CalPERS' board on Thursday adopted a new compensation package that increases salaries, retains or increases annual incentives depending on the position and introduces a long-term incentive program.
For example, investment managers would receive annual incentives of up to a target of 40% and a maximum of 60% and long-term incentives of 40% of their salaries. Investment managers' annual incentive targets had varied between up to 30% and up to 50% of salary with maximum annual incentives of 45% to 75% of salary.
The chief operating investment officer would receive an incentive of up to 75% and a long-term target of 50% of salary. That position had an annual incentive target of 40% of salary. The position of chief operating investment officer has been vacant since January when Elisabeth Bourqui resigned.
Separately, at CalPERS' investment committee meeting on Tuesday, CalPERS' CIO Yu Ben Meng made it clear that any additional transparency offered by its new private equity investment model would be shared internally and not with the public. The private equity investment model includes two entities — now limited liability companies — set up by but not owned by the $354.7 billion California Public Employees' Retirement System, Sacramento.
During Mr. Meng's presentation, he told the investment committee that the goal of the two private equity vehicles is to achieve "more investment capabilities in private equity as an asset class with the objective to achieve the scale and then to improve transparency, improve control and reduce costs."
But, he added, "the improved transparency is to improve the transparency of CalPERS. The general public will get exactly the same level of transparency as they do now."
The public would not receive information on the salaries of the executives hired for the separate entities or the operating costs CalPERS would pay so the public can compare those to the cost CalPERS is paying for the current, primarily commingled fund, model,noted former board member JJ Jelincic during a public comment period.
Indeed, when board members raised questions about the two outside entities' transparency and cost, investment committee Chairman Bill Slaton deferred the matters to closed session.
During discussions, board member Margaret Brown asked about transparency and the cost of CalPERS' current private equity program. Ms. Brown said she did a random check of four private equity investments made under the staff's delegated authority and CalPERS did not pay the standard private equity rate of 2% management fee and 20% carried interest.
Mr. Slaton said those issues should be discussed in closed session.
When Ms. Brown shared her view that the partnership or management agreements be made public as "the best guarantee CalPERS can have that we're not going to get snookered like we did in other previous investment ownerships," she was again told to wait until closed session.
Later board member and California state Controller Betty T. Yee also asked about the governance of the private equity investment model.
"This is critical, … but to me this is a big decision for this board. We have a fiduciary responsibility, but we're going to be really placing that responsibility on an outside entity, for the most part, under this model," Ms. Yee said during Tuesday's investment committee meeting. "So what I'm trying to get at is, I guess, what's our ongoing responsibility, the board? … How do we know that that governance is always going to be aligned with us?"
Again, Mr. Slaton said these issues should be discussed in closed session.
