which is a public meeting, and uh we feel we we are on the right track and and and believe that uh although there's a lot of noise going around private credit, that we're we're okay.

Bill Bartholomew 3:22

What do you say to people who look at the situation right now and they say the return target isn't high enough that actually rather than being in a space like private credit, we should be looking into even more alternative assets and trying to chase 9, 10, 11 percent. Obviously, that is a dangerous move, but we hear those voices from time to time as well.

James Diossa 3:45

I agree. And it's all depending on um on the fund, the fund's risk tolerance. If you compare it to a college or university endowment, uh they can take a little more risk. Uh pension fund like us, where we have to make sure we pay our benefits every month, our risk tolerance is very different. And so uh we we are uh very sensitive uh to all that. We are aware of some of the callings, as you mentioned, that we should be aiming for higher returns. But at the end of the day, the way this fund has been built out through a strategy is that when when the markets are doing very well, uh we we enjoy some of that upside. But when the markets are going down, we don't feel much of that pain on the downside. And so it's the reason why uh this fund is on track uh to being 75% funded by 2029-2030, and fully funded by 2034-2035. That's a huge milestone for the fund. And it just shows the discipline around the people that work in this office, but also the members of the State Investment Commission, and understanding that there's a lot of flashy things out there and and a lot of things that uh could could help us get there quicker or bring up more returns. More importantly, uh we know and we understand uh that our responsibility is our fiduciary one, and it's to the members. So that's our focus every single day.

Bill Bartholomew 5:13

Yeah, it's not like you know the state is gonna put $150 million down on whether or not it's gonna get to 94 degrees at TF Green by 3 p.m. on poly market or something. So sometimes you hear this stuff and you realize it's a garbage take, but it is out there, uh, no doubt is a sentiment that that's where you have to strike that balance of risk aversion versus are you limiting opportunity because of that risk aversion. So you strike that balance every single day. Let's talk about a couple of those things you raised. RI Anchorhome. Look, uh the the state doesn't act as a direct lender here. It's not like people show up at the state house like it's as if it's a bank. Yeah. But the Treasury uses up to $80 million in state deposits to back matching accounts at participating local banks and some credit unions. So I guess with that in mind, kind of flesh that out how that actually works for a person who's looking to take advantage of this program, where you're sort of the the not the lender of last resort, but kind of the backstop to the backstop.

James Diossa 6:17

Look, it it's it's been a very powerful program that we announced late last year with about $20 million uh with three financial institutions, one being Navigant Credit Union, uh Newport uh uh uh bank and also Centerville Bank. We decided to really look at the criteria of those folks that were close to uh being qualified by a mortgage, but because of the pricing of housing stock, but also uh the interest rate and PMI was keeping uh any buying purchasing power out of reach. And so through this program, we were able to eliminate PMI, uh keep an interest rate of 3.99 for 30 years fixed, and you know, change a little bit of the qualifications uh so that these folks can have more purchasing power, but also have reasonable mortgage payments that they can afford and stay in their home for the first time. So this is totally uh focused around first-time home buyers. We've been able to see great success. The first time we rolled out the program, all the funds were exhausted in literally a month. And what was very powerful about this is that a lot of communities saw uh purchasing abilities from some of our first-time buyers in their communities, which is very powerful. And two, it just shows the need for some, you know, uh more affordable rates in the mortgage space. So we announced uh a second round uh early earlier uh this month, and uh we've been able to partner again with Navigant, uh Coastal One, and Washington Trust. We're hearing nothing but great news about the amount of people blocking in for the first time and getting involved in the experience of buying their first time home, making their American dream come true.

Bill Bartholomew 8:09

Yeah, no, no question, a huge piece of the puzzle. We do need the housing stock for it to really work fully, and hopefully that is something that comes to fruition. Uh, we'll see how that plays out. I want to talk about cybersecurity just quickly and then get into soccer because you're also co-chair of Rhode Island's um essentially Rhode Island's operation intended with the World Cup. Look, uh the cybersecurity is a big deal. We all saw the health source breach. Uh a lot of people experienced it and learned a lot about vulnerability on a direct level here in Rhode Island. Now we have Claude Mythos out, which is anthropics unreleased AI that has literally been able to detect security vulnerabilities in financial and other institutional softwares and systems that coders, cybersecurity experts for decades have not been able to solve that very same problem. So we see where this is going. Cybersecurity is becoming more and more and more wild every single day. You manage the state's well, at least the pensioneers' money and a lot of you manage a lot of money for the state, we'll put it that way. Cybersecurity to you right now is it's it's critical.

