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If you were given the choice, which would you prefer: a large salary and a heavily deferred bonus? Or a much smaller salary and a far more immediate bonus.
These are the options on offer to anyone with the choice of working for an asset manager or an investment bank (equity analysts for example).
As we’ve said several times, some investment banks have deferred a high proportion of bonuses this year and increased salaries.
The same cannot be said of asset managers.
Base salaries at asset managers have stayed static
Much has been made of the pressure on independent fund houses to increase base salaries to compete with pay hikes at the captive asset management arms of investment banks.
They haven’t.
“We’ve surveyed 20 large investment houses, and pay has increased by an average of 4.8% this year,” says Richard Parkhouse, chief executive of asset management remuneration specialist PRPi Consulting. “The average annual asset management pay increase over five years is 3.8%. There are no dramatic increases in salaries currently.”
Similarly, new PwC research suggests asset managers have increased salaries by just 4%. Investment banks’ asset management arms, however, have been included in the sizable pay hikes.
But bonuses at asset managers have increased
While base salaries have stayed static at asset management firms, bonuses have increased. They’re up by an average of 20% this year, according to PRPi research.
Overall compensation costs are also on the up at bigger asset managers. Schroders, which saw AUM swell by nearly 50bn last year, increased remuneration by 23% (or 175k per head) and BlackRock spent an extra $166m on “incentive compensation” on the back of increased income.
Senior portfolio managers can earn salaries of between 140-160k, says Martin Lorigan, head of asset management at Principal Search, while CIOs should expect 175-200k. But bonuses can be anything from 100-400% of salary.
And the deferrals are tiny
Even better; because the majority of asset managers come under the ‘tier four’ category of financial institutions in the FSA’s remuneration code, they’re not required to enforce deferrals, clawbacks or other restrictions, suggests Jon Terry, head of the compensation practice at PwC.
In terms of pay, therefore, it’s largely business as usual.
“Deferrals for senior fund managers usually amount to 25% of bonus, but this has been common practice for some time and more down to retention value rather than regulatory demands,” he says. “We’re not seeing any fundamental shift in the pay practices of asset managers.”
Where salaries are on the rise in asset management is in sectors where demand is high across financial services – risk and compliance – suggest both Terry and Parkhouse.
If you search on jobs over 500k on this site, the results include:
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Credit Derivative Drafter
Credit Suisse
Competitive UK-London 20 May 11
Credit Derivative Drafter”
sounds like a deal!