What Crisis? Fund Management Bonuses Approach 2007 Peak

Fund managers' compensation is on the up, as hedge fund and investment banking incentives stagnate, say consultants.

Asset managers can look forward to a bump in bonuses and base salaries this year based largely on performance, according to consulting firm Greenwich Associates.

Based on a survey of more than 1,000 financial professionals, the firm projected a 5% to 10% increase in incentive compensation and a 3% to 5% raise in base salary for 2014. These estimates would put buy-side bonuses just 6% below 2007’s peak.

Furthermore, the report said equity managers are expected to out-earn their fixed income counterparts, thanks to the bull market and strong investment performance.

The firm calculated senior equity managers at an investment firm or mutual fund would make about $570,000 for 2014, compared to their fixed income manager peers’ $350,000. These figures are also slightly higher than last year’s, which remained at $530,000 and $340,000 respectively.

“These ongoing positive trends are making asset management more appealing as a career choice for financial professionals, relative to a sell side that is still plagued by reduced compensation on results, intense regulation, and somewhat diminished social status,” the firm said.

greenwich compensation 

Greenwich Associates said bonuses at investment and commercial banks were far from reaching the pre-crisis high, as they still lagged behind by more than 40%.

“The buy side looks particularly welcoming relative to a banking industry that still has not recovered fully from the global financial crisis,” the firms said. “By nearly every metric, the sell side is not what it once was as an employer.”

However, it’s not all good news for the buy side. 

While hedge funds pay their managers almost twice as much as traditional asset managers, their incentive compensation trails the pre-crisis peak by 35%, the firm said. Managers’ bonuses are also likely to flatten this year, largely due to disappointing performance, with both increases and decreases ranging from -5% to 5%.

“At the very least, [strong performing hedge funds] will be able to maintain incentive compensation at current levels,” the firm said. “Meanwhile, increasingly selective investors will continue to spurn funds that fail to deliver performance, and employees of these funds will see compensation continue to stagnate and even decline.”

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