Michael Travaglini, who as head of the state pension fund is among the highest paid government employees in Massachusetts, plans to quit next month, citing as a reason efforts by legislators to curb the compensation of people in his office.
Travaglini said ongoing efforts by legislators to limit a performance-based bonus system in the pension agency that he helped create three years ago was an important factor in his decision to leave June 11 and go to work for a Chicago investment firm.
"The issue of incentive compensation here is back on the front burner," he said. "If you need the context for my decision, it's an entirely personal one. I have a wife and three children and I'm going to provide for them."
Travaglini earns a base salary of $322,000 and can make as much as 40 percent more as a bonus, based on the performance of the pension fund. Other employees managing the pension can earn bonuses ranging from 30 to 40 percent, based on the fund's investment returns in relation to performance benchmarks.
Travaglini is the brother of former Massachusetts Senate leader Robert Travaglini.
He pointed to two legislative proposals that he said would make it harder to attract and retain talent to run the state's $37 billion pension fund. One would limit the ability of state workers to earn more than the governor, who is paid $143,000 a year. Another would block bonuses for years in which the pension fund lost money, regardless of its relative performance.
"Someone else can hang around for that, but it's not going to be Mike Travaglini," he said. "Most people will say, `Good riddance. If you want to make more money go do it in the private sector,' and that's what I'm going to do. But there's a real threat to not being able to recruit and retain competent people here."
Travaglini also bristled at campaign ads aimed at Timothy Cahill, the state treasurer and gubernatorial candidate who serves as chairman of the Pension Reserves Investment Management board. Ads financed by the Republican Governor's Association say the state paid out performance bonuses when the pension fund lost billions in 2008.
he bonuses, paid in September 2008 as financial markets were cratering, were based on the pension fund's investment performance for the prior three years, when the fund was performing well. Travaglini himself earned a bonus of $64,000 that year.
"The environment has turned hostile," said Travaglini, who will join Grosvenor Capital Management as a managing director for business development. His new job will involve pitching Grosvenor's hedge fund investments to public pension funds.
The state's pension fund has performed relatively well over the five full fiscal years under Travaglini's leadership. But it lost 23.9 percent in the fiscal year that ended June 30, 2009, in the midst of swooning financial markets, its worst performance ever. Typically among the country's top-performing public pension funds, the 2009 performance placed it among the bottom quarter of big funds for that fiscal year.