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Public Pension Exodus?
aiCIO reports, In Latest Public Pension Exodus, Chief Investment Officer of CT Scheme Quits:
The
political and financial strains on public pension plans in the United
States have often pushed top-tier investment managers to seek
opportunities elsewhere.
In the
latest example of a chief investment officer at a public pension
leaving for the private sector: The $25 billion Connecticut Retirement
Plans and Trust Funds (CRPTF) CIO Timothy Corbett has resigned to
become CIO and executive vice president of the Massachusetts Mutual
Life Insurance Company, where he will be in charge of the firm's
overall investment strategy. The resignation of Corbett will take
effect May 20.
“Connecticut has
been well-served by Tim’s exceptional skills and affable
professionalism,” said Denise Nappier, Connecticut’s treasurer, in a statement. “I am deeply grateful for his contributions.”
Corbett's
new supervisor -- MassMutual's Chairman, President, and CEO Roger
Crandall -- issued a separate statement on the CIO appointment, saying:
“With our unwavering focus on delivering long-term value for our
policyholders and given today’s new world of accelerated economic
change and increased regulation, it is important to have a Chief
Investment Officer focused exclusively on this role. Tim is a true
industry veteran with a strong record of performance with more than 20
years in leadership roles as an investment professional. With Tim’s
extensive investment expertise, risk management discipline and
leadership capabilities, I have every confidence he will continue our
track record of exceptional performance."
CRPTF's
investment performance speaks to Corbett's strong track record. Last
year, the scheme produced a net return of 12.88% for the fiscal year
ended June 30, increasing in value by $1.5 billion and finishing the
fiscal year with assets of $21.9 billion. "What drove the increase in
return was the fact that our plan was so well-positioned and
diversified even going into the downturn in late 2008 and early '09,
with about 10% in our liquidity fund," Corbett told aiCIO in
August, noting that during fiscal 2010, the fund's four best-performing
sectors -- emerging market equities, high yield bonds, emerging market
debt, and private equity portfolio -- each returned between roughly
17% and 25%.
From the departure of Massachusetts Pension Reserves Investment Management's (MassPRIM) Michael Travaglini to the more recent departure of San Diego County Employees Retirement Association's (SDCERA) Lisa Needle,
examples of investment heads leaving the public pension arena --
largely burdened with limited resources, severe underfunding, and
volatile boards -- for the private sector are numerous. Another such
notable example is the departure of Timothy Barrett, who served as the
chief investment officer at the San Bernardino County Employees'
Retirement Association (SBCERA) and now works as Eastman Kodak's
director of pension investments worldwide. "For me, Kodak offered an
opportunity to manage pension funds globally with various defined
benefit and defined contribution plans around the world," Barrett told aiCIO, referring to his departure from SBCERA in October 2010. "It was simply an opportunity I could not turn down."
In
January,Tim Thonis, pension administrator of the Ventura County
Employees' Retirement Association (VCERA) in California, resigned
unexpectedly, and while speculators blamed years of failed promises over
pay raises, he cited governance as the reason for his departure. VCERA
is still left without a CIO.
In
a 6-3 vote, the Ventura County Retirement Board had declined to make
changes that could have resulted in higher salaries for top officials
at the fund. Over the past two years, the Retirement Board had
recommended raising Thonis’ salary, but action had been delayed by
County Executive Officer Marty Robinson and the Board of Supervisors.
Thonis identified the attempt to raise his salary as one of fairness,
as he was promised certain assurances about compensation when he was
hired. The departure of Thonis, who ran the roughly $3 billion VCERA
fund as both CIO and CEO, marks the tension at public pension funds
over pay, as schemes struggle to retain their best talent.
"Tim
Thonis was doing an outstanding job. Everyone said he was doing an
outstanding job," Ventura Chairman Tracy Towner, a senior district
attorney investigator, told aiCIO, noting his belief that
politics at public pensions are hindering the investment process.
"Politics hindered our ability to retain someone like Thonis," he said.
"Now, Tim's at the Orange County retirement board making a lot more
money than he made here."
As
government-run pensions continue to run on government wages, chief
investment officers and others in the industry note that schemes in the
US may serve as a training ground for highly skilled people, such as
Corbett, Barrett, and Thonis, who will eventually seek opportunities in
the private sector with more money and less politics.
Not
much to add here except to say that they got to get the compensation
right at US public pension funds or else they risk losing all their
talent away to the private sector. These high level departures should
serve as a wake-up call to boards at these plans that something needs to
be done to prevent more exodus from the public pension ranks. The
success of any plan depends on its ability to attract and retain
talented and experienced pension fund managers.
