4.6 Staffing the NIIF

The compensation structures adopted by public capital SIFs—as quasi–public sector entities—are not always aligned with market terms, impeding their ability to compete aggressively for talent. Public capital SIFs are frequently subject to restrictions on compensation.43 This inflexibility can lead to suboptimal performance, as indicated, for instance, by research showing that top-performing public pension funds base executive salary on market compensation rather than on government salaries (Bachher, Dixon, and Monk 2016). Whereas noncompetitive benefits will fail to attract qualified management and staff, generous benefits may be both politically and legally unviable and may skew public opinion against the SIF. As nongovernment entities, mixed capital SIFs with nongovernment sponsors tend to have more flexible compensation structures than public capital SIFs, so they can more easily attract qualified professionals. If a SIF uses industry compensation structures, its size affects its management fees (since compensation is a fixed percentage of total assets under management) and, in turn, its ability to attract top talent.

Public capital SIFs nevertheless do attract talent because of the perceived prestige and benefits of working with a sovereign fund. ISIF, for instance, has limited annual employee turnover, standing at 14 percent as of December 31, 2018. Many SIFs have attracted qualified management and staff despite offering below-market levels of compensation. Working with SIFs can offer perquisites: doing so provides professional visibility and access to both public and private sector networks and can be a valuable learning ground for young professionals seeking to gain investment and development experience. Meanwhile, more senior executives, and particularly diaspora members, may wish to leverage their skill sets and background to benefit their country’s development or for broader economic impact.

Notwithstanding the limitations faced by public capital SIFs in offering compensation packages above public sector salary levels, such funds often have room for some performance incentives. SIFs commonly use performance-based pay, with bonuses linked to results, to enhance the commercial focus of managers and staff. For example, NSIA’s compensation program is 10 percent performance based. Its overall remuneration structure is reviewed and approved annually by the board’s Compensation Committee on the basis of market dynamics, with a view to be on par with the top quartile of the benchmark peer group (see NSIA

BOX 4.6

Staffing the NIIF

The National Investment and Infrastructure Fund’s (NIIF’s) staff includes 45 investment professionals with both international and local backgrounds in infrastructure investment and operations.

International experience for staff and managers of NIIF include the International Finance Corporation, the investment firm Actis, investment banks HSBC and Macquarie, professional services firms KPMG and Grant Thornton, and Khazanah Nasional Berhad. Domestic experience at NIIF includes the State Bank of India, investment firm HDFC Equity, the investment bank IDFC, and the industrial conglomerate Tata Group.

NIIF’s chief executive officer and executive directors have more than 25 years each of experience. For staff, experience ranges from a minimum of typically 4 years for analysts, to over 18 years for senior principals.

Sources: NIIF management; World Bank case study (see appendix A).