The State Teachers Retirement Board (STRS) of Ohio announced in a news release that its latest award of Performance-Based Incentive (PBI) Awards are determined based on the calculation of the “additional value” brought to the fund by the investment managers.
For FY 2005, STRS said the fund returned 12.25% and that after costs were deducted, the added value was determined to be 70 basis points or about $350 million. The system noted that the ending fiscal year balance of $59.7 billion represents the highest investment asset total in the 85-year history of STRS Ohio.
The latest PBI bonuses represented just over 1% of the $350 million earned by the fund. STRS noted that this represents the additional value brought to the fund through active management by STRS Ohio associates and external managers, above and beyond that which would result from passive indexing of system assets. Preliminary results for calendar year 2004 indicate that STRS Ohio saved $74 million by using internal staff as opposed to being 100% externally managed.
The STRS announcement said that an additional $118,331 will also be distributed to five members of the West Coast real estate operation as a geographic location pay differential.
The fund’s practice of awarding bonsues has proven to be controversial in recent years (See STRS Board Approves Only $2 Million in Bonuses ).