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Dangling $900K In Potential Pay, Virginia Woos Oregon CIO

When a large public pension dangles $900,000 in potential compensation in front of applicants, it gets a lot easier to lure top talent.

That is exactly what the $51 billion Virginia Retirement System did when it hired Ronald Schmitz as chief investment officer, replacing Charles Grant, whose contract expired in August. Schmitz is scheduled to start at the end of October.

Schmitz was hired away from the $60 billion Oregon Public Employees Retirement Fund, where he has been chief investment officer since 2003. Prior to Oregon, Schmitz had a similar role at the Illinois State Board of Investment.

At Virginia, Schmitz’s contract will pay him a base salary of $375,000, according to Jeanne Chenault, VRS’s director of public relations. Because Virginia is offering a bonus that could reach as high as 140 percent of his $375,000 base pay, Schmitz’s total yearly compensation could reach $900,000. Charles Grant, Schmitz’s predecessor at VRS, earned $654,600 in base pay and bonuses in fiscal 2011 ending June 30, according to public records.

That far exceeds Schmitz’s compensation at Oregon PERS, where filings indicate that he earned a base salary of $265,512, plus the potential to earn an additional 30 percent in performance bonuses.

Schmitz himself said compensation was a factor in his decision. In an interview with Buyouts, he said that while “he has enjoyed living (in Oregon) the last nine years, it’s exciting and exhilarating to make a change.” He said, “Financially, it’s an attractive offer. Oregon is a bit below the mean and Virginia’s offer is a nice step up.”

James Sinks, a spokesman for the $60 billion Oregon Treasurer’s Office, said the search for a replacement will begin “in earnest.” Schmitz’s decision, said Sinks, is “absolutely a loss (to Oregon) since he has been proven to be a very capable chief investment officer – look no further than the performance of Oregon’s portfolio since he has been in charge.”

At Oregon, Schmitz helped oversee one of the nation’s largest and most active private equity programs. Oregon PERS has a private equity target of 20 percent, and the portfolio is currently above target, at about 22 percent.

In Virginia, Diana Cantor, the chairwoman of VRS’s board, said in a statement, “board members look forward to working with (Schmitz) over the coming years to continue advancement of the VRS investment program and developing strategies that will maximize investment returns for the fund.” Virginia’s pension system has a 9 percent allocation to private equity.

Schmitz will manage a team of 45 investment professionals in Virginia, compared with 20 in Oregon. The reason for the difference, said Schmitz, is that Virginia manages more of its assets internally.

Regarding leaving Oregon, Schmitz said, “we’ve had a nice run, but it’s not going to hell once I leave. (Oregon) will continue to perform well.”