Pension sleuth Edward Siedle has launched a Kickstarter campaign to crowdfund an investigation into Rhode Island's troubled pension system. Reuters/Gary Cameron

Denizens of Kickstarter have crowdfunded everything from a beloved cult movie sequel to a bowl of potato salad. Now a new type of project will enter the arena: a public pension private eye.

Former Securities and Exchange Commission attorney and Forbes columnist Edward Siedle is launching a unique Kickstarter campaign to probe Rhode Island’s public pension system for conflicts of interest, excessive fees and transparency concerns. The $20,000 gambit would be the “first-ever crowdfunded investigation” of a state pension, according to Siedle, who says he has combed through over $1 trillion in pension fund investments throughout his career.

It wouldn’t be the first time the outspoken Siedle has investigated the Ocean State’s retirement system. In 2013, Siedle released a union-funded report that found “myriad conflicts of interest” in the state’s hedge fund investments and decried a sevenfold increase in fees paid out to Wall Street.

The report also questioned the state’s claims that risky investments were yielding higher returns. In three of the past four years, Rhode Island’s pension fund returns fell below the national median for comparable systems. As International Business Times reported last year, potential losses amounted to $372 million.

In a 2013 interview, former state Treasurer Gina Raimondo, now governor, dismissed Siedle’s report as an “opinion blog” and said the state’s investments aligned with industry best practices.

Siedle held on to his doubts. Hoping to renew his investigation this year -- but with the union tied up in a bevy of lawsuits surrounding the state pension -- Siedle seized on the idea of an investigation crowdfunded by individuals.

For most public pensions, Siedle says, “[t]here is virtually no input from the people whose money and retirement security is at stake.” State treasurers often preside over pensions with little public oversight, Siedle says.

The Kickstarter campaign would “allow employees to hire an expert of their own,” Siedle says. The campaign has raised just over $7,000, 35 percent of the target, with 21 days left on the clock.

The $8 billion Employee Retirement System of Rhode Island has had a rocky few years. The fund had a massive $5 billion unfunded liability in 2011. That’s when then-Treasurer Raimondo began shifting huge sums of pension fund cash into hedge funds and private equity firms, part of a reform plan that has drawn the praise of fiscal hawks and the ire of public employee unions.

Raimondo’s role in moving toward specialty Wall Street products has drawn sharp criticism. Point Judith Capital, a private equity firm where Raimondo once served as manager, received millions in pension cash to manage. Her former employer now charges the highest fee of any firm in the pension’s portfolio.

Rhode Island isn’t alone in its pension fund evolution. In the past decade, a wave of states have shifted their pensions from staid stock-and-bond portfolios to alternative investments -- a category that includes private equity firms, hedge funds, real estate and other nontraditional assets.

Nationwide, allocations of pension funds to alternative investments increased from 10 percent in 2006 to 25 percent this year.

State treasurers like Raimondo have justified the move by pointing to growing gaps between what pensions owe and how much they have, shortfalls exacerbated by declining state funding. Treasurers desperate to fill these holes have invested in hedge funds and private equity firms that promise higher returns and buffers against slumps.

For some, the strategy appears to pay off. According to Cliffwater LLC, an advisory firm that serves as Rhode Island’s hedge fund consultant, retirement systems with higher shares of alternative assets have boasted above-average returns over the past 10 years.

In Rhode Island, however, the outsized returns haven’t materialized. Over a three-year period ending in 2014, the pension's hedge funds underperformed the broader stock market by 13 points. Roughly 15 percent of the state pension fund's assets are invested in hedge funds, well above the national average.

Cliffwater has found that hedge fund returns varied widely. Legendary investor Warren Buffett’s hedge fund bet -- that over a 10-year period, ordinary stocks and bonds would top the returns of sophisticated hedge funds -- has, after seven years, held up.

The promise of higher returns has also brought steeper fees and diminished transparency, Siedle says. In 2013, those fees amounted to more than $70 million. Siedle also raised questions over the lack of transparency in hedge fund and private equity firms, which he calls “the highest-cost, highest-risk assets ever devised by Wall Street.”

The state treasurer's office did not immediately respond to a request for comment.

The state has argued in the past that its alternative investments meet legal standards and will help it close its pension shortfalls. It has also pointed out that these investments should be evaluated over a longer span, particularly as some are designed specifically to weather slumps rather than deliver constant high returns.

But Siedle isn’t satisfied. “You start pulling at threads and you don’t know how long they are or where they’re going to lead.”