US Plan Sponsors: Public, Corporate & Union

Compensation, Investment Performance & Asset Allocation Study

White Papers | December, 2011

Executive Summary

DHR International periodically conducts comprehensive surveys and reports on compensation, people moves and general sector trends. This study was produced by our Financial Services Practice, where we have focused on researching, analyzing and reporting the quantifiable information pertaining to specialized sectors within the market vertical. The primary purpose of the study is to provide greater insight into compensation trends at the Chief Investment Officer level, asset allocation developments, and investment performance as well as a summary of people moves across specialized sectors.

Data was compiled by using both primary and secondary sources. Primary sources included telephone and face-to-face interviews with prominent investment professionals – Chief Investment Officers and Senior Portfolio Managers – as well as annual and quarterly reports. Secondary sources include third-party databases and news sources from online providers. Whilst endeavoring to provide a rigorous research process, complete sets of data could not always be provided given the confidential nature of the information being obtained.

DHR International began compiling real-time data in May 2011, with subsequent amendments as changes to specific data points occurred, e.g. asset allocation or compensation changes. Fiscal Year is factored into our results as 1 July – 30 June, and is applicable to compensation and investment performance data. All financial values are in USD.

We surveyed and reported on a total of 175 pension funds, representing a total market value of $2,775bln. Assets under management range from $600m to $224bln, with the median fund size of $12.5bln. Eighty percent of respondent had assets under management of $20bln.

The study found marked difference in compensation, asset allocation and investment performance when compared by fund type and fund size. Average compensation for CIOs between public and union pensions are roughly equal, with corporate plans having notably higher levels. The general trend also shows that compensation increases with fund size. However, fund size does not translate into significantly differing performance. All three types of pension will be looking to increase their allocation to alternatives – Private Equity, Hedge Funds, Infrastructure and Commodities – and emerging markets in the coming years.

Survey Participants

DHR International focused efforts toward interviewing and gathering data on plan sponsors through the US. Across public and union pensions, we have endeavored to cover a variety of state and municipal funds as well as labor unions. This 2011 survey examines compensation, asset allocation and investment performance for a total of 175 funds. This includes 100 public plans, 50 corporate plans and 25 union plans with a collective market value of $2,775bln.

The tables below breaks down the assets among respondents by fund type and assets under management:




The latter half of 2011 was an active period by all accounts with a larger degree of turnover resulting from retirements, abrupt departures, internal promotions and new opportunities arising within competitor institutions. During the course of the downturn, 2008-09 in particular, employed individuals were primarily focused on “weathering the storm” in order to ensure that they were sufficiently protected from layoffs. With increased economic confidence comes an increased willingness to consider new options. From an employer’s standpoint, the downturn in the markets forced organizations to evaluate their bottom line and make cuts where necessary. In the pension fund sectors, there was an ever present need to cut unproductive staff, while incentivizing high-performance employees. Despite the relative insecurity in the market, the demand remained for investment professionals capable of generating steady returns through bull and bear markets. Corporate plans generally paid employees higher figures than public and union pension plans, and also provided greater incentives through pay-for-performance structures. Moving forward, all three types of plan sponsors will need to focus on performance related pay to attract talent. Many corporate pension plans have spun out from the parent company and become asset management institutions focused on managing assets on behalf of the parent company and external pension plans.


The median compensation for CIOs at public and union pensions remains closely correlated. Base salaries continue to be in the range of $150,000 to $250,000, with total compensation ranging from $225,000 to $350,000. Seventy percent of respondents have a base salary of $150,000 to $250,000, with their total compensation ranging from $225,000 to $350,000. The main difference between public and union plans is at the extremities. The lowest salaries for public and union plans were $130,000 and $165,000 respectively, but highest salary ranges were $1m and $650,000 respectively. Furthermore, a greater percentage of public plan CIOs was remunerated above $500,000 per annum than Union CIOs. Corporate plans remain the highest paying category with median base salaries ranging from $250,000 to $350,000 and total compensation of $500,000 to $800,000. Sixty five percent of corporate CIOs fell within this range. The lowest figure for annual compensation within corporate plans was $280,000 and highest was $2.4m. The most significant finding shows that annual compensation increases based upon a fund’s assets under management, regardless of investment performance. Therefore, if two managers record equivalent investment performance, their annual compensation will be greatly determined by the sum total of the assets each manages.


Asset Allocation

DHR’s asset allocation survey focused on the ten categories listed in the table below. The percentage breakdown represents weighted averages. As such, the portfolios of the largest funds had a greater influence on the results.


