State of Wisconsin Investment Board, Madison, approved about $9.8 million in staff incentive awards based on generating about $225 million in investment earnings above market returns and net of costs over the past five years, said Vicki Hearing, spokeswoman.
SWIB, which oversees a total of $110.4 billion, bases most of the program on the five-year return of the Wisconsin Retirement System's $93.6 billion core trust fund, whose diversified allocation includes domestic and international equities, fixed income, real estate, private equity and hedge funds.
The core fund's five-year annualized gross return as of Dec. 31 was 5.2%, above its 4.9% policy benchmark. The 2018 awards are the lowest amount paid in the past five years. The highest amount of staff incentive awards was $13.8 million in 2017 after generating $1.2 billion in investment earnings above market returns and net of costs for the five years ended Dec. 31, 2016.
SWIB has a staff of 169, which breaks down to 74 investment management staffers that receive the bulk of the awards, and 95 investment services staff, including in trading, accounting and technology, which also share in the incentive payments, Ms. Hearing said.
Individual bonuses were not disclosed.
The annual incentive awards were established in 2000 through a compensation restructuring in order to increase staff retention. The board, along with McLagan, SWIB's performance award consulting firm and a unit of Aon PLC, reviews the program annually.
Separately, for the year ended Dec. 31, the core trust fund returned a gross -3.25%, 21 basis points above its primary benchmark return of -3.46%. The annualized and 10-year gross return was8.8%, respectively, above the respective benchmark of and 8.2%.
Among the core trust fund's asset classes, private equity/debt had the best gross return for the year ended Dec. 31, at 15.9%, above its primary benchmark of 11.2%, followed by real estate equity at 8.8%, above its primary benchmark of 8.7%.
Those positive returns were followed by alpha pool overlay, which returned a gross -0.2% for the year, below its primary benchmark of 2.6%; Treasury inflation-protected securities at -0.5%, above its -0.8% benchmark; public fixed income at -0.76%, equal to its benchmark; multiasset strategies at -6.6%, below its -4.9% benchmark; and public equities at -9.2%, underperforming its -8.9% benchmark.
As of Dec. 31, the core trust fund's actual allocation was 49.1% public equities, 24.8% public fixed income, 15.3% inflation-sensitive securities, 9.6% private equity/debt, 7.9% real estate equity, 2.6% multiasset strategies, and 0.5% cash and overlays. The allocation is higher than 100% because of leverage.