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Portfolio > Alternative Investments > Hedge Funds

Hedge Fund Surge Drives Up Risk Management Pay

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NEW YORK (–The rising tide of hedge funds has lifted the compensation boats of those in the risk management industry.

According to a new survey by the executive search firm Risk Talent Associates LLC, total compensation for risk professionals grew by 9% in 2004 as compared with 2003 figures. Overall, the survey showed the average compensation in 2004 was US$374,006, up from US$340,075 in 2003.

In the survey’s executive summary, Risk Talent Associates officials singled out hedge funds as a reason for the boost in pay.

“Although hedge funds were not a part of the present survey, the rise of these funds has had a significant impact on capital markets risk compensation,” according to the survey summary’s authors. “As hedge funds mature and require both leading-edge risk management tools and supervision, they recruit from the top risk talent pool in capital markets, thereby increasing overall compensation.”

The email survey of 300 risk professionals showed that chief risk officers made the most in terms of total compensation–US$886,413 on average in 2004. That compares with US$802,357 in 2003. Of that, roughly US$255,556 was paid in straight salary in 2004, with average additional compensation of US$262,429 in cash bonuses and US$368,429 in non-cash bonuses, including stock and options.

Chief risk officers saw their average total compensation increase only 4% from 2003 to 2004. Vice presidents, on the other hand, increased their total compensation by 33% to US$273,300 while senior vice presidents/managing directors saw their average compensation jump 30% to US$378,755.

Risk professionals with between zero and six years experience stood to make, on average, US$212,282 in 2004, up from US$171,824 in 2003. Those with between seven and 15 years’ experience saw their average total compensation rise 39% to US$298,146 in 2004, while veterans with 16 or more years in the industry saw their pay jump 37% to US$487,766.

Risk professionals in New York and elsewhere in the Northeast made more than their counterparts in other areas, according to the survey.

Another Risk Talent Associates survey–this one on asset managers–will include information specific to hedge funds.

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Contact Bob Keane with questions or comments at: [email protected].


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