The imminent departure of longtime Chief Investment Officer Stan Mavromates helped spark an unusually contentious meeting of the Massachusetts Pension Reserves Investment Management board on June 7, focused on the system's compensation policies for staff.
Amid a spate of recent turnover, Michael Trotsky, Boston-based PRIM's executive director, and Robert L. Brousseau, one of nine board members as well as a member of PRIM's compensation committee, argued strongly that quick progress in hammering out more competitive compensation guidelines was urgently needed to avoid a destabilizing situation.
Mr. Mavromates, who will leave June 12 to join Mercer as its CIO for the Americas, and Katherine O'Neil, PRIM director of finance who resigned June 1 to join a local venture capital firm, are only the latest senior executives to leave the retirement system.
In August 2011, Wayne D. Smith, the senior investment officer overseeing PRIM's 10% allocation to private equity, left to join private equity fund-of-funds firm Pathway Capital Management as a senior vice president. That position remains vacant, as does that of Mr. Smith's deputy, Michael J. Langdon, who likewise held the title of senior investment officer, private equity, and left Nov. 14, 2011, to join Hermes GPE.
Karen E. Gershman, who was PRIM's chief operating officer and chief financial officer, left in 2011 to become COO of Health Advances, a strategic advisory firm for the health-care industry.
Meanwhile, PRIM's deputy CIO, Hannah Gilligan Commoss, is set to go on maternity leave this month, even as a new senior investment officer slated to assume oversight of PRIM's 10% hedge fund allocation from Ms. Commoss has yet to be hired.
At the meeting, Mr. Brousseau noted the only senior investment officer remaining will be Timothy V. Schlitzer, who oversees PRIM's real estate and timber allocation, leaving 90% of the overall portfolio with no dedicated senior staff overseeing it.
“How much more evidence do we need that this is an organization in crisis?” asked Mr. Brousseau, the board's longest-serving member at 25 years.
At the June 7 meeting, Mr. Trotsky called the number of top-level vacancies unprecedented and noted that Mr. Mavromates' departure, a big loss in itself, already was proving a hurdle in filling other key posts. “A leading PE candidate just pulled his hat out of the ring” because he didn't know who his new boss would be, the executive director said.
Mr. Trotsky warned that PRIM's failure to resolve the issue by quickly wrapping up a long-running review of the system's compensation policies could leave some of the 100 local systems in Massachusetts that outsource oversight of their portfolios to PRIM wondering whether to take back their assets.
Arguing for a greater sense of urgency — reflected by the executive director's contention in materials distributed at the meeting that the current level of staff vacancies posed “an unacceptable level of risk” for the retirement system — Mr. Trotsky called for the compensation committee to finish its review by the board's August meeting.
Barring that, he asked the board to grandfather in PRIM's current compensation policies — including bonuses of up to 40% for top staff if PRIM's overall three-year performance exceeds its policy benchmark by 75 basis points — for anyone Mr. Trotsky hires before the compensation committee completes its work.