Fifty money managers handling Wisconsin’s major public employee pension funds will get bonuses of $100,000 or more for their successful investment decisions over the past several years, pushing one executive’s pay over $1 million this year.
They are among 143 of the 152 State of Wisconsin Investment Board (SWIB) employees getting a total of $13.3 million in incentive payments approved by the board’s trustees last week, the largest pot of bonuses yet. Individual allocations were released on Wednesday.
At the top of the list is David Villa, SWIB’s chief investment officer, who oversees all of the investments made by the agency’s money managers. Villa is in line for a record bonus of $660,378, up from $420,812 last year. Added to his base salary of $415,000, Villa will be paid $1,075,378 this year.
Two other top SWIB officials also are targeted for bonuses topping $500,000. Executive Director Michael Williamson will get $648,643, up from $241,510 last year. With his $270,000 salary, Williamson’s pay this year will total $918,643.
Ron Mensink, managing director of analytics and fund management, will receive a $524,588 bonus, up from $282,091 last year, giving him total pay this year of $750,416.
Bonuses are determined largely on the income that money managers generate for the Wisconsin Retirement System (WRS) funds over a five-year period — which came to $2.65 billion above their benchmark earning goals over the past five years.
“That’s a very large amount for five years, and so the incentive compensation for investment staff is going to be reflective of that,” SWIB spokeswoman Vicki Hearing said. She said other forms of added value that employees contribute, such as cost-saving ideas, also play into the individual awards.
David Bennett, executive director of the Wisconsin Retired Educators’ Association, said some of the 15,000 people represented by his organization may have a hard time seeing those big rewards.
“It defies logic at certain levels because hardly any of us will ever see those sums of money in our own lives, so there’s a sort of a disconnect when we read about them,” Bennett said. “However, I think most of our members understand, perhaps begrudgingly, that this is the cost of doing business.”
Jim Palmer, chairman and president of the board of directors of the Wisconsin Coalition of Annuitants, said he has not heard any complaints yet from the 150,000 retired state public employees his group represents.
“At first glance, those numbers can seem large, undoubtedly,” said Palmer, who also is executive director of the Wisconsin Professional Police Association. But, he added, “The same kind of performance would garner much greater compensation in the private sector.
“The WRS and SWIB have really striven to maintain a competitive edge with respect to the private sector, and I think their ability to do that — in part, by using things like incentive bonuses — has helped to really promote the health and growth of the Wisconsin Retirement System,” Palmer said.
The bonuses come as more than 180,000 retired public employees who are invested in the WRS are about to receive the first increase in their pension checks in six years, starting May 1. That’s because five years of smoothing results of the 2008 stock market plunge finally ended last year.
SWIB manages more than $104 billion in assets as of March 31, mainly the Wisconsin Retirement System’s funds. The incentive payments come from retirement system funds, not taxpayer dollars, and do not need the Legislature’s approval.
Individual bonuses range from $1,245 to $660,378. Forty-seven are less than $10,000. Nine employees did not get awards because they did not meet criteria, such as the time period they worked at SWIB or other factors, Hearing said.
She said the compensation is based, in part, on the median compensation of peer groups made up of banks and insurance companies, not Wall Street investment firms.
“No, we can’t compete with them. They’re way, way higher,” Hearing said.
The total pot of incentive pay for SWIB staff rose 66 percent over last year’s $8 million and was triple the available bonus pay of $4.3 million in 2012.
The Wisconsin Retirement System is the ninth largest public employee pension fund in the U.S. and manages funds for more than 570,000 current and retired public employees statewide.
Morningstar called it the strongest funded state pension system in the U.S. in 2012 and 2013.