Fund, Foundation Execs Draw Higher Pay

U.S. executives at pension funds, endowments and foundations reaped higher salaries and bonuses in 2003 as the stock market gained and firms tried to attract managers, according to a report by Greenwich Associates.

These groups also are allocating more assets to investments such as hedge funds, increasing their risk for the possibility of higher returns, said the Greenwich, Conn.-based financial research firm.

The 26% gain in the Standard & Poor’s 500 index in 2003 ended the three-year bear market and helped boost the average bonus of eligible fund executives by 11% to $38,100, Greenwich said. The average salary of executives rose 3% to more than $130,700 last year from $126,700 in 2002, based on interviews with 686 fund professionals, the report said.

The rise in stock prices wasn’t enough to relieve the pension obligations of U.S. funds, which are being sapped by an aging population and low interest rates. Corporate pension plans, for example, were 78% funded at the end of last year, down from 121% in 1999, the report said, citing Standard & Poor’s data.

“The average plan was deep in the hole at the end of 2002,” Greenwich consultant Dev Clifford wrote in the report. “And the hole is getting deeper.”

Pension funds, endowments and foundations increasingly are using investments such as hedge funds to boost returns. Hedge funds -- lightly regulated investment pools -- are forecast to have an average annual gain of 9.1% during the next five years, the report said. Last year, 23% of these groups used hedge funds, an increase from 12% in 2000, Greenwich said.

Corporate and public pension funds plan to allocate 5% of their investments to hedge funds, according to the report. If they reach that level, hedge fund investments, including those from endowments and foundations, would total $250 billion, Greenwich said.

Among the 1,045 funds involved in Greenwich’s study, 12% hired a hedge fund manager last year and 15% intend to hire one this year.

Endowment managers’ salaries rose 1% to $156,800, and their bonuses jumped 25% to $67,200.