Texas pension manager paid $1 million trails peers who make less

, Bloomberg

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BrittHarris
Britt Harris

Britt Harris arrived at the Teacher Retirement System of Texas in 2006 from the world's biggest hedge fund with a mandate to improve the pension's performance. He also brought a Wall Street attitude about pay.

Harris, the Texas fund's chief investment officer, made $1 million last year in salary and bonuses, the most of any public pension employee in the 12 most populous U.S. states, according to data compiled by Bloomberg. Four other employees made at least $500,000, and the fund paid $9.7 million in bonuses in 2011, more than any in those states.

Funds where executives made far less posted better investment results than those produced by Harris and his staff over three and five years. They included, respectively, the Ohio Police & Fire Pension Fund, where the top-paid executive last year was William J. Estabrook, at $231,614, and the New Jersey Division of Investment, where director Timothy Walsh made $185,000 plus $7,500 for moving expenses, data show.

"These guys may claim to be worth their weight in gold," said Edward Siedle, a former U.S. Securities and Exchange Commission attorney and president of Benchmark Financial Services of Ocean Ridge, Florida. "They absolutely can't justify it."

Falling Behind

While Harris says public pension compensation must be competitive with the private sector to attract top talent, the Texas fund -- seventh-largest in the U.S. with $112.4 billion in assets -- is falling further behind in long-term obligations to more than 1.3 million education employees and retired teachers, including Harris's mother. The pay-and-performance disparities at public pension funds are among the findings of a data review in which Bloomberg compiled payroll records for 1.4 million employees of the 12 largest states.

Of the highest-paid pension executives in those states last year, all but two worked at the Texas fund or the State Teachers Retirement System of Ohio, data show. Yet the Texas fund's 2.12 percent return over five years as of June 30, 2012, net of fees, was less than five other state pensions, including the New Jersey pension plan, which returned 2.46 percent. The Texas fund's three-year results of 13.17 percent trailed Ohio Police & Fire, which returned 13.25 percent.

Harris, who became chief investment officer in December 2006, was hired by a board of trustees appointed by the governor. He said it isn't fair to judge his returns before 2009. It's only since then that his strategy has been completely in place after attracting the investment talent he needs, Harris said.

'Come Home'

"You get a better car, then you've got to have a good driver," Harris said in an interview. "This whole structure has been like a magnet to all these investors from around the country to kind of come home to momma, come home and serve the teachers."

The Texas fund's three-year return was just ahead of the State Universities Retirement System of Illinois and the Pennsylvania Public School Employees' Retirement System. Their top-paid executives earned $221,346 and $269,302, respectively, the data show. Neither fund pays bonuses.

"Strictly looking at performance for pay, there are a lot of people who are paid only mediocre salaries that deliver excellent performance," said Charles Skorina, an executive recruiter retained by the boards of institutional investors to identify and hire investment professionals.

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