Investment staff at the Victorian Funds Management Corporation (VFMC) will this week be re-interviewed for their jobs, as part of a restructure understood to have shaken staff morale.

Chairman-elect of the VFMC board, Mike Fitzpatrick, is understood to have successfully lobbied state treasurer John Brumby to raise base salaries and increase performance incentives for VFMC staff. His argument for higher pay hinged on the widening responsibilities of VFMC, which must now not only implement but set the investment strategies for its clients, as well as the example of Queensland Investment Corporation’s market-linked remuneration, it is understood. However, Government guidelines demand that any recipient of restructured remuneration must be tested in the marketplace first, according to a source close to VFMC. Hence an advertisement appeared in the Australian Financial Review last month, which the source said was “suitably vague” so as not to advertise currently occupied positions, but also encouraged external candidates to “advocate their skills” to the VFMC board. The seven-person VFMC investment team is set to double in size as it reorganises along ‘alpha’ and ‘beta’ lines and absorbs asset consulting responsibilities. However, the source said there was concern among staff that “non-return seeking” objectives would be added to VFMC’s mandate, such as support for Melbourne-based funds managers. The source said staff were upset and distracted by a perceived lack of job security, and a feeling that VFMC’s functions may be “politicised” under pressure from clients. Both VFMC chief executive, Syd Bone, and Mike Fitzpatrick were unavailable for comment.

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