NEW YORK (HedgeWorld.com)– A recent survey by the Association of Investment Management and Research, Charlottesville, Va., and Russell Reynolds Associates Inc., New York, shows that the most highly compensated investment professionals are those employed by hedge funds.
Hedge fund professionals earn 69% more than their peers in total median compensation. Money managers who work for mutual funds, insurance, and investment counseling firms also are near the upper end of the earnings continuum, the survey showed, while compensation is lowest at banks, endowments, and pension consulting firms.
The survey also revealed across-the-board declines in investment professionals’ compensation during the current economic downturn. Base salaries have remained relatively constant, but incentive compensation declined 38%, with median cash bonuses falling from US$50,000 in 2001 to US$30,800 in 2003. In the case of hedge fund and mutual fund companies incentive compensation accounted for nearly half of the median total compensation.
“The economy has brought about a fundamental change in the way organizations approach incentive compensation,” said Debra Brown, a managing director in the investment management practice of Russell Reynolds. “These findings indicate that investment management professionals’ compensation is more closely tied to the overall success and profitability of the parent organization than ever before. While individual performance still matters, limited resources and a shrinking bonus pool are universally felt.”
The survey broke down the effects of the downturn according to job function, and revealed that professionals responsible for managing or analyzing assets on a global basis experienced the sharpest drop. Global equities securities analysts saw their median compensation decline 33%, from US$230,000 to US$155,000. Global equities portfolio managers saw a decline of 40%, the greatest single two-year drop in all job categories.
“While AIMR members continue to be well compensated, they–like their firms and like their clients–are feeling the ripple effects of a bear market reflected in their overall compensation,” said Raymond DeAngelo, vice president of AIMR, in a statement.
Experience, Sex, Region, Other Factors