San Diego County Approves $1.4M Comp Plan for Outside Investment Consultant

August 24, 2009 ( - The San Diego County Employees Retirement Association board has approved a compensation plan that could top $1.4 million a year for an outside consultant to manage the county's $6.3 billion pension fund.

San Diego television station KFMB reports that the board voted 6-3 to approve a pay package that consists of an initial $345,000 retainer, a base fee of $535,000 annually and a potential of an additional $535,000 a year in performance pay, according to Brian White, SDCERA’s chief executive officer. A news report in the Union-Tribune said the agreement  is a three-year deal that may be extended two years.

The pay package amounts to almost six times what the association’s previous chief investment officer, David Deutsch earned ($209,000 a year) and surpasses what top officials at the state’s largest public pension funds are paid, according to the newspaper. Deutsch quit five months ago after the fund suffered losses of more than $2.5 billion.

There has been controversy among board members about the potential salary to be paid since the decision was made two weeks ago to outsource the CIO function (see San Diego County to Outsource Investment Chief Job ). Most board members said added investment earnings would make up for the increased compensation, and Board member James Feeley said the system needs to be innovative to compete with private-sector money managers.

However, County Supervisor Dianne Jacob, Treasurer-Tax Collector Dan McAllister, and board member David Myers, all of whom voted against hiring an outside manager, opposed the recommended compensation plan. Jacob noted during the prior board meeting that the pension fund grew from $5.4 billion to $6.2 billion after Deutsch left – an $800 million increase without the benefit of a chief investment officer. “I’m not convinced at this point we need to spend that kind of money,” she said, according to the Union-Tribune.

After it began its search for a new CIO, the pension system received 130 or more résumés and interviewed 12 finalists before deciding to outsource the job. The CIO oversees outside investment advisors and a staff of 10 to manage day-to-day investments for the $6.3-billion fund, and reports to the chief executive officer and the Board of Retirement.

“This is a key position that requires broad investment knowledge and experience, the ability to craft, articulate and implement a dynamic investment strategy, and the ability to work with the Board of Retirement to maximize returns for members and the employer,” Brian White, chief executive officer, said (see SDCERA Opens CIO Search ).