Last year, the Teacher Retirement System (TRS) of Texas –oddly – came under fire from the Wall Street Journal for the success of its private equity returns. This year, Harvard University has hired away one of TRS’ private equity team members to head its PE portfolio.
As the Boston Globe article says, Richard Hall will join Harvard University's endowment fund after managing $14 billion in private equity for TRS for six years.
We mention this only to discuss a point.
Successful money managers with great track records are in high demand. The skills and techniques that Hall and others develop in the course of their work at a successful public employee pension system are desired by other organizations, like university endowment funds, large hedge funds, or mutual funds.
Whenever we see news stories about the bonuses paid to top money managers and staff at public pension systems, and then we see comparisons to average salaries of teachers or other public employees, we wince a bit like everyone else. But, we know that those bonuses are unbelievably small compared to what other money managers and staff receive at private sector money management firms. We read recently of $20 million salaries for top executives at PIMCO, for instance. (Inside the Showdown Atop Pimco, the World's Biggest Bond Firm, WSJ, Feb. 24, 2014).
But truly the market for those with skills and experience in managing money is highly competitive and there’s always an organization which needs a boost from those with fresh approaches and a winning track record. Harvard’s endowment fund is an incredibly prestigious group and it is our bet they pay handsomely, probably offering Mr. Hall (a Harvard graduate) a very sweet deal indeed.
In the world of money management, talent poaching is the name of the game. Texas is fortunate to have so many dedicated professionals at all its pensions, sometimes working with below-market compensation packages. We salute them all. – Max Patterson