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In the good ole days, incentive pay was given to those that earned it. In these days, incentive pay is used for failure. I have just about seen and heard it all.
What a sad day this is for us educators who depend on these people the "manage" our money.
Try to have a good day, because this story makes me sick.
http://www.sacbee.com/topstories/story/1791260.html
Calpers, Calstrs Award Big Bonuses Despite Losses After all that we have seen, this crap goes on and on.
#2
Posted 19 April 2009 - 03:29 PM
"Retirement fund officials say bonuses like those paid to Ailman and Read help attract and retain top talent."
I swear, if I hear one more time about the need to offer bonuses in order to "retain top talent," I am going to throw up.
Having said that, the total compensation packages for these guys (~ $652,000 for the CalSTRS guy) do not seem out of line. In fact, I would have thought that they would have been higher. These are huge funds, and they undoubtedly take plenty of skill to manage.
I swear, if I hear one more time about the need to offer bonuses in order to "retain top talent," I am going to throw up.
Having said that, the total compensation packages for these guys (~ $652,000 for the CalSTRS guy) do not seem out of line. In fact, I would have thought that they would have been higher. These are huge funds, and they undoubtedly take plenty of skill to manage.
#3
Posted 19 April 2009 - 04:11 PM
QUOTE(apteacher @ Apr 19 2009, 03:29 PM) 
Having said that, the total compensation packages for these guys (~ $652,000 for the CalSTRS guy) do not seem out of line. In fact, I would have thought that they would have been higher. These are huge funds, and they undoubtedly take plenty of skill to manage.
AP,
No, it doesn't until you compare it with other top California public officials, click here. The state tresurer and controller together make about 2/3 of what the CalSTRS CIO makes. Remember, CalSTRS is a public institution getting tax payers money from the state. These salaries are also paid by educators salaries and SD's contributions so they should not make more than the Governor. Also, to lower the demand for skilled managers and I think you know where I am going here, use index funds for the domestic and international equities. We know through countless academic studies that managers do not add value. William Bernstein's book illustrates those studies.
One last point, in all of the documents I have read and the CalSTRS website, I have never seen the word "bonuses" anywhere. Its its not out of line, why keep it a secret?
Has anybody heard of CalSTRS and CalPERS paying bonuses?
Chart of the base salary and bonuses.
Steve
#4
Posted 19 April 2009 - 07:34 PM
QUOTE(sschullo @ Apr 19 2009, 02:11 PM)
Also, to lower the demand for skilled managers and I think you know where I am going here, use index funds for the domestic and international equities. We know through countless academic studies that managers do not add value.
Great point. Even with the use of index funds, though (and I am in full agreement with you on that), there is still a certain amount of skill required in determining the appropriate mix of assets for the fund. A 600-700K salary still does not seem out of line to me for this particular position, even though it is substantially more than is earned by other state
#5
Posted 19 April 2009 - 11:53 PM
AP,
There is a bill pending in Sacramento that would freeze all salaries higher than 150,000 and stop bonuses for all state workers.
The CalSTRS board opposes this bill unless amended (no details provided) click here What are the 3 teacher (Dillon, Reilly and Widerner) representatives thinking?
Steve
There is a bill pending in Sacramento that would freeze all salaries higher than 150,000 and stop bonuses for all state workers.
The CalSTRS board opposes this bill unless amended (no details provided) click here What are the 3 teacher (Dillon, Reilly and Widerner) representatives thinking?
Steve
#6
Posted 20 April 2009 - 07:44 AM
snip: "CalSTRS' $17.1 billion private equity portfolio could lose at least a third of its value because three-quarters of its investment is in buyouts, insiders say.
Although these investments are giving investors headaches now, at the time they seemed to be a great deal, Mr. Dennison said. In the private equity world, bigger was better, and pension fund officials felt they were making safe bets with the name-brand firms.