»
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It is a problem when people who are ostensibly European act like Japanese teenagers.
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I must say, living in Spain I would tend to side with this opinion of the Spanish banks
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Vanguard Index Fund would bring them far greater performance at a literal hundreth of the cost of the churn and burn regime set up by financial 'professionals' is sickening.
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I just know there had to be some Gordon Gekko types in a cigar bar somewhere (severalwheres) drinking scotch and high-fiving each other.
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The Yen, and Japan, raising cash to pay for the reconstruction of the country, is already on the path of Yen appreciation and will be assisted in their efforts by the other central banks. By acting in a co-ordinated fashion they will begin to reverse the worldwide race to the bottom.
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compound annual inflation rate, the appropriate term to measure this year over year inflation measurement? This level of inflation will make it difficult for people to properly value the products they buy relative to the products value in silver.. A value buying guide might be a useful tool going forward.
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The Yen, and Japan, raising cash to pay for the reconstruction of the country, is already on the path of Yen appreciation and will be assisted in their efforts by the other central banks. By acting in a co-ordinated fashion they will begin to reverse the worldwide race to the bottom.
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Okay, just watched these two pesnion fund managers on CNBC with Maria "G6" Bartiromo.
Joe Dear CALPERS
&
Chris Ailman CALSTRS
What tools.
These two were showing their hand, talking about getting together with other pension funds around the world to make investments and go long, do the buy and hold.
Wow.
I wonder what the boys on Wall Street will do with giant globs of public pension money?
OMFG
I just know there had to be some Gordon Gekko types in a cigar bar somewhere (severalwheres) drinking scotch and high-fiving each other.
Kockupalot translation service:
"...they've got to get the compensation right (big croney pay rise) at US public pension funds (started as a ponzi scheme now reaching its assured suicidal end) or else they risk losing all their talent (what talent?) away to the private sector (yes, look how well mega-bonuses worked out on Wall Street right up to 2007 - another 'winning strategy' by Kockup)
this industry was a sham to begin with but Kockpot can't get enough fingers in the dyke fast enough to stop the drowning of these turkeys
...keep clucking around like a headless chicken Kockupalot, at the very least it's very entertaining to see your desperate, dumb and futile sides all on public display every week
These guys are leaving because they see the WRITING ON THE WALL. Public pensions are going to be a cluster fuck soon and they know it.
As far as compensation goes, all of these financial types are way overpaid. They helped create a system that is so fucking complex and esoteric and then charge exhorbitant fees to run it. Just like the lawyers.
Value add to society is nill. I agree with the first comment. Vanguard Index Fund.
There is no such thing really as a talented pension fund manager in the US now because they all suffer from a normalcy bias that no longer applies to our condition.
maybe normalcy bias, I'm more inclined to think they are suffering from the Dunning–Kruger effect
Amazing how little you know of added value that is being created in public and private markets by large pension funds. All this anti-pension sentiment is based on lies. Many US plans have significantly outperformed their benchmark portfolio but bad political decisions, rosy investment assumptions, high discount rates and historic low interest rates have all exacerbated pension deficits. In other words, it's not just about poor asset management (although there is plenty of that too!)
Sorry, Leo, but unless you're just about to retire, your defined-benefit check isn't going to be there for you.
Consider the state of Illinois: The governor wants to borrow another $8.75 billion just to pay the state's past-due bills. It's doubtful he'll get his wish, but even if he could that wouldn't touch the $8 billion funding gap in the state's current budget.
Do you really think Illinois will be able to keep its state-employee retirement promises? Hint: Illinois has already borrowed billions just to meet past state pension payouts.
http://www.chicagotribune.com/news/local/ct-met-quinn-borrowing-plan-201...
It is also about cronyism, kickbacks, and chicanery.
Do you want to engage in a first ever, and back up your claims with some empirical data?
Could you please post a chart of the average returns of pension fund managers aggregated (you are free to use median returns, also) post fees, compared to a Vanguard Index Fund, over even a 10 year time frame?
Use VBINX, which is average for Vanguard.
C'mon, Leo. The data should be at your fingertips already.
I know the answer. But you wrote this insane article, so defend your article now.
Churn & Burn Leo. That's my new nickname for you, since you're endorsing the incredibly inefficient (from a tax and otherwise) performance of 'asset class and stock pickers' versus a Vanguard No-Load (tax efficient and otherwise) index fund.
