Nathan Story Blog

MassPRIM Israel Bonds Documentation

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Download Response (zip file)

The Request

I requested the Massachusetts Pension Reserves Investment Management Board (MassPRIM) the following:

1. Investment policy documents, policy statements, investment guidelines, or eligibility criteria governing the selection of foreign sovereign debt instruments within investment portfolios managed by MassPRIM.

  1. Comparative analyses prepared by or for MassPRIM evaluating State of Israel bonds against other instruments on metrics including yield, credit quality, liquidity, or duration.

  2. Memoranda or analyses prepared by or for MassPRIM supporting the purchase or renewal of State of Israel bonds.

  3. Due diligence documentation maintained by MassPRIM in connection with the purchase or renewal of State of Israel bonds.

  4. Any record establishing a standing authorization or instruction to roll over State of Israel bonds. This instruction is referenced in Chuck LaPosta's Jan 5, 2026 email "The details of the CIR are consistent with the bonds rolling off and match PRIM's instruction to roll into similar bonds."

I'm not smart enough to have come up with that language. I took most of it from this request by Christopher Sweat to the Illinois State Treasurer.

The Response

I will excerpt below the most interesting parts.

COMMONWEALTH OF MASSACHUSETTS
PENSION RESERVES INVESTMENT MANAGEMENT BOARD
...
Minutes of the October 5, 2006, Board Meeting
commencing at 9:30 a.m.
...
MR. MAVROMATES: Okay. The first item on
Agenda, we obviously had Mr. Sperling here
presenting Tom Lee. The State of Israel bond
recommendation, some of the board members may
recall in May 2001 this Board voted to restart
the program that had been started by MASTERS in
1989 and '94, and we made a commitment of $5
million a year per year for a total of five years
or an aggregate amount of $25 million. And the
way that we organized the program, we tried the
latter, latter meaning the maturities of each of
the bonds are in separate years. One matures
every year. And then the Board voted to roll
those over as they mature. What we're missing
now is we're missing a ladder for 2008. If you
look there at 2007, 2009, '10, '11 and '13. So
what we'd like to do today, and the Investment
Committee supported this recommendation, is
purchase an Israeli bond, currently a two-year
bond, a $5 million bond that will mature in 2008.
And then that way our ladder will be complete,
and this thing will go in sort of a perpetuity,
just rolling over continuously.
PRIM Board Meeting Minutes of October 5, 2006,
For Approval at the December 5, 2006, Meeting
Page 56 of 130
The current holdings for those that have an
interest are in Appendix F, and one thing that's
sort of astonishing to me is that most of the
rates are in the 5.75, 5.85. And just for a
point of reference, during those same time
periods, the Lehman aggregate, which is an
investment grade bond portfolio, the one-year
return on that is 1.71, and three years 3.98, and
five years 4.87. So this is where this bond
would reside, where the current holdings do
reside. They are currently rated A2, A- by
Moody's and S&P. They have been rating for a
while and staff and the Investment Committee
recommend the purchase of a $5 million Israeli
bond in the current calendar year.
TREASURER CAHILL: Any questions? Motion.
MR. AIKENS: We'll be up to 30 million; do I
get that right?
MR. MAVROMATES: That's correct.
MR. AIKENS: How volatile are these bonds?
I mean, when Hazbullah shoots off a rocket, do
these bonds reflect that?
MR. MAVROMATES: The way it works is in this
particular case we purchased a two-year bond, and
you get interest payments along the way, and you
PRIM Board Meeting Minutes of October 5, 2006,
For Approval at the December 5, 2006, Meeting
Page 57 of 130
get your principal back in two years. So you
don't trade these bonds.
MR. AIKENS: Are they priced daily?
MR. MAVROMATES: Well, they're priced at
book value. So at the end of it, you're going to
get, if your face value is $5 million, you're
getting $5 million in 2000.
MR. AIKENS: But I couldn't sell it to
somebody else before that.
MR. MAVROMATES: No. It's like a, for lack
of a better word, CD. It's like a two-year CD.
MR. BROUSSEAU: Are you saying the
volatility of the bonds are not impacted by the
geopolitical --
MR. AIKENS: No, because they're illiquid.
It's like a CD.
MR. MAVROMATES: But to that extent, their
credit rating has not changed. Israel's credit
rating has not changed, even during those times
or even times of conflict.
MR. SCHWARZENBACH: Can I just ask maybe an
obvious question, why are we even discussing
this? I'm sorry, maybe I don't understand
something. This is a bond purchase. We don't
discuss bond purchases in general, and I'm trying
PRIM Board Meeting Minutes of October 5, 2006,
For Approval at the December 5, 2006, Meeting

