Take-home pay for investment professionals is rising faster in Asia than in the US, although total compensation still lags considerably, according to research firm Greenwich Associates and compensation consultancy Johnson Associates.
According to Greenwich research, total compensation in Asia is up 8% on average for fixed income professionals this year and 10% for equities investors. In most cases the range of increase was between 5% and 15%.
US remuneration levels for traditional asset management firms in 2011 were forecast to be flat to 5% up on the fixed income side and flat to 5% down on the equities side.
Within the hedge fund universe, pay was expected to vary widely this year based on company performance.
These expectations are substantially more bullish than those for the banking sector, for which year-on-year compensation was projected to fall by as much as 30% or possibly more.
Asset management industry earnings figures for 2010 provided to AsianInvestor show that fixed income professionals in Asia earned 40-45% as much as their US counterparts, while equities staff earned 55-60%.
The figures for 2011 are yet to be finalised, but Abhi Shroff, Singapore-based consultant at Greenwich Associates, suggests professionals in Asia are catching up, albeit slowly.
Equities portfolio managers are still paid a premium over their fixed income counterparts: last year the former earned 2.4 times more than the latter on average, while equities traders earned 1.4 times more than fixed income traders. Interestingly, however, a fixed income head trader earned 1.5 times more than an equities head trader.
Shroff says asset management compensation structures globally are shifting away from bonuses in favour of annual salary. But that trend is less pronounced on the buy side than the sell side, where firms have come under greater pressure from regulators, he adds.
“In terms of moving to bigger bases, we have certainly seen that globally,” says Shroff. “The other thing we have seen is moving from a very formulaic compensation model to a mix of discretionary and formulaic.”
In Asia, compensation for many asset managers at non-Asian firms is still determined at headquarters, he notes, whereas in other industries a lot of packages are now being localised. This means compensation packages are not that different in the region, although Shroff says firms often pay a premium for senior staff in Asia relative to other markets.
“In Asia, especially in asset management, [pay] is determined more by demand and supply, and demand for asset managers on both the investments and sales sides is higher than supply," he says. "That drives up compensation, especially at senior levels.”
The biggest challenge for asset managers in the region is finding senior talent with relevant experience, says Shroff. However, hiring in Asia is steady in the asset management industry, unlike the boom and bust of banking, with most of it organic growth. The larger asset managers, he estimates, are adding between one and four sales and client-servicing staff a year, on average.
Hiring has been heavier for fixed income investment staff in the past year or so, with international fixed income mandates having grown in size. But in general they will still earn less than their equities counterparts, whose role is more active.
In terms of compensation for sales staff, Shroff says Asia compares well to the US and in some cases pay is higher, with guaranteed bonuses up front.
“If you are joining an international asset manager with a relatively small presence in Asia, you know it is going to take one to three years before you start to win any substantial business,” he adds. “So an experienced professional will want some kind of security upfront in terms of a bonus.”
The 2010 figures put an Asian fixed income portfolio manager’s earnings at an average of $192,000 (base of $97,000, bonus of $95,000). Meanwhile, fixed income head traders in Asia earned $380,000 per annum (base $99,000 and bonus $281,000), and fixed income traders $122,000 (base $61,000, bonus $61,000).
On the equities side in Asia, a portfolio manager averaged $455,000 (base $212,000, bonus $243,000); an equities head trader $256,000 (base $124,000, bonus $132,000); and an equities trader $176,000 (base $108,000, bonus $68,000).
Further, a director of research earned $475,000 (base $206,000, bonus $269,000), and an analyst picked up $286,000 (base $129,000, bonus $157,000).
On the hedge fund side, an equity professional took home $555,000 (base $175,000, bonus $380,000), while a fixed income colleague earned $1.09 million (base $239,000, bonus $849,000).
For its study of US asset management, Greenwich Associates and Johnson Associates interviewed more than 1,000 professionals at investment management firms, mutual funds, hedge funds, banks, insurance companies, government agencies and pension and endowments.