The Future Fund’s first annual report since hitting near-full staffing levels shows a level of overall executive remuneration and performance bonus components not too far below that of large commercial funds managers.
The top two total salaries – presumably general manager Paul Costello and chief investment officer David Neal (but not necessarily in that order) – are $955,000-$969,000 and $745,000-$759,000.
The breakdown between base and performance component of total remuneration for the top two are: $551,665 fixed and $409,932 performance, followed by $498,614 fixed and $254,293 performance related.
The third-best paid Future Fund executive has a higher performance-related proportion: $333,568 fixed salary and expected $273,525 performance related.
A senior financial services recruiter said yesterday that those salaries were probably only 30-50 per cent below what would be expected from a comparable privately owned funds management firm.
"The problem is that you can’t really point to a comparable firm," he said. "Nevertheless, they are good salaries for a federal agency and indicate a commitment to attracting talented professionals. The (Future Fund) can probably get away with paying slightly less than commercial firms because of the prestige attached to it."
Total average salaries for the top 10 executives above $130,000 in the year to June was $4.89 million. The average number of staff over the year was 24, however the Future Fund is understood to have been approaching is target of about 20 investment professionals and 20 other staff towards the end of the period.
Paul Costello said in his review in the report that the Future Fund remained committed to keeping the organisation as small as practicable.
"Our preferred model is to have our internal team concentrating on big-picture risk management and applying their skills to the identification of quality partnerships through which we implement this…
"We are not attracted to bringing an activity in-house unless we can be satisfied it will add to our comparative advantage in running a highly efficient long-term portfolio."
The agency’s indirect cost ratio – the commonly accepted way of disclosing and comparing portfolio management costs – was only 7.5bps ($39.8 million), of which costs relating to board and staff were 3bps ($13.9 million).
The accounts show that investment management and advisory fees totalled $21.03 million, custodian fees $2.24 million and transaction costs $15.74 million for the year.