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Michael Williamson, SWIB exec director, State Journal photo

Michael Williamson, executive director of the State of Wisconsin Investment Board.

Employees of the state agency that manages the Wisconsin Retirement System’s money will share in a record-high pot of bonuses this year.

The State of Wisconsin Investment Board will divvy up $13.8 million, SWIB’s Board of Trustees has decided.

That’s the prize for investing the retirement system’s assets in a way that earned $1.2 billion over general market returns over the past five years — market returns are the benchmarks SWIB tries to beat.

Four top officials will receive awards of $500,000 or more. The largest goes to David Villa, chief investment officer for investment groups. He is in line for a $582,489 bonus. Added to his annual salary of $442,500, that puts his total compensation this year at $1,024,989 — the only SWIB official whose pay will top $1 million.

“Our job is to earn the best possible returns with appropriate risk to ensure the WRS meets its obligations today and in the future,” SWIB executive director Michael Williamson said.

“The key to being able to attract and keep qualified people is the pay structure trustees have put into place,” he said. “It is a true pay-for-performance plan.”

Individual bonuses this year ranged from $1,449 to $582,489. Eleven SWIB employees did not qualify for an award.

This year’s total pot is bigger than in past years even though the investment earnings were even with last year’s and lower than the two previous years:

  • 2017: $13.8 million in bonuses for $1.2 billion over SWIB’s benchmarks
  • 2016: $11.1 million in bonuses for $1.2 billion over benchmarks
  • 2015: $11.9 million in bonuses for $1.4 billion over benchmarks
  • 2014: $13.3 million in bonuses for $2.65 billion over benchmarks

The annual earnings are figured after costs that include SWIB operations and employee salaries.

Several factors go into calculating the bonuses, SWIB spokeswoman Vicki Hearing said, including how much private sector competitors are paying their money managers.

“In 2016, the market was paying more than two years ago,” Hearing said. She said SWIB looks at median pay at investment organizations such as banks and insurance companies.

“We do not define the playing field, but we have to be on the field if we want to compete for skilled staff,” Williamson said.

Jim Palmer, president of the Wisconsin Coalition of Annuitants, said the bonuses are justifiable.

“Any observer would, at first glance, recognize those numbers as large,” said Palmer, whose group represents more than 150,000 retired public employees throughout Wisconsin.

“The fact of the matter is the bonuses that SWIB provides have really helped to promote the health and growth of the Wisconsin Retirement System. And that’s been a benefit not only to public employees but to Wisconsin taxpayers, in general,” Palmer said.

He said the strength of the retirement system is an economic engine that keeps a high percentage of public employees living in Wisconsin after they retire.

The bonuses, meanwhile, “have drastically reduced the turnover” at SWIB, Palmer said, also saving taxpayer costs.

Hearing said no SWIB investment staff left for another job from 2014-2016 compared to an 8.7 percent turnover rate in the 1998-2000 fiscal years.

SWIB manages more than $104 billion in assets, primarily from the Wisconsin Retirement System, which provides current or future pensions to more than 600,000 active or retired public employees.

“At a time when many public pension funds are struggling with issues related to underfunding, the WRS remains among the few that are financially strong,” Williamson said.

The Wisconsin Retirement System is the ninth-largest U.S. public pension fund and the 25th-largest public or private pension fund in the world.

About 75 percent of WRS pensions paid to retirees comes from earnings on SWIB’s investments. The rest comes from contributions by state and local governments and school districts that participate in the system and from employees.

SWIB estimated it saves $75 million a year by managing nearly two-thirds of the WRS assets in-house instead of contracting that out.

“This is more than SWIB’s $53 million total annual operating budget, including all staff compensation,” the agency said in a news release Friday.

SWIB’s budget is paid from investment returns, not from general taxpayer dollars, Hearing said.

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