James Diossa 9:16

Uh, and it's it's essential. I think you know, outside of the daily transactions that we have coming out of this office, we have a lot of uh personal identifiable information. Uh and to me, that is paramount to how we operate. Everything that we look at, we look at it also through a lens of cybersecurity. And it's uh it is why we've been consistent with uh our assessments every year, our reviews top-bottom of our cybersecurity practices. The governor, the legislature, gave us uh uh uh the ability to hire a full-time cybersecurity uh person who's overseeing this whole operation. And and what I've always said too is that now these rating agencies are looking at financial security as part of, you know, a reason to upgrade or downgrade our credit rating. And so we've taken that very serious. Uh, and uh, you know, we were just down there, uh, the governor and I with Fitch, Moody's, SP, and this is part of the presentation now because this is what they want to hear. Yeah, no question about it.

Bill Bartholomew 10:27

Let's talk about soccer. I think back to uh when you and I first met, I was like, oh, wait a minute, I think I did you play soccer at the Lusitania Club like in Central Falls? Because I played and refereed there. So yeah, you and I share a a lineage there, no doubt about it. Our paths collided in the past.

James Diossa 10:44

Yes.

Bill Bartholomew 10:45

Today you were co-chair along with Liz Tanner. Um lot of roles that Liz Liz Tanner has had in this state of Commerce RI head and and many others. Uh you are co-spearheading Rhode Island's affiliation uh organizational support for the World Cup. What does that entail in terms of there's a million events happening, there's watch events, unofficial, official, but what exactly do you see as your charge here?

James Diossa 11:12

Yeah, so like it's it's it's very clear. I I think that you know the number one responsibility of this whole organization is to ensure that, you know, Rhode Islanders, tourists, uh feel safe. They have the ability to move around our state, uh, they have the ability to enjoy our state. We also want to capture as much of uh economic impact as possible. And bottom line, we want this to be fun for everyone. And so, whether you're a soccer fan or not, uh we want this to be a joyous uh experience. And so you're right, we're gonna have a very busy summer. Uh, there's gonna be a lot going on. Uh, the fact that you know Bryant and Providence is hosting the Ghana national team is a big deal. And the fact that Bryant has signed on for the second phase of the World Cup, I mean whoever goes on to the next phase, they'll have the opportunity to choose Bryant as a place to practice, uh, and also can choose Providence to stay in. That's a huge deal. But throughout this whole time, we're gonna have different soccer-related activities across the state, from watch parties in Central Falls, Pentucket, Providence, East Providence, to uh, you know, different activities in in in Newport, uh, northern side of the state, et cetera. Uh, what's gonna be even more exciting is on June 7th, the K. Verdian national team, who has qualified for the first time to the World Cup, is actually making their first stop in the States in Patucky. So Patuaki's gonna give them a major setup. It's a big deal. Saturday, we're bringing a former national Colombian legend to come uh talk about the excitement around the World Cup. And now we've enlisted the House of Portugal, uh, which will be right there at um uh right off next to Station Park, where they'll bring Portuguese legends every week to you know keep the excitement around the Portuguese national team. And we gotta we gotta clearly identify the full uh experience that Province is gonna put out through the watch party. They're gonna show up every single game. And so this is gonna be an exciting time for a state. And I hope it it's not only rewarding as far as an experience, but also that our small businesses and and and many of our businesses enjoy uh the impact of it.

Bill Bartholomew 13:46

Yep, it's gonna be a fun summer for a lot of reasons. This included lots to watch for, and perhaps we will be in touch and we'll see you out there at the different events. General Treasurer James Diosa, great to talk with you today. Thanks so much.

James Diossa 13:58

Always good. Always good to see you. Take care.