Questions raised now are “the 20-20 hindsight. Realistically, some of the people who did these things in retrospect would not have done what they did. Put them in the high regret category,” he said.
But Mr. Kaplan said investors should have seen a problem when they were sinking a good deal of capital into leveraged buyouts. "
/snip
Full article:
http://www.pionline.com/article/20090420/P...p;rssfeed=rss05
The point for us ordinary investors is that the extreemly talented, resourceful and highly educated CalSTRS managers were too confident ("at the time they seemed to be a great deal"). Well, they screwed up and did not predict the downfall nor analyze correctly the incredible risk they were taking.
For us, no matter how risk tolerant you and I think we are, a good rule of thumb is to reduce your percevied risk tolerance by one half. In other words, if you think you can tolerate a reduction in your portfolio of 20%, think 10% and adjust your bond allocation accordingly.
Have a good day,
Steve
Although these investments are giving investors headaches now, at the time they seemed to be a great deal, Mr. Dennison said. In the private equity world, bigger was better, and pension fund officials felt they were making safe bets with the name-brand firms.
Questions raised now are “the 20-20 hindsight. Realistically, some of the people who did these things in retrospect would not have done what they did. Put them in the high regret category,” he said.
But Mr. Kaplan said investors should have seen a problem when they were sinking a good deal of capital into leveraged buyouts. "
/snip
Full article:
http://www.pionline.com/article/20090420/P...p;rssfeed=rss05
The point for us ordinary investors is that the extreemly talented, resourceful and highly educated CalSTRS managers were too confident ("at the time they seemed to be a great deal"). Well, they screwed up and did not predict the downfall nor analyze correctly the incredible risk they were taking.
For us, no matter how risk tolerant you and I think we are, a good rule of thumb is to reduce your percevied risk tolerance by one half. In other words, if you think you can tolerate a reduction in your portfolio of 20%, think 10% and adjust your bond allocation accordingly.
Have a good day,
Steve
#7
Posted 20 April 2009 - 01:51 PM
Hi,
I asked the reporter how he got the information about bonuses. I used the search tool on CalSTRS website and all that came up were the teachers bonuses and how to use them in the benefit calculationl. Suprise teachers don't get bonuses!
The reported wrote back:
Hi Steve:
Reaction to the story from retirees has been mixed. Folks like you are angry at the bonuses. Other folks are angry at me for reporting them.
As to how I found out, it started with noticing a change in AB 53 that lined out the word, "bonus," and strike outs to some other sentences that would have stopped bonuses. When I asked Senator Portantino's office about it, they told me that CalPERS had opposed the language in the bill. So I requested bonus info from CalPERS and, just out of curiosity, CalSTRS.
It's all public record, the funds just don't highlight it. You have to know who and how to request it.
Thanks for reading. Hang in there.
Very secretive stuff and they thought we would not find out. This entire story really stinks. I would have liked CalSTRS to be a TPA for the 457b plan for LAUSD, but now I am wondering...
Steve
I asked the reporter how he got the information about bonuses. I used the search tool on CalSTRS website and all that came up were the teachers bonuses and how to use them in the benefit calculationl. Suprise teachers don't get bonuses!
The reported wrote back:
Hi Steve:
Reaction to the story from retirees has been mixed. Folks like you are angry at the bonuses. Other folks are angry at me for reporting them.
As to how I found out, it started with noticing a change in AB 53 that lined out the word, "bonus," and strike outs to some other sentences that would have stopped bonuses. When I asked Senator Portantino's office about it, they told me that CalPERS had opposed the language in the bill. So I requested bonus info from CalPERS and, just out of curiosity, CalSTRS.
It's all public record, the funds just don't highlight it. You have to know who and how to request it.
Thanks for reading. Hang in there.
Very secretive stuff and they thought we would not find out. This entire story really stinks. I would have liked CalSTRS to be a TPA for the 457b plan for LAUSD, but now I am wondering...
