Two papers on Savvy Investor set out 2015 compensation levels (salary and bonus) across a variety of front office and investment management roles in the US and UK. Between them, the two surveys cover portfolio manager salary levels and investment analyst salaries for both equity research and fixed income; not only traditional fund manager salary levels but also hedge fund salary expectations. The surveys incorporate both equity and fixed income analyst salaries and portfolio manager salary and bonus levels, as well as rewards for economists, strategists and multi-asset managers. A third survey covers private equity salary levels. All three papers can be downloaded via https://www.savvyinvestor.net/search/all-results?keywords=salary.
US Asset Manager Compensation Survey
“Asset Management Compensation: Second Choice No More” is a collaborative effort between Greenwich Associates and Johnson Associates. It explains how the asset management industry is growing into a far more attractive destination for financial professionals due to promising growth prospects and “attractive and stable pay” for new industry entrants as well as veterans. It also analyses why “sell-side” firms such as investment banks are losing out to “buy-side” firms such as hedge funds in the battle to attract and retain quality staff. One reason the authors cite is regulatory overbearance on the “sell-side” – a consequence of the financial crisis.
Across the asset management sector, the average asset manager salary is expected to increase at a rate of 3-3.5% in 2015, slower than the previous year’s 5-10% but still faster than the industry average. Hedge fund salary increases, on the other hand, have been less uniform and weaker than traditional peers. Overall, the recent investment performance of hedge funds has varied from fund to fund. At the close of 2014, this performance was projected to be flat on average with actual incentive pay ranging from around -5% to +5%.
Those professionals seeking to cross over from "sell-side" to “buy-side” roles, however are advised to be cautious. Buyside firms continue to keep a tight leash on compensation funding. They are being more diligent and aggressive in weeding out poor performers, increasingly developing talent internally and striving to remain lean in terms of workforce numbers.
A graph on page 5 of the document shows how the emphasis in compensation agreements amongst “buy-side” firms and their employees has gradually changed since the financial crisis in favour of long-term profit sharing schemes. Long term profit shares can now, for example, make up 18% of an equity portfolio manager's salary up by 4% in 2010. The same can be said for a fixed income trader whose salary can now be made up of 17% long term profit shares, up 9% in 2010.
UK Front Office and Asset Management Salaries
The second paper “Front Office Management and Asset Management: The Outlook for 2015” is by Michael Page the recruiter. It details important hiring trends and how asset management salaries have risen following the exodus of talent from the investment banks and other “sell-side” firms. 2015, it says, is set to be positive in terms of the hiring market and compensation levels will continue increasing though it will remain a candidate-driven market. Detecting the departure of important staff, some “sell-side” firms belatedly began to raise wages to better compete with “buy-side” firms. However the EU bonus cap coming into force will affect many of these institutions.
The Michael Page paper helpfully gives a breakdown of the salary outlook for different sections of the financial services industry – from corporate banking to distressed debt to M&A. It is incredibly useful because understanding the state of individual parts of the industry is vital for industry professionals wanting to know the salary trend within their own area. But it can also be helpful when considering a change in career.