State fund managers got $1.2 million in bonuses
April 1, 2009
DENVER ” Investment managers for Colorado’s largest state pension plan got $1.2 million in bonuses for 2006-2007, but the fund’s director says further bonuses have been canceled because of the economy and outrage over compensation at insurance giant American International Group Inc.
Meredith Williams, executive director of the Colorado Public Employees Retirement Association, said Wednesday the bonuses were for 2006 and 2007, when the market soared, and were paid in 2007 and 2008. He said he has canceled bonuses for 2008, due to be paid this year, even though some investment managers may have earned them.
“The policy is that if you outperform (market benchmarks) in a given year, you earn an incentive. We will not be paying incentives in 2009 for 2008 performance,” Williams said.
Williams said there is no comparison with the national furor after AIG shelled out $165 million in bonuses to employees, including traders in a financial products unit that nearly brought about the insurance company’s collapse. The company has accepted $182 billion in federal aid.
“AIG was paying bonuses two weeks ago for performance in 2008 when they lost their shirts. We have not and do not intend to pay bonuses for 2008 for anybody on our staff, bar none,” Williams said.
Williams said PERA is a shareholder organization that suffers along with other investors when investors are cheated.
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Assets managed by PERA dropped from $41.4 billion on Dec. 31, 2007, to $30 billion on Nov. 30, 2008, he said.
The 25-year return on the fund’s assets and investments had been 10.8 percent annually through 2007. Losses last year dropped that return to 8.9 percent.
Williams previously had asked staff to put a price on potential changes in benefit formulas, including eliminating cost-of-living increases and changing retirement ages. PERA has at least 431,000 members and beneficiaries. Any changes would require legislative approval, which is not likely until next year at the earliest.
Incentives paid to PERA’s money managers totaled $540,000 for 2006 and $722,000 for 2007. The incentives were limited to a maximum of 35 percent of base salaries, which ranged from $280,610 for the chief investment officer to $109,905 for an equity analyst as of January.
Williams said PERA had written agreements to pay bonuses for previous years when the market was booming but that he decided to cancel all incentive pay this year because of its poor performance.
He said he notified investment managers about the decision, even though PERA could be legally liable to pay them, “and they were all very quiet.”
Williams said the PERA Board of Trustees approved policy for performance incentives and incentives for managers not directly involved in investing in 2003. He said board members did not receive any incentives.