Hedge Fund Surge Drives Up Risk Management Pay

NEW YORK (HedgeWorld.com)–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.