Asset Managers Achieve Hefty Paychecks in 2010

(November 16, 2010) — Despite uncertainty about the market’s direction and the strength of the global recovery that have lowered expectations for compensation growth in 2010, US asset managers are again expected to rank in generous paychecks.

The report of compensation benchmarks by Greenwich Associates and Johnson Associates showed that although the global market crisis reduced average compensation levels throughout the asset management industry, compensation is rebounding after two difficult years. According to the report, the average compensation for senior hedge fund managers focused on fixed income has rebounded from the lows of the financial crisis to record levels. The findings pegged projected average total compensation for senior fixed-income professionals at hedge funds at $1.1 million, with investment professionals at hedge funds experiencing by far the largest declines. “Hedge fund equity professionals in 2010 are earning about half what they took home in the boom days of 2007 — and less than their counterparts at traditional asset management organizations,” Greenwich Associates’ Director of Institutional Marketing Jennifer Litwin said in a statement.

Meanwhile, the study showed that equity and fixed-income professionals at traditional asset management firms have experienced far less volatility in compensation levels. For example, average compensation levels among senior fixed-income professionals at traditional funds and advisors declined by about 5% between 2007 and 2008 and then jumped 53% from 2008 to 2009. Those levels are projected to increase to $525,000 in 2010.

“For many firms, managing expectations and communication will be key,” said Francine McKenzie, managing director at Johnson Associates. “Given the strength of performance in the first two quarters and without factoring in the slowdown in the second half, many investment professionals may be expecting more than a 10% increase.”

The study also looked into pay differences by job title: The average 2009 total compensation for chief investment officers in equities was approximately $1.8 million, compared to $825,000 for equity portfolio managers, $540,000 for directors of research and $320,000 for analysts. In fixed income, CIOs earned approximately $850,000 on average compared to a range of $340,000 to $525,000 for other investment professionals.

“Despite what we’ve been through, the asset managers are doing better than expected,” Litwin told Investment News. “The fact is you need to pay to keep your talent.”