The asset classes representing the largest allocations were domestic equities, domestic fixed income and global/international equities. Collectively the average portfolio represents approximately 65% exposure to equity. Significant allocations also include Private Equity and Real Estate asset classes. Collectively these five asset classes accounted for almost 90% of the $2,775bln surveyed. Investments in the remaining asset classes represented a much smaller proportion of total assets, although hedge funds and commodities/real assets show a spike in interest.


Increasingly larger allocations are being made to alternative investments, commodities, infrastructure and emerging markets in a bid to increase risk-seeking assets. Despite suffering from significant losses in 2008-09, most plan sponsors have recuperated a majority of losses. However, funding status remains a critical issue and CIOs are looking to fully utilize exposure to alternatives in order to boost returns. Many corporate plans already utilize liability-driven investing, but public and union plans are beginning to consider utilizing LDI strategies in order to de-risk their portfolio where necessary.

Public Pension Allocation Mix

Pubic pensions had the highest allocation to domestic equity and fixed income, with approximately 30.6% and 20.3% allocated respectively in 2011. These figures were closely followed by global/international equities (19.9%), private equity (7.5%), and real estate (7.4%). Between the three types of pensions, public plans had the largest allocation to global/international fixed income.


Corporate Pension Allocation Mix

The average core asset class allocation for corporate plans was 29.8% to domestic equity, 38.8% to domestic bonds, 10.4% to global/international equity, and 0.5% to global/international bonds. Corporate plans also had an 11.5% allocation to alternative asset classes. Indications showed that future years will provide greater allocation to asset classes that provide higher returns within low-risk parameters, and many plans will retain their focus on liability-driven investments.


Union Pension Allocation Mix

Union pensions had the highest allocation to domestic equity and fixed income, with approximately 37.3% and 27.1% allocated respectively in 2011. This figure was followed by global/international equities (13.9%), real estate (6.8%), and hedge funds (5.4%). Between the three types of pension, union plans had the largest allocation to hedge funds although this figure is not likely to increase significantly in the next few years.


Public vs. Corporate vs. Union Asset Allocation

Our survey results showed that all three types of pension plan sought out diverse investment opportunities, incorporating a blend of equity, fixed income, real estate, private equity, hedge funds, commodities, infrastructure and emerging market asset classes. Whilst continuing to incorporate domestic stocks and bonds as well as global/international equity and fixed income, the predominant focus of both types of funds rests on diversification away from traditional asset classes and toward alternative asset classes, although not significantly in the near term.
Many corporate plans are allocating 5-10% to absolute return strategies, and are reducing their core equity and fixed income exposure. Public and union plans are also heading in a similar direction although the largest allocations aren’t quite as high. CIOs deduce that this type of strategy will lead to stabilized returns over the long-term given that absolute return strategies respond to all types of market conditions, whilst bonds do not participate equally in strong markets. Furthermore, commodities, infrastructure, emerging market equities and real estate have gained increased prominence in all three pension fund types..
Participation in private equity and venture capital investments fluctuated very little over the past few years. Public pensions generally had a higher allocation to private equity type investments; however the asset class remains an important allocation to all three types of funds. Despite poor returns in recent years, private equity/venture capital is viewed as a critical component in the asset allocation for public, union and corporate pensions alike.


Allocation by Fund Size

Asset allocation by fund size also showed interesting results. Generally speaking, allocations to domestic equity and fixed income decreased with fund size, while global/international equity and emerging market equities allocation increased with fund size. Furthermore, private equity and real estate allocation generally rose with fund size while hedge fund and commodities/real assets allocations decreased.




Public plans fared better than those of corporates and unions in the past few years. Despite significant losses in FY 2009 (-19.4% on average), all three fund types had more or less erased this differential by FYE 2011 (21.2% on average). However, with markets tumbling in Q4 2011, performance once more receded into negative territory. Funds managed to cushion losses due to higher allocations to absolute return strategies, commodities and other real assets as well as lower allocations to domestic equities and private equity/venture capital through 2010-11. Despite significant losses in FY 2009, the last two years (2010 & 2011) have resulted in exceptional returns as the market grew in confidence. However, given the deteriorating situation in Europe and resultant figures closer to home, FY 2012 has gotten off to a cumbersome start.


We found no clear indication of whether fund size determines better investment performance. Funds with assets between $5-20bln weathered the downturn in 2009 better than funds of both larger and smaller size. Funds with assets greater than $20bln were the worst performers in 2009. Once the market turned in 2010, there was no clear correlation in performance based on fund size. In the long run, greater assets under management may well result in greater opportunities at home and overseas, and larger funds will gain increased prominence.



