CalPERS struggled through one recent search for a portfolio manager in which 193 of 221 candidates turned down a chance to work at the nation's largest pension fund.
Meanwhile, the Massachusetts Pension Reserves Investment Management Board has been searching four months for a chief investment officer.
These are just two of the many hiring problems faced by executives at public pension funds.
Just as they are searching for, and trying to retain, key investment professionals, so are they searching for solutions to the perennial hiring problem. Some have given flat raises to all staffers; some are considering performance-based bonuses and; many simply hope quality-of-life issues will outweigh desires to get rich.
"People who are here are here because they make a lifestyle choice," said Tom Herndon, executive director of the $102 billion Florida State Board of Administration. Living in Tallahassee has advantages for families, and outdoor activities such as hunting and fishing are "five minutes away," he said.
But those reasons aren't enough to compel people to stick around. Of the approximately 60 investment and information technology staff employed by the board, Mr. Herndon estimated between 10% and 20% left for private sector work in 2000. In an attempt to slow the exodus, William M. Mercer has been hired to conduct a compensation study to investigate what the board will need to do to keep staff. Mr. Herndon said he hopes to have the study completed by June.
Florida's portfolio managers earn between 55,000 and $100,000; they manage about 40% of the board's assets internally.
A survey conducted by consulting firm Watson Wyatt for the California Public Employees' Retirement System found the median salary for a private sector portfolio manager ranged between $143,955 and $172,592, depending on the asset class.
`Hard to compete'
The $49 billion Washington State Investment Board, Olympia, has had similar problems. "It's kind of hard to compete with private sector jobs," said James Parker, executive director.
In his six years with the Washington fund, Mr. Parker has lost 11 investment officers of a staff that averages 17 people. Eight of the 11 left for positions with private companies.
"We're never going to be able to match the private sector," said Chief Investment Officer Gary Bruebaker.
The board has been working with the state's personnel department in an attempt to get a better compensation plan. Board employees do get a workers' compensation plan.
Investment officer salaries range between $56,000 and $72,000, while senior investment officers earn between $81,000 and $104,000. Senior investment officers earn between $81,00 and $104,000.
About a third of the board's assets are managed internally, Mr. Bruebaker said.
Adding a performance-based bonus plan would require passing legislation, Mr. Parker said, but the Legislature is split so evenly between Republicans and Democrats that "controversial" legislation has a difficult time.
Mr. Parker would like to see an exemption for his investment staff from state laws restricting the board from paying bonuses and higher salaries. He said doctors employed by the state of Washington receive salaries and bonuses competitive with those they would receive from a private hospital.
As for what the system can offer, Mr. Parker joked, "Let's sell Mt. Rainier." The fund's scenic location is one selling point, another is the shorter work schedule a board employee would have in comparison with a private sector employee.
Farther down Interstate 5 in Sacramento, the $165 billion CalPERS has boosted investment staff pay, because of turnover and hiring difficulties.
The system suffered a 14% turnover rate in 1999 and 2000, said Pat Macht, chief of public affairs, and has had difficulty filling vacated positions
Research positions take an average of 14 months to fill. Ms. Macht estimates filling positions can take CalPERS "double and triple" the amount of time it would take a private company.
As a result, CalPERS increased investment staff salaries by 10% in September, said Ms. Macht. Portfolio managers, for example, receive salaries between $88,000 and $105,000. However, a portfolio manager making $105,000 is receiving $39,000 to $67,000 less than the median portfolio manager would make at an investment management firm, according to a study conducted by consultant Watson Wyatt.
Like their counterparts at Washington state, CalPERS focuses on candidates who like the idea of public service. As the largest pension fund, Ms. Macht stressed CalPERS' "sophisticated environment." The fund is, "a great place to grow," for investment professionals, she said.
Although no applicants are admitting they would like to have CalPERS on their resumes, Ms. Macht said, "Obviously people who have come here have gone on to higher-paying jobs."
In addition, CalPERS' location in central California is a great area for families, Ms. Macht added.
In another example, the $30 billion MassPRIM Board is offering a salary of $160,000 to its next CIO. Andy Hunter, chief executive officer of executive recruiting firm Whitehead Mann Pendleton James, which is assisting with the search, estimates a CIO with a successful "multistyle, multi-asset class" firm could make a salary close to $1 million "very quickly."
"It's a challenge because the cost to acquire talent is high," said Mr. Hunter. He admits that a "catch-22" is built into the industry - investors who are trained to make money would likely be more attracted to jobs with higher salaries. Firms like his often look to public funds when recruiting because they provide a wealth of talent.
Still, Mr. Hunter is optimistic there are people who are motivated by the chance to work for a public fund. He believes there are individuals out there who believe in the "spirit" of public service more than a huge paycheck.
The problems are not universal, however.
Herb Dyer, executive director of the $55 billion State Teachers' Retirement System of Ohio, Columbus, said in no uncertain terms his fund is not experiencing problems with turnover. In fact, he feels he could get more staff easily if he had to. The secret, he said, is that the fund's board of trustees allows Mr. Dyer to compensate employees in a way that is competitive enough to keep them from jumping to the private sector.
Although no studies have been completed recently, Mr. Dyer said, his staff is generally compensated better than their peers at other public funds.
Ohio Teachers' portfolio managers earn between $90,0,000 and $125,000, said Mr. Dyer, although none is currently earning the top salary.
Perhaps viewing the public pension plan employment as a government job is not the best tactic for keeping investment professionals. Investment staff are not viewed as typical civil servants, Mr. Dyer said.
The investment staff of close to 120 people manages 88% to 90% of the fund's assets in-house, thus increasing the importance of retention. If he needed to hire someone, Mr. Dyer said, "I could line up 20 guys."
And, he said, "Columbus is a great place to live."
Likewise, the $15.5 billion Illinois Municipal Retirement Fund, Oak Brook, hasn't had a problem attracting or retaining employees, said Walt Koziol, director of investments.
He believes the combination of a good benefits structure and a dedication to the organization itself have contributed to retention.