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.”

Read: What can Canada learn from Britain’s pension reforms?

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.

Read: Lessons from Europe’s pension stress test

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.

Read: Luring talent to manage pension assets in-house when you don’t have much to offer

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Teachers in the US earn $35K – $45K. In Canada teachers earn $70K – $90K. Does this mean that we need to adjust the income of all Canadians because their counterpart in another part of the world earns a different income?

Thursday, May 05 at 12:20 pm | Reply

Joe Nunes:

While I agree with Ambachtsheer that market forces will tell you what you need to pay managers, I disagree that the public sector is in direct competition with the private sector.

Public sector managers have much better job security regardless of performance and if I had to guess have more comfortable work conditions as compared to the private sector managers that live and die by their most recent 4 quarters of performance.

Pay levels for our public sector managers should reflect these differences in the nature of the role and in my estimation the pay should be less than in the private sector.

Finally, like a beauty contest, judging a good investment manager is very difficult and beauty is often subjective. There are likely many capable managers from whom we can choose – we don’t need to all rush to the same guy or gal that did the best in the last 3 years according to Morningstar.

Thursday, May 05 at 1:14 pm | Reply

Matt Kirkbride:

If you want see an example of an obscenely over paid public servant, check the salary & bonuses paid to New Zealands Superannuation Fund Cheif executive who took home $1.03 million as June 2016.
Pretty irritating if your a Canadian living in NZ where they deduct your CPP payments from your NZ pension !!!
See : New Zealand Herald 7 Oct 2016 “The public sevant on more than $1m”

Monday, October 10 at 6:42 pm | Reply


@Matt – Perhaps you didn’t notice that the CEO of the CPPIB made $6M, and that is in Loonies which are worth more than Kiwis.

Thursday, December 14 at 11:21 am

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