Compensation Strategies for Public Pension Investment Staff

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Building Effective Compensation Programs for Public Pension Funds

Compensation Strategies for Public Pension Investment Staff

Practical insights into designing competitive compensation programs without compromising stakeholder accountability.

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Public pension funds play a vital role in securing the retirement benefits of millions of public servants. However, these funds face a persistent challenge: attracting, retaining, and motivating top investment talent while operating under heightened public scrutiny.

This article explores the core challenges of compensation within public funds and offers actionable strategies for designing transparent, effective pay programs.

Key takeaways

  1. Align compensation programs with strategy: Compensation programs and incentive metrics should align with the fund’s mission, requiring close coordination between compensation consultants and investment advisors.
  2. Conduct compensation benchmarking: Regular compensation benchmarking is essential to attract and retain talent by assessing roles against peers in public funds and the broader asset management sector.
  3. Provide transparent communication: Documentation of programs and transparency with investment staff, the board, and external stakeholders should provide clarity on the mechanics and pay outcomes.

50%

Approximately half of public funds offer incentive compensation to at least some staff.

Source: Based on data from Aon’s Radford McLagan Compensation Database for U.S. public funds.

If you would like to discuss how these insights may apply to your organization, please contact our team for additional perspectives on evolving practices across public funds.

Report

Compensation Strategies for Public Pension Investment Staff

Insights into designing competitive compensation programs for investment staff at public funds.

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Disclaimer

Aon's Radford McLagan Compensation Database, powered by the firm's Human Capital Analytics platform, has been a trusted industry benchmark for more than 50 years. Built on rigorously validated, non-crowdsourced data, it is relied on by over 8,500 organizations and includes information on more than 30 million employees across 115 countries and 150 job functions. The Database delivers a comprehensive view of global compensation trends, helping organizations make better decisions.

This material is intended for institutional investors and public fund fiduciaries only and is provided for informational and educational purposes. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities or to engage in any investment strategy.

The information provided relates to Aon Investments USA Inc. (“AIUSA”) and Aon Consulting, Inc. (“ACI”). Aon plc is a large, diversified professional services company, and services are provided through its subsidiaries and affiliated entities. Investment advisory and investment consulting services are provided by AIUSA, an SEC‑registered investment adviser. Non‑investment consulting services, including Human Capital Solutions and compensation advisory services, are provided by ACI. Although AIUSA is wholly owned by ACI, an indirect subsidiary of Aon plc, each entity operates as a separate legal entity.

This paper discusses compensation design concepts, benchmarking practices, and incentive structures observed across public pension funds. Any references to compensation data, market observations, or incentive design practices are based on information from Aon’s Radford McLagan Compensation Database, a proprietary compensation advisory resource maintained by Aon. These references are provided for illustrative purposes only and should not be construed as guarantees of outcomes or performance. 

Any discussion of investment performance metrics, benchmarks, time periods, or risk measures is provided solely to illustrate common approaches used by public funds in the context of incentive compensation design. Past performance is not indicative of future results, and no representation is made that any approach described will achieve its intended objectives. Forward‑looking statements are based on assumptions and are subject to change; actual outcomes may differ materially.

This material is general in nature and does not take into account the specific circumstances, objectives, or governance structures of any particular fund. Readers should consult their own financial, legal, tax, and other professional advisers before making any decisions.

This document is provided on an “as is” basis, without warranty of any kind. AIUSA, ACI, Aon plc, and their respective affiliates disclaim any liability for losses arising from reliance on this material. This content is confidential and proprietary and may not be reproduced, redistributed, or disclosed to third parties without Aon’s prior written consent.

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