A recent exodus of chief investment officers into the private sector from public and not-for-profit pension plans is both noticeable and not automatically due to the lure of higher salaries, according to executive search consultants.
“There's been at least a 30% increase over what we've seen historically in the last 15 months,” said Joseph McCabe, the Boston-based vice chairman of executive search firm CTPartners.
“It comes in waves,” said Renee Neri, a New York-based associate principal with Heidrick & Struggles, referring to CIOs leaving the public and not-for-profit worlds. “It's been particularly active now.”
Although consultants don't keep a comprehensive count, at least a dozen CIOs have moved to the private sector from public pension plans, endowments and foundations in the past 18 months.
Among CIOs moving from large public plans or endowments to the private sector:
• M. Timothy Corbett left the $25.1 billion Connecticut Retirement Plans & Trust Funds, Hartford, this month to become executive vice president and CIO for the Massachusetts Mutual Life Insurance Co., Boston.
• Lisa Danzig left the $1.8 billion endowment for The Rockefeller University, New York, to become a managing director of Post Rock Advisors, a New York money management firm founded by Carol Einiger, Ms. Danzig's predecessor as the university's CIO.
• Timothy Barrett left the $4.9 billion San Bernardino (Calif.) County Employees' Retirement Association in October to become director of pension investments at Eastman Kodak Co., Rochester, N.Y., which had $11.4 billion in retirement assets as of Sept. 30.
• Adam Tosh resigned from the $10.95 billion Kentucky Retirement Systems, Frankfort, in July to become managing director of investment solutions at the investment consulting firm, Rogercasey, Darien, Conn.
Search consultants suggest the increase in CIO departures is, in part, a reflection of an improving economy. “There's always been more money” in the private sector, but there was “slowdown in hiring in 2008 and 2009,” said Mary Hobson, a Denver-based executive vice president of executive search firm EFL Associates. “We're seeing that turn around now that the private sector is picking back up.”
In 2008 and 2009, “the jobs just weren't there” in the private sector, added George Wilbanks, a New York-based consultant in the asset and wealth management practice for Russell Reynolds.
He said the flow of CIOs from the public and not-for-profit fields into the private sector is a periodic occurrence, heavily dependent on the economy. “Look at any 18-month cycle, and you'd probably see the same thing,” Mr. Wilbanks said. “We would have probably seen the same thing in 2005 and 2006.”
As the economy improves, companies are more willing to scout for high-performing CIOs outside the private sector. “They're watching them all the time,” Mr. Wilbanks said.
Although the consultants declined to talk about clients or comment on specific job changes, they said there's more motivation than mere money for making a move.
“I'd say the compensation factor is second or third on a CIO's list, “said Ms. Neri, referring to CIOs at foundations and endowments. Dealing with boards of directors and public government bureaucracy creates frustration and is a major cause for job-hunting among public-sector and not-for-profit CIOs, she said.
“The attractiveness of the private sector is that it's more entrepreneurial and less bureaucratic,” said Mr. McCabe. He agreed that some CIOs, especially those in the public sector, eventually chafe at the impact of expanding regulatory requirements and meddling politicians.
“You have all this second-guessing and Monday morning quarterbacking,” said Mr. McCabe, adding he has seen a “much greater receptivity” in the past 18 months by public-sector and not-for-profit sector CIOs to considering a private-sector job. “The higher calling to public service has turned into an overwhelming sense of frustration.”
Mr. McCabe recalled instances when his firm would approach a public-sector or not-for-profit-sector CIO about a private-sector job. “In the past, they said they wanted to stay,” he said. “It's less so now.”'
However, money clearly plays a role for attracting CIOs who aren't frustrated, although consultants say the pay can vary widely even within categories of similar types of pension plans or endowments with similar asset sizes. Larger plans pay more, and bonuses based on investment performance can elevate a CIO's income.
Compensation is generally lowest for CIOs at municipal pension plans and state pension plans, with average base salaries ranging from about $165,000 to $300,000 and total compensation ranging from $175,000 to $650,000. The base salary for a corporate CIO can be $300,000 to $400,000, and the total pay can reach $800,000 to $1.4 million.
Among large endowments, a CIO can earn a base of $250,000 to $600,000, but bonuses can push the total pay to $600,000 to $3 million. For large foundations, base salaries can run from $250,000 to $900,000, while total compensation can range from $500,000 to $2 million.
Search firm executives said there is no clear pattern for private-sector employers hiring CIOs from the public or not-for-profit worlds. “I've seen public plan CIOs go to investment consultants, endowments, money managers and corporate plans,” said Ms. Hobson. “It seems to be about the individual opportunity.”
In the last 18 months, CIOs have left for jobs as diverse as creating a hedge fund or moving to a money manager. And some private-sector CIOs have made the reverse voyage, such as Kenneth Frier, leaving his CIO's job at Hewlett-Packard Co., Palo Alto, Calif., in August 2010 to become CIO of Stanford Management Co., which manages $14.5 billion in assets for Stanford University, Palo Alto, Calif.
There's even a CIO who left a foundation to manage assets of Oprah Winfrey. Peter Adamson left the $3 billion Broad Foundations, Los Angeles, in spring 2010 to serve as CIO for the personal and foundation assets of the talk show queen.
Although there has been a recent uptick in migration to the private sector, consultants said that even now CIOs will more likely change jobs within their own fields. For example, a public plan CIO will go to a larger public plan, a second-in-command endowment executive will be promoted when a CIO leaves, or an investment official at a large public plan will become CIO at a smaller public plan. “The natural progression is to go to a peer organization,” said Mr. Wilbanks.
And often they stay put. Among foundations, for example, Ms. Neri of Heidrick & Struggles doesn't expect much CIO turnover. “For a lot of people in the foundation world, there is a strong connectivity to the mission,” she said.
Even when they wave a lot of cash at prospective candidates, search consultants said they get rebuffed. “It's hard to put your finger on it, but people turn us down when we say, ‘Let us double your compensation,'” said Mr. Wilbanks. “There is a real pride in public service.”
