The ‘brain drain’ is the sociological phenomenon typically associated with developing nations, in which a country’s best and brightest leave home to seek opportunities and fortunes abroad. The so-called ‘diaspora’ of talented Australians, that has been lamented in the arts and sciences, can now be observed in financial services; it is no secret that literally hundreds of aspiring finance professionals have been lured by the global centres of New York and London.
As the current generation of superannuation executives approach retirement, recruiters have expressed concern that the unglamorous salaries of industry and public-sector super funds might not be enough to seduce the world’s top investment professionals, Australian or not,into stewarding the nation’s retirement assets. While it is generally agreed that Australia’s superannuation system is the envy of the world, the remuneration of its executives is anything but.
Not only does the pay in Australian super funds pale in comparison with asset management, but overseas pension funds are remunerating their top executives up to 10 times some of the highest salaries available here. Consultants believe the source of the problem lies in the origin of the industry funds and the ethos of “profit for the member”, that has left some funds philosophically opposed to paying performance bonuses to their executives. Such an attitude was not a problem when funds were small and the investment decisions outsourced. But as the funds grow and develop in-house teams to make direct investments, a new calibre of professional is required. Recruiters are adamant that if Australian super funds hope to compete in the global market for the top investment people, they may need to seriously rethink the way they structure remuneration.
Pay in pension funds
At the $64 billion Future Fund, Australia’s sovereign wealth fund set up to meet the future superannuation liabilities of public sector employees, the highest-paid executive in 2007 received a total remuneration package of between $460,000 and$474,999. The next in line received between $235,000 and $249,999. Over at the$37 billion Victorian Funds Management Corporation, the fund responsible for investing Victorian public servants’ superannuation and insurance assets,things are slightly more cheery, with the highest-paid executive receiving between $510,000 and $519,000, and the next $380,000 to $389,000. When it comes to industry funds, the figures are not so readily available, but sources estimate that slightly north of $400,000 would be about the limit the biggest industry funds would pay their top executives.