CalSTRS is preparing to award a record-breaking $1.1 million bonus to its one of its top executives following the 27.2% investment return the pension funded recorded in 2020-21 financial year.

This proposed bonus, combined with with his pay of $590,000, would mark the highest compensation on record for CalSTRS Chief Investment Officer Christopher Ailman, according to a public pay database kept by the State Controller’s Office.

It also appears to be the first million dollar bonus at either of California’s two major statewide pension funds. Former CalPERS Chief Investment Office Yu Ben Meng earned about $850,000 in performance incentives in 2019.

It won’t be the last.

CalPERS has been considering offering pay incentives that would reward longevity in a chief investment officer. It adopted a plan this spring that would offer up to $2.8 million in salary and incentives for its next chief investment officer if that executive stays at least five years.

Ailman has led the investment office at the California State Teachers’ Retirement System since 2000, overseeing investment strategy for a fund that provides retirement benefits to about 975,000 people.

The California Public Employees’ Retirement System and CalSTRS award bonuses to their chief investment officers based on multi-year formulas. The formulas moderate their bonuses in big years like the past one, but also can yield substantial pay incentives in years when the pension funds miss their earnings targets.

Ailman last year earned $733,000 in performance incentives in addition to his pay that year of about $590,000, according to CalSTRS records.

CalSTRS in the 2019-20 financial year missed it investment return target. It achieved a 3.9% investment return that year, below its goal of 7%.

The Teachers’ Retirement Board is scheduled to vote on Ailman’s bonus at its meeting Friday. It’s also scheduled to award a performance incentive to recently retired CalSTRS Chief Executive Jack Ehnes, whose bonus is expected to be about $650,000.

According to a board report, the three-year returns on CalSTRS’ investments “outperformed their benchmark and contributed to the overall alpha of the the total fund.”

“Based on the board’s assessment of (Ailaman) personal performance, the (Ailman’s) 2020-21 total incentive award is calculated to be $1,103,094. This represents an award of 186.87 percent of the base salary of $590,292 for the2020-21 fiscal year,” according to the agenda item for the CalSTRS board’s Nov. 5 meeting, where the bonus will be voted on.

CalSTRS in July announced that it had earned record-breaking 27.2% return on its investments, propelled by a thriving stock market and private equity gains. That drove the value of the CalSTRS investment fund to $308.6 billion, up from $246 billion the year prior.

CalPERS, too, posted big returns on its investments last summer. It reported a 21.3% preliminary return on its investments for the fiscal year which ended in June.

This story was originally published November 1, 2021 at 5:00 AM.