During the course of our research we asked participating CIOs and Senior Portfolio Managers about likely asset allocation trends in the near future. In particular, we were keen to ascertain the allocation changes regarding the asset classes discussed thus far. Our research uncovered the following asset allocation considerations for the coming three years:


Our findings highlighted that investors turned negative towards sovereign debt – primarily as a result of concerns over the Eurozone – and also towards core equity classes. The outlook over the next three years is likely to be one of diversification from core asset classes into alternatives, with real estate, infrastructure, private equity and hedge funds attracting the strongest interest. Despite stagnation in fixed income asset classes, anticipated increases in allocation to alternatives is likely to come from equities.
Entry into emerging market equities is also likely to increase steadily over the next three years. As equities in the US and Global/International markets yield lesser returns, funds will likely access the potential of harnessing greater risk-adjusted returns through investments in emerging markets, in particular BRIC countries as well as peripheral Asia-Pacific and South American countries.
Respondents indicated they have plans to make changes to their risk management approach, increasing the sophistication of their internal decision making and governance processes. Across all three pension types, investors are seeking greater transparency. Larger institutions are trending towards separately managed accounts, but nearly all respondents want greater accountability from external managers.

People Moves (2011)

Jonathan Glidden joined Delta Airlines as Managing Director for Pensions. He previously held the Director of Manager Research and Portfolio Construction designation at Wilmington Trust.

Don Green joined Texas Teacher Retirement System as Chief Financial Officer. He previously held a Senior Advisor for Budget designation for Texas Lt. Gov. David Dewhurst.

David Durbin was appointed Acting Executive Director at Pennsylvania Statement Employees Retirement System. Mr. Durbin was previously Director of Member Services.

Cynthia Steer leaves Russell Investments, where she was Managing Director for Investment Strategy and Consulting.

Jim Mosman of the National Council on Teacher Retirement announces that he will be stepping down as Executive Director in 2012.

Martin Jaugietis was promoted to Director and Head of Liability-Driven Investment Solutions at Russell Investments. He was previously a Senior Consultant within the company.

Daniel Greene was promoted to Executive Director of Boston Retirement Board. He previously held the Chief Investment Officer designation.

David Ewer joined the Montana Investment Board as Executive Director. He was previously Montana State Budget Director.

Lee Ann Palladino was appointed Chief Investment Officer for Connecticut Retirement Plans & Trust Funds. She was previously Acting CIO and Deputy CIO within the plan.

Peter Gerlings joined Rogerscasey as Managing Director for Investment Solutions. He was previously a Managing Director with K2 Advisors.

Dhvani Shah joined Illinois Municipal Retirement Fund as Chief Investment Officer. She was previously Director of Private Equity with New York State Retirement System.

Mansco Perry III was appointed to the board of New York State Teachers Retirement System. Mr. Perry is currently Chief Investment Officer for Macalester College in St. Paul, MN.

Gerald McEntee announced his retirement as President of AFSCME Employees Pension Plan in 2012. Mr. McEntee also served as the pension plan’s Chairman.

Michael Moran was appointed Pension Strategist for Goldman Sachs Asset Management. Mr. Moran moved across from Goldman Sachs Global Markets Institute where he was Vice President.

Monte Tarbox joined IAM National Pension Fund as Chief Investment Officer. He was previously Client Services Director with industry Funds Management.

Kathryn Wojciechowski and Steve Spook were named senior investment officers at the Florida State Board of Administration. Both were previously portfolio managers within the credit and real estate desks respectively.

Dan Weiss resigned as Executive Director at Ohio State Highway Patrol Retirement System.

Sylvia Poniecki joined Wespath Investment Management as Manager for Positive Purpose Lending Program.

David Kushner joined L.A. County Employee Retirement Association as Chief Investment Officer. He was previously deputy Director for Investments at San Francisco City & County Employees’ Retirement System.

Don Pierce was named Chief Investment Officer of San Bernardino County Employees’ Retirement Association. He was previously Interim CIO at the fund after Timothy Barrett, Executive Director and CIO, left in November 2010.

Jay Willoughby joined Alaska Permanent Fund as Chief Investment Officer. He was previously Co-Managing Partner with hedge fund Ironbound Capital Management.

Keith Bozart will retire as Executive Director of the Wisconsin State Investment Board in 2012.

Bradley Smith joined NEPC as Partner and Senior Consultant. He was previously Principal and Eastern Region Leader at Hewitt EnnisKnupp.

David Barnes joined NEPC as Senior Consultant. He was previously a Senior Consultant with Hewitt EnnisKnupp.

Sue Crosby joined Mercer as a Partner. She was previously a Partner at Parella Weinberg.

Terry Slattery joined Iowa Municipal Fire & Police Retirement System as Executive Director. He was previously an Executive Director with New Mexico Public Employees’ Retirement System.

Sidney Marder resigned from Illinois Teachers’ Retirement System.

Bernard Cocheme will retire as CEO of United Nations Joint Staff Pension Fund in 2012.

