Pension Funds and Incentive Compensation: A Story Based on the Ontario Teachers' Experience
5 Pages Posted: 23 May 2009
Date Written: May 20, 2009
This article describes the evolution of the incentive compensation system for the investment division of Ontario Teachers' Pension Plan. Today, the system is based on carefully-designed interfaces between actual results, investment benchmarks, risk budgets, and compensation formulas. The authors note that the system is part of a broader compensation structure that rewards managers on the basis of overall absolute fund performance combined with benchmark-relative performance.
Keywords: Integrating Risk and Compensation, Investment Incentive, Pension Fund, Risk Budgeting, Rotman
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