Charles Skorina had a problem. As an executive search consultant specializing in filling investment officer holes at pension funds and endowments, he was often asked by boards of trustees to produce metrics to aid in candidate comparisons. But in his 30 years in the search business, such data had proved hard to come by — that is, until late January. That’s when Skorina’s “CIO Performance-for-Pay” ranking (see chart below) hit the institutional investor zeitgeist.
Skorina, a former Russian linguist in the U.S. Army with an MBA from the University of Chicago, has collected a lot of data over three decades. But he pondered what data to use and how to present the findings. “I thought a lot about it,” says the headhunter, who publishes a humor-laced monthly letter detailing anecdotes around endowment and pension executive turnover, which he estimates as 10 percent a year. For the index, Skorina says, “we finally decided to do the top 50 and use a simple standard measure.” That measure turns out to be a comparison of a CIO’s annual salary with their fund’s annual returns, with Sharpe ratios and standard deviation thrown in.
Even among CIOs with the highest rankings, the feedback from the investor community has not all been positive. “It’s not entirely factually based,” explains University of Michigan CIO Erik Lundberg (No. 2). His objection: Skorina shows Lundberg’s base pay exclusive of the CIO’s performance bonus that gets paid out over several years. Lundberg says that some of his peers object to the timing of the five-year survey which includes poor fund performance during the financial crisis of 2008-’09.
“I think it’s really silly,” says Deborah Kuenstner (No. 5), CIO of Wellesley College. “It’s not meaningful, because the data is too noisy.” Kuenstner points out that her track record at her alma mater only goes back to 2009, when she replaced Jane Mendillo (No. 48), who departed for Harvard University. But because Skorina used five-year data, part of Kuenstner’s high return-to-pay ratio is attributable to Mendillo’s previous efforts.
Skorina agrees that there is no perfect measure and that data imperfections did leak into his index. He points to Jonathan Hook (No. 49), CIO of Ohio State University, as an example. Hook took over the OSU endowment in 2009 after it earned a 5.1 percent return for the previous three years. During the same time period, Hook earned a 12.3 percent return for Baylor University. “It’s not entirely fair to saddle him with the mediocre performance of OSU before he got there,” admits Skorina, who does include an explanatory note in the full report. Sharpe ratio–to-compensation and other measures are also included in the full report.
The headhunter promises to revise his next CIO index, taking these complaints into account. For now, he concludes: “You can have a thousand different soft measures for a CIO. At the end of the day, you hire this person to make money for your institution.”
CIO Performance-for-Pay Ranking
Including 5-year returns and total compensation
50 Highest-Paid Nonprofit Chief Investment Officers
(bps/$100k of compensation: 2006-2010)
Charles A. Skorina & Co.