CIO of Pennsylvania Pension Plan Retires Amid Controversy

(December 8, 2013) — Pennsylvania State Employees’ Retirement System (SERS) will be short a CIO come December 31 this year.

According to the Philadelphia Inquirer, CIO Anthony Clark has announced his retirement to the board, following the $25 billion fund’s decision to investigate his tenure. The allegations against Clark are not yet public.

“Just before the Thanksgiving holiday, SERS board chairman was made aware of an allegation related to one of SERS’ senior staff,” said a statement from the board. The Inquirer then reported that spokesperson Pamela Hile confirmed the allegations were in fact against Clark.

SERS also said the subject of the allegation was prohibited from returning to the office and was barred from access to computer files—“to err on the side of caution.”

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“If there is merit to the allegation, we are eager to discover and address it,” the statement said. “We are also eager, however, to ensure that conclusions are not drawn until a thorough, independent investigation has been completed.”

The SERS board is said to meet on Wednesday to discuss incorporating a third-party investigator but it did not immediately respond to a request for comment.

Clark served as CIO of the Pennsylvania defined benefit and contribution plans since April of 2011. He previously worked as deputy CIO for the Pension Benefit Guaranty Corporation.

Earlier this year, Clark faced trouble with his $250 million hedge fund initiative with New York-based Tiger Management. According to the Inquirer, Clark had recommended the firm based on highly positive projections—stable returns of 8% to 12% a year. However, Tiger Management underperformed by “speculating on gold futures.” The hedge fund manager said it was returning SERS’ investments.

SERS provides benefits for over 200,000 public employees and is currently 58.6% funded with an unfunded liability of $17.9 billion.

(December 8, 2013) — Data from 20 UK and 20 mainland European pension funds has found that CIOS from the island nation are paid as much as £40,000 less a year than their continental counterparts.

In pension funds where an external fund management model is used—and assets range between £1 billion and £8 billion—European CIOs are paid £163,000 on average, compared to just £123,000 in the UK.

In addition, the average bonus for UK CIOs us just 27% of their annual wage on average, compared with 46% in Europe.

This means the total remuneration package average is £156,000 for the UK and £238,000 for Europe, meaning CIOs in average are being paid around 52% more in compensation in European schemes.

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Within Europe, the remuneration packages were broadly similar between countries, with France offering the lowest at around £220,000 and the Netherlands offering the most.

Leo Meggitt, head of the pensions and investment practice at executive search firm Flint Hyde, said the discrepancy between total wages meant that UK pension funds, and in particular, financial directors of the plan sponsor, were struggling to be competitive in remunerating their investment staff.

“Schemes with an external fund management model have increased the average salary in the past 3 years but at a very slow rate. In 2010, the average UK salary was £113,000,” said Meggitt.

“There are two main reasons for this: firstly, these positions have historically been filled by people from an accountancy or treasury background and therefore didn’t command the type of salary that investment people would expect. Even though these positions have been filled by skilled investment people for a number of years now, schemes have been slow to break the historical mold in place.

“Secondly, pension funds mostly consider this role within the context of the business activity of the sponsor. So if you join the pension fund of a retailer, your salary and bonus will be constructed in line with the other roles within that sector and organisation, rather than in line with salaries in the investment sector.”

The situation is different for those pension funds with internal asset management functions however. The likes of the UK’s Universities Superannuation Scheme, for example, have remuneration structures which have remained competitive with European equivalents, Meggitt continued.

The role of a CIO is still attractive to many, Meggitt said, as they are seen to offer a less stressful environment compared to traditional asset management jobs, but many are put off by the salary.

“The positions have become more demanding with the increased focus on the impact of a pension fund on its sponsor and there is a growing feeling that if you have responsibility for the investment strategy of a multi-billion pound fund then you should be remunerated in line with other investment sectors such as asset management,” he said.

“There will be a marked increase in the number of CIOs attracted to roles with an asset owner. European schemes, in the main, appear to have bridged this gap more quickly than UK pension funds,” Meggitt concluded.