On Both Sides of the Atlantic, Pension Plan Salaries Draw Ire

While seemingly inevitable, the focus on investment manager compensation has now spread to pension funds, a move that will concern many as talent retention worries continue.


(August 20, 2009) – In what to many must seem like the inevitable, pension fund managers on both sides of the Atlantic are facing ire over salaries and bonuses in a year when almost every plan lost significant amounts of money.


At Promark Global Advisors – the rebranded manager of General Motors’ (GM) pension assets – salaries have come under fire as American federal pay czar Kenneth Feinberg begins to turn his gaze on the auto maker. Although individual salaries at Promark aren’t broken down publicly, it is known that the unit invests $102 billion on behalf of GM workers. Despite posting only an 11% loss in 2008, Feinberg is expected to scrutinize any bonuses with a keen eye, according to the New York Times. While the formula being used to assess compensation at bailed-out companies allows for commission-based payments, it is unclear whether Promark – which manages not only the GM pension plan but $18 billion in pension assets for other corporations – should be viewed as proprietary traders (which would mean Fienberg could limit their compensation) or not. Nancy Everett, previously the chief investment officer at the Virginia Retirement System, leads Promark and is expected to be one of the employees whose compensation is closely scrutinized.


In the United Kingdom, even a pension fund receiving no government handouts is now under attack for paying out $3 million in bonuses in a year when the fund lost upwards of $12 billion. The Universities Superannuation Scheme (USS), which invests on behalf of a quarter million higher-education employees, has approximately 60 staff members and was heavily invested in the equity markets entering the autumn of 2008. A recent article in London’s Telegraph claims that while losing money for the fund, employees were awarded the nearly $3 million in bonuses in a system that pays out over five years. A report by the USS, however, claims that the likelihood of future payments of this size is low due to the difficulty of hitting targets after such a poor year.


While not surprising, the newfound focus on compensation at pension funds will surely be of concern to many within the industry. With many banks fearful of losing highly compensated employees to smaller, less regulated vehicles, pension funds will now be feeling similar concerns


To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>