Page 58 of 130
to understand.
MR. AIKENS: We're managing this; right?
MR. SCHWARZENBACH: This is direct held;
that's the point?
MR. MAVROMATES: This is parked in, let's
say, for example, Black Rock's portfolio and they
manage the coupon name. So we don't --
MR. SCHWARZENBACH: But I'm just trying to
understand why this even exists and why we even
have it. And I'm not saying that we shouldn't be
investing in Israeli bonds, but I mean, we don't
talk about investing in German bonds or we don't
talk about investing in, you know --
MR. MAVROMATES: I can't buy these bonds
myself. I have to have approval. I'm trying to
be as transparent as possible.
MR. SCHWARZENBACH: That's what I'm trying
to understand.
MR. TRAVAGLINI: While we park them in Black
Rock's portfolio, it's not the Black Rock PM
making the buy decisions.
MR. SCHWARZENBACH: I'm trying to understand
why do we have this portfolio separate from
everything else. Is it because it's Israel?
MR. MAVROMATES: It's a legacy portfolio
PRIM Board Meeting Minutes of October 5, 2006,
For Approval at the December 5, 2006, Meeting

Page 59 of 130
that was started in the '80s and '90s, and for
whatever reason people thought it was a good idea
to continue the program.
MR. SCHWARZENBACH: Again, I'm not trying to
say we shouldn't. I'm just trying to understand
why we continue -- we wouldn't do this today. To
start from scratch today, we wouldn't go out
there and sit there and say that we wanted to do
a portfolio.
TREASURER CAHILL: We might. It would be
something that the Investment Committee would
decide like the ETI program. It's a program in
country specific borrowing or lending, and if the
Investment Committee with the support of the
Trustees decided to do it, we would do it, but I
think the idea is that because it's a program
separate from the way we do our other investing,
it should come up separate.
MR. SCHWARZENBACH: I agree with that. I
understand that.
TREASURER CAHILL: And that's why we do it.
And as we said, it's something that previous
Treasurer's have done and we've decided to
continue it and then fix the hole that was there,
which I think makes a lot of sense.
PRIM Board Meeting Minutes of October 5, 2006,
For Approval at the December 5, 2006, Meeting

Page 60 of 130
MR. AIKENS: Would it be highly unlikely for
this type of instrument to be in any of our fixed
income manager portfolios?
MR. MAVROMATES: Well, it has the
characteristics of investment trade bonds.
MR. AIKENS: So we might have a hundred of
Israel, for all we know?
MR. MAVROMATES: Well, no. They don't trade
publicly. In other words, we have other dollar
denominated non-US bonds in our portfolio now.
MR. AIKENS: All we're trying to do is look
at the concentration in the State of Israel, and
so I'm leaping to the conclusion that our fixed
income managers would not have --
MR. MAVROMATES: They would not have that.
We do have equities, obviously, and even a lot of
Israeli stocks are listed on the NASDAQ. It's a
good point. We don't have any concentration in
Israel.
TREASURER CAHILL: Is there a motion?
MR. McSHERRY: Move.
MR. CESAN: Second.
TREASURER CAHILL: Motion is made and
seconded. All those in favor say aye.
THE BOARD: Aye. (Unanimous.)
PRIM Board Meeting Minutes of October 5, 2006,
For Approval at the December 5, 2006, Meeting

Page 61 of 130
TREASURER CAHILL: Opposed? The ayes have
it.
(VOTED: That the PRIM Board approve
the purchase of a $5 million State of
Israel Bond maturing in 2008; and,
further, that the Board authorize the
Executive Director to take all actions
necessary to effectuate this motion.)

The following is from PRIM Board Minutes of May 22, 2001:

E. State of Israel Bo11ds
Mr. Mavromates repo11ed on the State of Israel bonds. Between 1989 and 1994, the
former MASTERS Tmst purchased about $26 million in face value bonds. All of these
holdings were transferred to the PRIT Fund when the Funds merged in 1997. Since that
time, about $15 million of these bonds have matured. As of the end of April, PRIM held
about $11 million of these bonds. The bonds are used for infrastructure projects in Israel
and must be held to maturity. They have an investment grade rating and are currently
rated A- by S&P and A2 by Moodys. The Investment Committee recommends a
commitment of $5 million dollars per year over the next five years. The total
PRIM Board Mi1111tes of May 22, 2001 ♦ Page 5
commitment total over the next five years is $25 million - $11 million of that will come
from the proceeds of the maturing bonds PRIM currently holds.
The Board took the following action on a motion made by Mr. White and duly seconded
by Mr. Amato.
Voted: That the PRIM Board renew, upon maturity, the current holdings of State of
Israel Bonds, and when necessary commit additional funds to achieve an investment
of up to $5 million per year over the next five years; and further, that the Board
authorize the Executive Director to take all actions necessary to effectuate this
motion