Tue, Sep 21, 2021
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Compensation growth stalls in asset management, says new report from Greenwich Associates and Johnson Associates

Wednesday, November 18, 2015
Opalesque Industry Update - Pay levels in asset management in 2015 are projected to be slightly lower, according to a new report, Say Goodbye to Buy-Side Boom Times, from Greenwich Associates and Johnson Associates.

Across the industry, compensation levels are expected to decrease 5%. The uptick in market volatility will likely result in wider differentials in pay due to variation in incentive compensation pools. This would represent a dramatic shift for an industry that had, until recently, experienced strong asset growth and a steady demand for talent.

“Asset managers are facing difficult decisions about budgets,” says Greenwich Associates Analyst Kevin Kozlowski. “2016 will be a much tougher slog for managers—especially the biggest firms.”

Pay falls short of expectations
Buy-side compensation for 2014 was flat to just slightly higher than 2013 levels—falling short of market expectations for increases in the range of 5%-10%.

· U.S. Equity Portfolio Managers Total average annual compensation was fairly flat from 2013-2014, ending at approximately $690,000. Mix of pay was also essentially unchanged over the past 12 months, with an average $460,000 or 65% taking the form of bonus and the remaining 35% as salary.
· U.S. Fixed-Income Portfolio Managers Compensation held firm from year-to-year at levels not seen since 2005. Total annual pay averaged $504,000 in 2014, with almost 60% coming from bonus.
· U.S. Buy-Side Fixed-Income Traders Total annual compensation increased again to approximately $325,000 in 2014 with slightly more than half of 2014 pay from bonus.
· U.S. Buy-Side Equity Traders Head equity traders saw a steady appreciation in compensation from 2011 to 2014. This aligns well with previous estimates for investment management while equity traders have seen a modest decrease in compensation since 2012.

“Portfolio managers and buy-side traders have been paid well during the good times, with many professionals experiencing several years of steady compensation increases,” says Johnson Associates Managing Director Francine McKenzie. “As performance lags and asset growth slows, we do not expect firms to alter compensation structures to deliver increases or even maintain current levels.”

Hedge funds vs. traditional managers: The pendulum swings
Hedge fund compensation could be better moving forward as return-hungry investors direct assets to alternative products. However, compensation among hedge fund professionals will vary dramatically, with pay skewed toward firms that have produced strong investment returns, and within those firms, to the teams specifically responsible for generating that performance.

In the recent past, hedge funds and traditional asset management firms have been on opposite trajectories, with traditional firms closing the historic gap in pay. Looking ahead, Greenwich Associates and Johnson Associates expect the dynamic between hedge funds and traditional firms to swing in the opposite direction.

An increase in market volatility should create alpha-generating opportunities for hedge funds that will appeal to investors struggling to earn attractive returns and diversify portfolios. These positive factors will provide support for hedge fund compensation. As pay levels at traditional management firms are held back by an increasingly challenging market environment, the compensation gap could begin to widen once again.

Press release

www.greenwich.com

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. PE/VC: Private equity GPs, LPs alike working on diversity and inclusion, Chinese regulator vows to crack down on private equity, venture capital funds, The VC playbook for portfolio companies: learning from the Covid-19 crisis[more]

    Private equity GPs, LPs alike working on diversity and inclusion From PIonline.com: Private equity general partners and limited partners are doing more to increase diversity in private markets, according to a report released Tuesday by the Institutional Limited Partners Association.

  2. PE/VC: Private equity continues to lead fund closings, Venture capital firms are fighting to throw money at cleantech[more]

    Private equity continues to lead fund closings From PIonline.com: Among private fund closings, private equity funds have led the pack starting in 2011, based on data collected by Pensions & Investments. During those years, private equity's share has ranged from 56% to 72% of the total

  3. PE/VC: Climate tech is hot, but VCs can't forget about water, Five top trusts to tap into the private equity boom[more]

    Climate tech is hot, but VCs can't forget about water From Crunch Base: "It is unequivocal that human influence has warmed the atmosphere, oceans, and land." These fiery words come from the latest landmark U.N. report detailing intensifying, universal climate change impacts. They cover

  4. New Launches: H.I.G. closes first European buyout fund at $2.4bn, Cheyne Capital raises another $1.18bn credit fund to invest in struggling European companies, Falfurrias Capital Partners raises $850m in oversubscribed fund, Alan Howard-backed 10T raises $750m for debut crypto fund, Crayhill Capital strikes $820m hard cap close for second credit-focused fundraise, Edmond de Rothschild's Eres IV eyes second close in H1 2022, Revaia closes Europe's largest female-founded VC fund, Octopus unveils UK Future Generations sustainable fund, TrueBridge Capital Partners closes seed & micro-VC fund I, at $170m, Federated Hermes launches low-carbon bond fund with Swedish partner[more]

    H.I.G. closes first European buyout fund at $2.4bn From PIonline.com: H.I.G. Capital closed its first European middle-market buyout fund, the H.I.G. Europe Middle Market LBO Fund, at €2 billion ($2.4 billion), a news release shows. The fund targets middle-market companies prim

  5. U.S.: Peter Thiel gamed Silicon Valley, Donald Trump, and democracy to make billions, tax-free[more]

    From Bloomberg: The meeting started with a thank-you. President-elect Donald Trump was planted at a long table on the 25th floor of his Manhattan tower. Trump sat dead center, per custom, and, also per custom, looked deeply satisfied with himself. He was joined by his usual coterie of lackeys