Asset managers have to compete with Silicon Valley for top talent, and now public pensions are upping their game to grab and keep lead executives.
The New York City Retirement Systems and the Florida State Board of Administration revamped their compensation plans to recruit talent, Pensions & Investments reports. The pensions still can’t touch the asset managers with the amount of pay available, but they’re hoping the new edge will make them more appealing to skilled staff that may want out of the Wall Street rat race. Writes P&I:
“While we can’t compete with Wall Street, we have to be in the ballpark when it comes to our public pension peers,” said Scott Evans, chief investment officer of the $163.4 billion New York City Retirement Systems. City pension officials have lamented for many years that investment staff salaries were too low.
In the coming months, Evans and at least 40 other investment professionals in the city’s five pension funds will get raises. The money will come from the pension system assets.
The Florida State Board of Administration put its new compensation plan in last month, giving new incentives to its CIO and 61 other investment staff. Investment staff now has their performance measured against three levels of benchmarks, offering differing levels of pay varying with responsibility. Pay will come from the pension board’s budget. Florida began looking at new compensation structures a few years ago, but had to make sure everything was approved with policy makers.
The State of Wisconsin Investment Board shows the benefits of restructuring pay. Since changing compensation, the fund’s staff turnover when from 9% in 2000 to 1% today. The fund has also moved from 25% of assets internally managed in 2007 to 60% in 2015.
The incentive compensation program “is not an expense – it’s an investment,” says Michael Williamson, the executive director. “We are in a war for talent.”
New Jersey Pension Fund is tied up with legislatures over its compensation plans. The fund has relatively low pay compared to other pensions, and it’s become a problem.
“We have had a reasonable amount of turnover at the higher levels: that hurts us,” says Brendan Thomas Byrne Jr., chairman of the State Investment Council.
Photo: Andrés Nieto Porras