Pension funds see remuneration from two different but uniquely intertwined perspectives. As institutional investors, they are under increasing pressure to hold companies, including banks, to account over executive pay.
Yet they are part of the wider financial services world in which they invest and employ investment professionals themselves. They need to reward the right individuals in the right way in order to meet their objectives.
There is a wider shakeout in financial services as the banking sector re-focuses on rebuilding its balance sheet and increasing its regulatory capital in readiness for the ‘new world’ of Basel III.
Many, especially those with over-specialised roles that are now less in demand, are leaving banking or financial services altogether.
Pension funds, conversely, are staffing up. They are also becoming a more attractive place for individuals who would previously have sought roles in ‘racier’ jobs in banking, hedge funds or asset management.
Pension funds have a lot to commend them in the employment stakes for well qualified investment staff, many of whom will be keen for a job with a more focused, even social, purpose.
Pension funds offer social purpose in spades, since there is an immediate connection with the goals of the institution, paying pensions, and the members themselves.
A pension fund might offer the opportunity to work across the whole portfolio, to understand the whole range of asset classes and risk.
There is plenty to do for those experienced in asset allocation; the role of short, medium and long-term asset allocation is arguably much more important than ever, and some pension funds now even employ individuals specialised in the tactical asset allocation.
Pension funds don’t suddenly downsize in a crisis (although they don’t upsize in a boom either), and they don’t ask investment management staff to don a marketing hat and to pitch for business.
They offer a thoughtful, well-balanced workplace that is a much more attractive place to work for many.
Like cavalrymen on the Western Front, many pension funds are blithely under-equipped to face the turmoil of asset markets, the maze of risk management and the complexities of managing these.
Trustees, well informed by their consultants, are realising that they need to increase their internal investment staff.
Many smaller funds are becoming more effective ‘delivery organisations’ for pensions by recruiting one or two extra investment or risk management staff.
They realise that the best defence against the vagaries of financial markets is attack by qualified staff. And there has been no better time than this to recruit good professional staff.