Oh dear Leo, you said "value added".
Everything I have read about pension funds is that they can't even attain 8% a year. What?
If the pirates serving as fund "managers" aren't willing to be paid based on performance they should not be in a "public" or civil role. Meaning, the fund loses 20% in a year and they get nothing.
No fund manager should get more than twice median pay for all civil workers in a state. Give them a bonus of the % of their salary they can get for the pension fund per year.
Anything else is an admission that the funds, and the markets, are a ponzi and the managers gutless pirates who raid one pension fund ship after another, burning them as they go and jump from one to another.
The idea that you need to "pay for talent" to do simple tasks of public good is bullshit.
If this were the case, police and fire and teachers would get paid as much as fund "managers".
Leo, I don't understand how you get frustrated with the lack of responsibility, but then seem to worship these overpaid ship-jumpers (?).
The arrogance, entitlement, and greed of these financial scumbags needs to be snuffed out at the end of a rope.
It's absolutely about poor asset management, and only about asset management, which lends further credits to TIS' comment regarding buying an index. You just ticked off a number of examples: pension deficits created by: 1) rosy assumptions 2)political !!! decisions, 3) failing to reallocate in the face of historic low rates and 4) high discount rates employed...
I dont get it: what's the big deal?
Are the readers (and writers) of ZeroHedge going to live in a country called USA till their retirement?
Are you? Seriously? USA will exist till your retirement?
Millions upon millions are trapped by the system they feed.
You can't touch your IRA or 401K before 59 and 1/2 years old or you taxed out the wazoo.
And now, look at the exchange rate for the Dollar; many reasons the FED is happy to pummel the dollar and pump equities - more taxes from hollow "capital gains" and to make it harder to jump the U.S.A. ship.
Off topic but... Leo, how could you guys vote for that douche-bag Harper after he and the Queen's governor suspended Parliament? The guy is a proto-fascist...
The next thing you are going to tell me is a Goldmanite runs the Bank of Canada and you watched the entire parasitic, inbred royal family wedding with a hanky at your cheek to catch the tears...
Help! My pension fund manager loaded up on chinese solars and Greek debt. Now we are broke and he wants a 400% pay raise. What should we do?
Just kidding leo; I know you wouldn't do anything that crazy...
I will gladly manage any pension without pay. I only expect a bonus of 1% if the returns exceed 12% in a year. Simply buy PMs and you're rich.
It's a problem for any industry, but please tell me, when did all these guys get so frigging greedy?
IF they think they are worth more dough, why don't they do the honest thing and use their own hordes of cash to bankroll their own trading?
Disgusted from Broadstairs...
like the auto industry...its all great until the numbers falter or it gets harder to hide issues, then the finger pointing starts. Top to bottom that industry needs review but where there are huge amounts of fees to be made, too many people have an interest in keeping the game going.
@TIS, Exactement. This article talks about this guy's razor-sharp skills in an environment when EVERYTHING went up over 50%. I guess he cherry-picked the right ones to make half-that. Vanguard, or TIAA-CREF, or TROW, or...would indeed have made him look even better.
There is no doubt that Mr Corbett sweat a lot. He also knew that he was going to make 4% this year at most. Smart man.
Which pensions had big gains when the markets melted down? None? Sounds like these guys are boat captains who take credit for rising tides.
So... we're complaining about executive salaries here? OK.
I imagine public pension executives are sought after more for their potential influence than their actual talent, much like other former governement officials, e.g. regulators.
No we are talking about PUBLIC SERVICE EXECUTIVE salaries here. The conversation doesn't have to go any farther than that.
99.5% of pension fund managers would do better by simply investing in a Vanguard No-Load Fund that simply tracks the indexes and then quitting, disgorging their entire compensation/salary.
That tells the real tale of the fraud that is compensation for 'pension fund management.' The whole industry is a joke, really.
That entire states, cities and unions have paid so much money to hordes of 'financial professionals,' when a simple and extremely inexpensive Vanguard Index Fund would bring them far greater performance at a literal hundreth of the cost of the churn and burn regime set up by financial 'professionals' is sickening.
+100
+ another 100
Someone had to say it! Cheers Truth
Amen!!
Since when have the most "talented" ever worked for the government? No, these are political animals who allocate funds to various managers, theirs is a once a month conversation on allocation, or should be. And given the level of these funds involvement in the financial meltdown, clearly due dilligence isn't exactly a priority. They just see the gravy train ending before the other managers do.
Amen +1000
+1