UT System Regents Approve New UTIMCO Compensation Plan
AUSTIN – The University of Texas System Board of Regents today (Aug. 20) authorized a new compensation plan for The University of Texas Investment Management Co. (UTIMCO) employees that would limit incentive payments in times of extraordinary market conditions.
All investment return calculations will continue to be based on trailing three year results. With the new plan, up to 50 percent of incentive pay earned by UTIMCO senior staff would be deferred for three years (up from the current 30 percent). The deferred amounts would then increase or decrease according to the endowments’ investment performance.
To deal with extraordinary circumstances, if losses equal or exceed 5 percent at the end of the year earned incentive compensation would be decreased to the point where if losses exceeded 14 percent they would be eliminated altogether. Conversely, if endowments gain 20 percent or more at the end of the year earned incentive compensation would be increased up to a maximum of double.
Furthermore, if the endowments post any loss whatsoever at the end of the year, the portion not already deferred for three years would be deferred for one year, and would increase or decrease based on the endowments’ performance over that period.
Finally, if the endowments lose 10 percent or more after the compensation period has ended, but before payment calculations are finalized, incentive compensation based on the trailing three-year period, the portion not already deferred for three years would be deferred for one year.
The changes were proposed as part of a regular review of UTIMCO compensation practices and were supported by national consultants who specialize in compensation and investment matters. The UTIMCO Board engaged Mercer as its compensation consultant, and the UT System Board of Regents hired Buck Consultants to provide an opinion as to the appropriateness and reasonableness of the plan.
“These changes came about after a very thoughtful and deliberate review process, and the new plan incorporates what we believe is an insightful, innovative and fair approach to incentive compensation – one that clearly works in the best interests of the organization while also recognizing the inherent unpredictability of the markets,” said Regents’ Vice Chairman Paul Foster, who also is a member of the UTIMCO Board of Directors.
UTIMCO is a 501(c)(3) investment management corporation whose sole purpose is the management of investment assets under the fiduciary care of the Board of Regents of The University of Texas System. Created in March 1996, UTIMCO is the first external investment corporation formed by a public university system in the nation. It invests endowment and operating funds currently valued at about $19.2 billion.
About The University of Texas System
The University of Texas System is one of the nation’s largest higher education systems, with nine academic campuses and six health institutions. The UT System has an annual operating budget of $11.9 billion (FY 2010) including $2.5 billion in sponsored programs funded by federal, state, local and private sources. Student enrollment exceeded 195,000 in the 2008 academic year. The UT System confers more than one-third of the state's undergraduate degrees and educates nearly three-fourths of the state's healthcare professionals annually. With more than 84,000 employees, the UT System is one of the largest employers in the state.