Steve
#8
Posted 21 April 2009 - 12:56 PM
Hi,
Jon Ortiz is taking heat for publishing this report.
He needs to be acknowleged for his courage.
Could you send him a message:
Jon Ortiz
jortiz@sacbee.com
Jon Ortiz is taking heat for publishing this report.
He needs to be acknowleged for his courage.
Could you send him a message:
Jon Ortiz
jortiz@sacbee.com
#10
Posted 21 April 2009 - 05:34 PM
QUOTE(sschullo @ Apr 20 2009, 05:44 AM)
For us, no matter how risk tolerant you and I think we are, a good rule of thumb is to reduce your percevied risk tolerance by one half. In other words, if you think you can tolerate a reduction in your portfolio of 20%, think 10% and adjust your bond allocation accordingly. [/size]
That is some pretty darned good advice, Steve.
#11
Posted 21 April 2009 - 05:59 PM
Hi AP,
I just get good information from very bright people over at the Bogleheads forum and pass it on. I am a mere conduit. Adrian is a very sharp investor who is a sheriff by profession who came up with this idea. The only thing I can do is at least recognize a good idea, but I am about as creative as a carrot.
Have a good day,
Steve
I just get good information from very bright people over at the Bogleheads forum and pass it on. I am a mere conduit. Adrian is a very sharp investor who is a sheriff by profession who came up with this idea. The only thing I can do is at least recognize a good idea, but I am about as creative as a carrot.
Have a good day,
Steve
#12
Posted 22 April 2009 - 08:46 AM
Steve,
I think that the market downturn has shown that many of us -- including institutions such as CalSTRS -- perhaps were more aggressively invested than was appropriate. I've pointed out before that target retirement funds especially have been ridiculously overweighted in stocks. This is true even with our own favorites like Vanguard, Fidelity, and TRP.
It's one thing for a person to THINK that he knows his risk tolerance, but your rule of thumb is a good reality check for us.
I think that the market downturn has shown that many of us -- including institutions such as CalSTRS -- perhaps were more aggressively invested than was appropriate. I've pointed out before that target retirement funds especially have been ridiculously overweighted in stocks. This is true even with our own favorites like Vanguard, Fidelity, and TRP.
It's one thing for a person to THINK that he knows his risk tolerance, but your rule of thumb is a good reality check for us.
#13
Posted 22 April 2009 - 11:26 PM
QUOTE(sschullo @ Apr 20 2009, 08:44 AM)
snip: "CalSTRS' $17.1 billion private equity portfolio could lose at least a third of its value because three-quarters of its investment is in buyouts, insiders say.
Although these investments are giving investors headaches now, at the time they seemed to be a great deal, Mr. Dennison said. In the private equity world, bigger was better, and pension fund officials felt they were making safe bets with the name-brand firms.
Questions raised now are “the 20-20 hindsight. Realistically, some of the people who did these things in retrospect would not have done what they did. Put them in the high regret category,” he said.
But Mr. Kaplan said investors should have seen a problem when they were sinking a good deal of capital into leveraged buyouts. "
/snip
Full article:
http://www.pionline.com/article/20090420/P...p;rssfeed=rss05
The point for us ordinary investors is that the extreemly talented, resourceful and highly educated CalSTRS managers were too confident ("at the time they seemed to be a great deal"). Well, they screwed up and did not predict the downfall nor analyze correctly the incredible risk they were taking.
For us, no matter how risk tolerant you and I think we are, a good rule of thumb is to reduce your percevied risk tolerance by one half. In other words, if you think you can tolerate a reduction in your portfolio of 20%, think 10% and adjust your bond allocation accordingly.
