Wisconsin investment board gives $8M in bonuses
MADISON, Wis. (AP) — Wisconsin's pension fund managers were given more than $8 million in bonuses as a reward for strong investment returns, nearly double what they received last year, according to records released to The Associated Press on Friday.
The bonuses come as most retirees are about to see their pension payments decrease in May for the fifth year in a row due to effects of the 2008 recession. The bonuses were approved by the State of Wisconsin Investment Board on Wednesday and finalized Friday, said the board's spokeswoman, Vicki Hearing.
Twenty-nine people will receive six-figure bonuses. All but six employees of the board, 139 out of 145 workers, will receive some bonus. Seventy-four employees will get bonuses of at least $25,000.
Nearly everyone receiving a six-figure bonus is a money manager. Roughly half of the agency's employees, 66 out of 145, are money managers.
Of the six who didn't get bonuses, four were ineligible and two didn't meet performance standards, Hearing said.
Chief Investment Officer David Villa is getting the largest bonus of nearly $421,000. Two managing directors, Bill McCorkle and Ron Mensink, were the next highest with bonuses of nearly $287,000 and about 282,000, respectfully.
The bonus for the retirement system's executive director was split between the retiring office holder who left in June, Keith Bozarth, and his successor, Michael Williamson. Bozarth will get about $181,000, and Williamson will receive $241,000.
The bonuses are tied to performance and are only given when state investments surpass thresholds set by the board's trustees in consultation with industry consultants, Hearing said. Last year, the state's core fund, a diversified group of investments that includes benefits for all 167,000 retirees in the Wisconsin Retirement System, grew by 13.7 percent. The benchmark was 12.8 percent.
The variable fund, which has higher risk and about 40,000 investors, grew by 16.9 percent. The benchmark was 16.7 percent.
In total, state investments grew by $583 million more than they would have had the funds only reached the benchmark levels.
In 2012, when the bonuses were $4.3 million, that was after investments in the core fund increased just 1.4 percent and the variable fund dropped by 3 percent.
While the state's investments grew, core fund investors will see a cut in benefits of 9.6 percent starting in May because pension payments are based on a five-year smoothing formula. But this is the last year that the negative effects from the 2008 recession will be felt by retirees. Since investments have gone up since 2009, pension payments also are expected to increase starting in 2014.
Even in 2008, when core fund investments dropped by 26 percent, the board handed out $1.7 million in bonuses.
Hearing said the bonuses are a part of the cost of investing in Wisconsin Retirement System funds.
"Were not paying the same as those big money managers on the East and West Coast," she said. "We're not paying the same salaries as they do."
Salaries paid to SWIB employees, including the bonuses, come from the earnings, not general funds paid by taxpayers.
"If we paid outside managers, it would cost more than three times the money to manage those same funds," Hearing said in an email. "We pay competitive compensation to attract and retain competent professionals to manage the retirement funds."