Pension funds should hire highly qualified candidates to manage investments even if it means paying them handsome six-figure salaries, pension expert Keith Ambachtsheer said at an event on Wednesday.
“One of the big things that’s an issue today around the world is this compensation stuff,” said Ambachtsheer, director emeritus of the Rotman International Centre for Pension Management, during an event hosted by the Canadian Pension and Benefits Institute in Toronto. “The Canadian model has broken the mould by basically saying you have to pay whatever the markets say you have to pay in order to get the people you need.
“If you want really good people that know how to do private equity transactions in your own shop, they cost a lot of money and, if you can’t pay, you can’t play.”
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In his remarks, Ambachtsheer addressed criticisms by Virginia Holmes, chairwoman of the Universities Superannuation Scheme, a private pension plan for universities and other higher education institutions in Britain.
Last month, Investment & Pensions Europe reported Holmes as saying Canadian pension fund managers earn too much, which is “completely and utterly unacceptable.”
Her comment referred to Ambachtsheer’s research, which found that across 10 Canadian pension funds, the average earnings of a pension fund manager was $207,000 at the end of 2010.
In comparison, the average for U.S. pension funds was $127,800, while in northern Europe and Britain, it was $157,100.
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Ambachtsheer defended the Canadian model, suggesting it makes more sense to hire in-house experts than outsource the job at a cost of four per cent of a pension fund’s private market holdings.
Countries like the Netherlands have had to use that option because of a rule in the public sector that states a public employee can’t earn more than the prime minister. “What it means is [its public sector] can’t be competitive in private market investing,” said Ambachtsheer.
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