Raudline Etienne joined Albright Stonebridge Group as Senior Director. She was previously Chief Investment Officer at the New York State Common Retirement Fund.

Samuel Belk joined Cambridge Associates as Director of Diversifying Investments. He was previously Managing Director for Absolute Return and Distressed Strategies at the Dartmouth College Endowment.

Bryan Martin joined New Jersey Division of Investments as Head of Real Estate. He was previously Director of Investments at Indiana State Teachers’ Retirement Fund, and Director of Alternatives at Indian Public Employees’ Retirement Fund.

Peter Lewis joined Towers Watson as Head of U.S. Real Estate Investment Manager Research. He was previously Senior Real Estate Investment Officer at Liberty Mutual Group.

Brian Guthrie was promoted to Executive Director of the Texas Teachers’ Retirement System. He was previously Deputy Director for the fund.

James Gearin joined J.P. Morgan Retirement Plan Services as Chief Operating Officer. He was previously a Partner and Head of Retirement at consulting group Knowledgent Group.

Eileen Dunbar was named Chief Operating Officer at Marco Consulting. She previously served as Chief Financial Officer within the consulting firm.

Jack Marco was named Chief Executive Officer and Chairman of Marco Consulting. He reclaims the CEO role following the departure of Russell Campbell.

Jeffrey Burton was promoted to Portfolio Manager at the Pennsylvania State Employees’ Retirement System. He was previously Associate Portfolio Manager for the fund.

Tom Murphy was named Head of Asset Management for the U.S at Mercer. He was previously Head of Investment Management for the company’s EMEA operations.

Carroll South announced his retirement as Executive Director of the Montana Board of Investment by 2011 year end.

Sherwood Yuen, James McAllister, Michael Swinney and Brianne Weymouth were named as Vice President’s at investment consulting firm Callan Associates. Mr. McAllister and Mr. Swinney joined from Hewitt EnnisKnupp; Mr. Yuen joined from Wells Fargo Alternative Asset Management; and Ms. Weymouth joined from PNC Capital Advisors.

Wayne Smith joined Pathway Capital Management as Senior Vice President for Fund of Private Equity Funds. He was previously a Senior Investment Officer for Private Equity at the Massachusetts Pension Reserves Investment Trust.

Russell Clarke was named Global Chief Investment Officer for Mainstream Asset by Mercer. He was previously the firms Asia-Pacific CIO.

Allen Boyd was named Vice President and Treasurer for Texas Instruments. He was previously Vice President and Director of Financial Report with the company.

Jonathan Breth joined Bogdahn Group as a Senior Consultant. He was previously a Senior Consultant with the Consulting Services Group.

Jacob Walthour joined Cliffwater as Managing Director for business development and client services. He was previously Head of U.S. Distribution with Citadel Asset Management.

Leonard Knepp announced his retirement as Executive Director for Pennsylvania State Employees’ Retirement System at the end of 2011.

John Devir joined PIMCO as Executive Vice President in the Credit Analysis team. He was previously Managing Director and Head of Equity Strategies at Barclays Capital. He accepted an offer from Harvard Management Co. but opted for the PIMCO role only a few weeks before his Harvard start date.

Louis Finney joined UBS Global Asset Management as Executive Director and Senior Strategist. He was previously a Principal and Senior Consultant at Mercer.

Bill Benson was appointed Chairman of the Board of Trustees of the Mississippi State Employees’ Retirement System.

Norm Ruggles joined San Bernadino County Employees Retirement Association as Chief Executive Officer. He was previously Vice President at Pension Trustee Advisors Inc.

Vincent Brown resigned as Chief Executive Officer of Santa Barbara County Employees’ Retirement System.

Miguel Zarate joined Marquette Associates as Senior Vice President and Senior Consultant. He was previously a Senior Vice President and Senior Consulting with Marco Consulting Group.

Hilary Wiek joined RogersCasey as Director of Global Equity in the Alpha Investment Research Group. She was previously Director of Public and Private Equity at the South Carolina Retirement Systems.

Mary Kate Wold joined the Church Pension Fund as President and Chief Executive Officer. She was previously a Senior Vice President, Finance at Wyeth/Pfizer.

Judith Parker announced her retirement as Associate Executive Director of the Illinois State Universities Retirement System.

Robert Clone joined the Indiana Public Employees’ Retirement Fund as Director of Private Equity. He was previously Portfolio Manager for Alternative Investments with the Michigan Retirement Systems.

Frederick Herrmann joined New York State Teachers Retirement System as Managing Director of Public Equities. He was Previously a Managing Director and Portfolio Manager for Equity Quantitative Strategies.

Bruce Feldman announced his retirement as Director of Alternative Investments at the Pennsylvania State Employees’ Retirement System.