Public pension managers are constantly challenged to keep top staff from leaving for the more lucrative private sector.
Their plight was echoed again in April at the Milken Institute's Global Conference in Los Angeles, with the heads of several public pensions encouraging state and local governments to make compensation packages more like those of private asset managers.
“How do you attract top investment talent with civil service wages?” asked Robert Kleine, Michigan's state treasurer.
Kleine's comments must have carried an eerie resonance 400 miles north in Sacramento, the state's capital and headquarters of the California Public Employees' Retirement System (CalPERS).
The public pension behemoth, which manages roughly $244 billion (€159 billion) in assets and has a pioneering private equity programme, saw both its chief investment officer and chief executive officer almost simultaneously announce plans to move on to jobs in the private sector
CIO Russell Read, who joined CalPERS in June 2006 from Deutsche Asset Management, said he would resign to pursue cleantech and environmental investments, effective 30 June 2008.
Known to be passionate about the environment, and having had roles including socioeconomic advisor for the Forest BioProducts Research Project at the University of Maine, Read's move into cleantech came as little surprise to those familiar with his investment background.
But just seven days later, CEO Fred Buenrostro confirmed reports that he will he retire at the end of the year. Buenrostro had worked as the pension's top executive for six years.
The back-to-back departures sparked speculation that tension had emerged between CalPERS' board of directors and the investment staff, specifically regarding the aggressiveness of the pension's newly developed infrastructure asset class.
CalPERS president Rob Feckner quickly moved to quell such speculation.“Media reports that raise a spectre of controversy between [Buenrostro] and the board are exaggerated,” he said in a statement.“Anyone who knows CalPERS knows that part of our success as an organisation is our willingness to speak frankly and debate the issues. It comes with the territory.”
He added that Buenrostro's departure wasn't unusual for a public pension like CalPERS.
“Like so many other CEOs and senior executives here who have given up lucrative private sector opportunities to serve the public, he has over time talked more and more about wanting to consider the time left in his career to pursue exciting opportunities in the private sector.”
Read's CalPERS salary for the 2006-07 fiscal year, including $403,070 in incentive awards, was roughly $950,000. Buenrostro's pay for the 2006-07 fiscal year was more than $300,000.