Massachusetts Appoints Trotsky as Director of $41.3 Billion Pension Fund

The $41.3 billion Massachusetts pension appointed Michael Trotsky as executive director after the previous head said the public fund doesn’t adequately compensate its employees.

The nine-member board of the Massachusetts Pension Reserves Investment Trust, which is chaired by state Treasurer Timothy Cahill, voted unanimously today in favor of hiring Trotsky at an annual salary of $245,000. Trotsky, 46, previously served as executive director of the state’s Health Care Security Trust, which was established with money the state received from suing tobacco companies.

The board also defeated by a vote of 6-3 an amendment from Greg Mennis, who represents Governor Deval Patrick, to exclude the executive director from bonuses based on the fund’s performance. The board three years ago approved bonuses of as much as 40 percent of salary after backing away from a plan to pay as much as 100 percent.

“This is a good salary,” said Robert Brousseau, who represents the state teachers’ retirement system and headed the search for the new executive director. “This puts us in a good compensation position.”

Trotsky replaces Michael Travaglini, who was paid a salary of $322,000 and a performance bonus of $64,000 in 2008; he earned no extra pay last year when the fund underperformed. Travaglini, who left to join Chicago-based money manager Grosvenor Capital Management, said after he announced his resignation in May that the pension fund doesn’t pay its top executives enough money.

Salary Limits

The pension fund for state employees and teachers grew by $3.6 billion in the fiscal year ending June 30 to $41.3 billion, gaining 12.8 percent after losing a record 24 percent the previous fiscal year. It exceeded its benchmark return of 9.77 percent, driven by gains in fixed income and global equity markets as well as higher returns from private-equity investments, the board said in a release last month.

The Massachusetts Senate in April attempted to limit the top salary of state employees to no more than the governor’s annual pay, which is about $140,000, sending legislation to the House. There was also an effort this year in the Legislature to restrict bonuses at the pension fund if it loses money regardless of its performance versus other public funds.

To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net.

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