MassPRIM's Travaglini Denies Pay-to-Play in State Pension Fund

(March 29, 2010) – Michael Travaglini, executive director of the Massachusetts Pension Reserves Investment Management Board (MassPRIM), denies allegations against State Treasurer Timothy P. Cahill of pay-to-play, asserting that the board’s superior investment record speaks for itself.

“Since Cahill’s position as treasurer for the past seven years, we’ve been ranked in the top 10% nationally in terms of the investment performance of the fund,” Travaglini told ai5000. “Those returns would not have been possible if we had been making decisions other than objective investment choices.”

Cahill, who unenrolled from the Democratic Party to run for governor as an independent, has been lambasted in the news recently for allegations of pay-to-play fundraising, in which payments are made to influence decisions on where to invest public pension-fund money. According to The Boston Globe, Cahill accepted more than $100,000 in connection to Michael A. Ruane, a Boston investment manager at TA Associates Realty, which has been reportedly allotted $500 million in state funds to invest since Cahill became treasurer in 2003.

The alleged practice highlights concerns over donations from investment managers as well as the issue of investment managers and placement agents making donations for personal gain, hoping to influence pension fund allocation. While placement agents open funds to potential bribe issues, they don’t necessarily lead to bribery.

But, Travaglini stated that Ruane, who runs a real estate portfolio for MassPRIM at TA Associates Realty, was not trying to influence investment decisions despite multiple donations from real estate managers who worked with Ruane. Ruane solicited legal contributions for Cahill and abided by campaign finance laws, Travaglini said.

According to Travaglini, Cahill had nothing to do with the hiring of Ruane’s firm, which was hired by the previous treasurer. TA Associates Realty is one of the five real estate firms that MassPRIM uses to invest.

MassPRIM supervises the Pension Reserves Investment Trust (PRIT), which has roughly $44 billion in assets under management, and operates on a fund of fund strategy. “We use hedge fund investments, but we exclusively give our money to five firms that decide which hedge funds to invest on our behalf,” said Travaglini. “We don’t make those hedge fund decisions.” Those five funds include New York-based Arden Asset Management, K2 Advisors in Stamford, Conn., The Rock Creek Group, based in Washington, DC., Chicago-based Grosvenor Capital Management, and Pacific Alternative Asset Management Company (PAAMCO) in Southern California.

“We’ve required disclosure of third party relationships for more than 10 years,” Travaglini said.

Thomas Kelly, a friend of Cahill’s who said he hopes Cahill becomes the next governor, sides with Travaglini regarding allegations of pay-to-play against the state treasurer. Kelly works at Can Am Consultants, which provides so-called “third-party marketing” services for businesses, including investment companies and venture capital firms seeking to raise capital from pension funds.

“Cahill’s been under attack regularly in Massachusetts, but there’s never been an issue of pay-to-play here,” said Kelly to ai5000. “That may be true in other states where the treasurer is the sole trustee, but not here in Massachusetts.”