Asset Manager Pay Increases
Friday, November 04, 2011

Competition for asset managers has seen remuneration increase for a second successive year as pressures to attract and retain talent return, according to a new report by PwC.

PwC’s annual asset management report shows that asset manager remuneration increased by an average 18% over the last year and company salary bills increased by an average of 4%.

However, the report shows that, compared with 2010, compensation as a percentage of net revenues and bonus costs as a percentage of pre-bonus operating profit have remained fairly constant. This year’s average compensation as a percentage of net revenues was 42% (the same as in the 2010 survey) and bonus costs as a percentage of pre-bonus operating profit were 34% (38% in 2010 survey).

Tim Wright, remuneration director at PwC commented:

“Asset manager pay has increased for the second year in a row although this is underpinned by improvements in profitability. Increases haven’t been across the board. There is noticeable differentiation this year with fund managers benefiting more than sales staff."

“This reflects pressure in the markets; fund managers have performed to protect and grow the investments they have, exactly what they’re measured against, but market uncertainty resulted in pockets of poor sales activity which affected sales related incentives. It’s been tough to bring new assets through the door and the focus was on retaining existing money, trying to stem the tide."

“The recent financial market volatility also means companies will face a headache at the end of the year. Many fund managers have delivered investment performance in 2011 but market turmoil is going hit many companies’ bottom line, putting them in a tricky position with remuneration.”

However, the report also highlights worries firms have about the EU Capital Requirements Directive (CRD III) pay regulations, which appears to be having practical implications for European-headquartered asset managers. The study found that 85% of these asset managers are concerned about the new rules and report difficulties competing for investment professionals in growing markets.

Wright added:

“Companies are expanding in Asia more than anywhere else. Regulation for local firms there is currently less onerous but companies based in Europe are restricted in how they can reward their people in these markets. They’re concerned it will prevent them from competing and will challenge their expansion. This concern is magnified as asset managers continue to fear the worst from upcoming EU regulations which have the potential to further restrict pay practices in the sector.”

“Increased regulatory hoops are also slowing down the recruitment process. One respondent described the impact of the regulation as ‘fighting with one hand behind our backs'.”