May 30, 2012 / 8:48 PM / 5 years ago

UPDATE 1-Massachusetts pension fund exec heads to private sector

By Svea Herbst-Bayliss

BOSTON, May 30 (Reuters) - The chief investment officer of Massachusetts' $50 billion state pension fund, Stanley Mavromates, is leaving for a position in the private sector.

Mavromates, who has amassed a track record of some of the best returns for public funds in his dozen years at the Massachusetts Pension Reserves Investment Management Board, will leave on June 12, Michael Trotsky, the fund's executive director, said on Wednesday.

He will join investment consulting firm Mercer, which has offices in Boston.

Mavromates, 51, who invests retirement savings for teachers, police officers and other state workers, helped place a chunk of the state fund's assets with some of the world's best-known hedge funds and other asset managers, such as Och-Ziff Capital Management Group LLC and Pershing Square Capital Management.

Long-term, the annualized return for the pension plan fund since inception is 9.56 percent, exceeding the fund's benchmark, the 8.25 percent return assumption set by statute.

Investments in alternative assets like private equity and hedge funds have helped boost returns, and Mavromates, known for his calm and steady presence during board meetings where he routinely described complicated investments in simple language, recently helped oversee the fund's decision to make direct investments in hedge funds.

Like some other public pension funds, Massachusetts decided to go it alone on hedge funds, relying both more heavily on its consultants and the in-house investment staff to make these selections instead of paying extra fees to funds of funds to construct the portfolios.

Mavromates joined the pension fund's investment staff in 2000 and has held the chief investment title since 2005. Over the years he supervised many of the pension fund's star employees, Trotsky said in a memo sent to staff on Wednesday. "Stan has not only contributed tremendously to PRIM's great performance and success, but has also contributed tremendously to PRIM's positive culture," Trotsky wrote.

The pension fund, however, has been plagued with a string of departures at a time many of its top investment professionals have been approached by head hunters with the prospects of far higher salaries in the private sector.

Turnover has been nearly 200 percent in the last 10 years. Former executive director Michael Travaglini left two years ago followed in 2011 by Karen Gershman, who had been the chief financial officer. Last summer two top staffers in the fund's private equity group, Wayne Smith and Michael Langdon, left.

The state will begin looking for a new chief investment officer immediately.

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