Have a good day,
Steve
Steve:
The ingorant reporter who wrote this article is confusing volatility ("could lose one third of its value") with the ultimate return of private equity (PE). PE is a long term illiquid investment that is intended to provide a cash payment at profit at a specific future date to enable the pension plan pay benefits due at that time. Pension plans do not purchase PE as an asset to be sold for a gain before the cash out date. Because it is illiquid and lack of comparable pricing PEs mark to market value will fluctuate due to market conditions which are irrevalent because the pension plan has no intention of selling the investment before its cashout date. Many publicly traded companies became privately owned because of the burdens of compliance with the Sarbanes Oxley Act.
#14
Posted 23 April 2009 - 08:54 AM
QUOTE(intruder @ Apr 22 2009, 11:26 PM)
QUOTE(sschullo @ Apr 20 2009, 08:44 AM)
snip: "CalSTRS' $17.1 billion private equity portfolio could lose at least a third of its value because three-quarters of its investment is in buyouts, insiders say.
Although these investments are giving investors headaches now, at the time they seemed to be a great deal, Mr. Dennison said. In the private equity world, bigger was better, and pension fund officials felt they were making safe bets with the name-brand firms.
Questions raised now are “the 20-20 hindsight. Realistically, some of the people who did these things in retrospect would not have done what they did. Put them in the high regret category,” he said.
But Mr. Kaplan said investors should have seen a problem when they were sinking a good deal of capital into leveraged buyouts. "
/snip
Full article:
http://www.pionline.com/article/20090420/P...p;rssfeed=rss05
The point for us ordinary investors is that the extreemly talented, resourceful and highly educated CalSTRS managers were too confident ("at the time they seemed to be a great deal"). Well, they screwed up and did not predict the downfall nor analyze correctly the incredible risk they were taking.
For us, no matter how risk tolerant you and I think we are, a good rule of thumb is to reduce your percevied risk tolerance by one half. In other words, if you think you can tolerate a reduction in your portfolio of 20%, think 10% and adjust your bond allocation accordingly.
Have a good day,
Steve
Intruder
My responses are in red.
The ingorant reporter who wrote this article is confusing volatility ("could lose one third of its value") with the ultimate return of private equity (PE).
Volatility is risk. Without risk, there is no return and there is the chance of reduction in value too. There is no guarentee that PE will return as expected. In this case it lost one third of its value. Nobody knows what the ultimate return.
BTW I have noticed that all people who have a different opinon are "ignorant". There must be a lot of ignorant people in this world. Are there ignorant people in the financial industry?
PE is a long term illiquid investment that is intended to provide a cash payment at profit at a specific future date to enable the pension plan pay benefits due at that time.
So are equities or any investment, except cash. Pension plans have long term horizons. My point is that CalSTRS did not have enough of the safe fixed securities, treasuries for example.
Pension plans do not purchase PE as an asset to be sold for a gain before the cash out date.
Thats why I have been arguing for index funds with rebalancing.
Because it is illiquid and lack of comparable pricing PEs mark to market value will fluctuate due to market conditions which are irrevalent because the pension plan has no intention of selling the investment before its cashout date.
Thus, CalSTRS took on a risk not expecting the extreem financial crisis going on. The question remains will CalSTRS have taken on this risk had they known the financial crisis? I seriously doubt that, but retrospection is worthless in this business.
Many publicly traded companies became privately owned because of the burdens of compliance with the Sarbanes Oxley Act.
Of course, blame those awful regulations. Had they stayed public, those managers might have a job now (with less pay obviously).
#15
Posted 24 April 2009 - 07:57 AM
Steve,
Try this one.
http://johnwphipps.blogspot.com/2009/04/an...inequality.html
This is written by a full-time farmer and part-time journalist. Very down to earth blog. It just goes into much more depth on how these "execs" think they are the only people working more than 8 hours a day and that entitles them to mega-bucks.
Try this one.
http://johnwphipps.blogspot.com/2009/04/an...inequality.html
This is written by a full-time farmer and part-time journalist. Very down to earth blog. It just goes into much more depth on how these "execs" think they are the only people working more than 8 hours a day and that entitles them to mega-bucks.
