Infographic: LP Temptation To Cross To The Dark Side

Ronald Schmitz recently acknowledged to sister magazine Buyouts that the $900,000 in potential annual compensation offered by Virginia Retirement System factored in his decision to become its next chief investment officer this month. Schmitz had been CIO of Oregon Public Employees Retirement System since 2003.

Schmitz joins a parade of investment officers who have stepped down this year from positions at retirement funds in California, Massachusetts, New Mexico and New York. Some, like Schmitz, are staying in the public sector. Others, like Raudline Etienne, former chief executive of the New York State Common Retirement Fund, are heading into the private sector, in her case to join consulting firm Albright Stonebridge Group.

Just how big a role compensation plays in any individual departure is almost always impossible to say. Still, the latest edition of the 2011-2012 Holt-Thomson Reuters Private Equity and Venture Capital Compensation Report (North American edition) sheds light on what public pension funds are up against in competing with the private sector for talent—click through below for infographic.

One of the most common destinations for departing investment officers, particularly those with private equity expertise, has been funds of funds. The business isn’t growing as fast as it once was, if at all, but it still pays well, according the report. In fact, partners can easily earn in salary and bonus what they’d make in comparable positions at a buyout firm or venture capital firm, although the potential for profit-sharing is less (see infographic at right).

Partners at the 12 managers of funds of funds participating in the Holt-Thomson Reuters report earned a median of $457,900 in salary and bonus this year. In addition, partners of funds-of-funds managers take a cut of the 5 percent or 10 percent carried interest often charged by their firms. Partners in the study are entitled to receive a median of 0.6 points of carried interest, out of 100 points total, or $5 million in dollars at work (points multiplied by dollars in all active funds).

The managers of funds of funds in the study have a median of $1.3 billion in assets under management. The North American venture firms in the study have a median of $712 million in assets under management; the North American LBO/growth equity firms have a median of $951 million in assets under management.

All told, 124 firms participated in the Holt-Thomson Reuters compensation survey this year, providing data on more than 3,000 employees.

For editorial questions about the 2011-2012 Holt-Thomson Reuters Private Equity and Venture Capital Compensation Report contact david.toll@thomsonreuters.com. For information on how to order a copy contact Greg.Winterton@thomsonreuters.com.

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