The chair of the Universities Superannuation Scheme’s (USS) in-house manager has criticised the “completely and utterly unacceptable” levels of pay at Canadian pension funds, warning of the impact on the UK pensions market.
Virginia Holmes – who, in addition to chairing USS Investment Management (USS IM), is a board member of the CAD90bn (€61bn) Alberta Investment Management Corporation (AIMCo) – said USS was questioning how to retain its staff with Canadian investors setting up London offices.
“When I go across to Canada and [meet remuneration consultants], I am truly and genuinely shocked, and I take a lot of being shocked,” the former UK chief executive of AXA Investment Managers said.
Speaking at the book launch of Keith Ambachtsheer’s ‘The Future of Pension Management’, she added: “You seem to have this classic scenario [in Canada] where seven funds have benchmarked themselves up and up and up to levels that are completely and utterly unacceptable in the public purpose world.”
In a survey conducted for his book, Ambachtsheer found that, across 10 Canadian pension funds, more than 2,160 full-time employees responsible for $631bn (€476.1bn) in assets earned $448m at the end of 2010 – an average of $207,000 per person.
In comparison, 10 US funds managing $902bn employed 1,469 full-time staff for $187m, or $127,800 on average, below the average $157,100 paid to 579 staff across eight funds in Northern Europe and the UK.
Holmes said she was hopeful the UK had a sufficiently large number of pension funds against which to benchmark pay to avoid a situation similar to Canada.
But she struck a cautious note due to the increasing number of international pension funds setting up London offices, saying there was no easy answers on the matter of pay.
Canadian pension plans that have opened London offices have “a bunch of empty desks” and would look to institutions including the £49bn (€66.9bn) USS and £23bn Railpen Investments to hire private market staff, she said.
“When we talk about [remuneration] at USS, we talk about it in a very different way than [they do at investment banks] because we believe people are privileged to work at USS, not least because they don’t have to go out and sell,” she said.
For his part, Ambachtsheer argued that pension fund investment was a “high-compensation market” and that the model in Canada was often for base salaries of CAD500,000, with a performance-related element enabling a three or fourfold increase over the base.
A similar approach is employed by the CAD282bn Canada Pension Plan Investment Board, where the six highest-paid executives, including chief executive and president Mark Wiseman, had a combined base salary of CAD2.5m in 2014 but total remuneration packages worth CAD19.5m.
This compares with the highest-paid individual at USS IM earning £991,000 in 2014, according to the manager’s most recent accounts.
Ambachtsheer noted the funds in Canada needed to balance staff ability to earn multiples of their income in the private market versus the comparatively lower pay of those contributing to many of the funds.
Some quotes have been modified since publication