How much am I worth? Investment risk analyst, hedge fund

A panel of specialist headhunters give their assessment of typical London pay packages: investment risk analyst, hedge fund: salary - 50,000-70,000 for two to four years experience, bonus 50%-100%

For cinemagoers, The Matrix was a muddled and overrated sci-fi film, with Keanu Reeves trying to save the world from hundreds of stick-wielding Hugo Weavings.

For the typical investment risk analyst the matrix with which they must grapple every day is an equally complex but ultimately far more rewarding beast - it is the basis on which their risk analysis is predicated, so they can assess their fund's exposure to sectors or specific stocks.

Duncan MacKay, head of hedge fund services at Penna Consulting, said: "The risk analyst must check that everything is within limits, that things are not veering too much one way or the other. He or she must deal with complex calculations that can help make or break a fund's performance."

The good news for hedge fund investment risk analysts is that they are increasingly in demand. Any fund worth its salt is going to have at least one - the larger ones have several - especially after some widely publicised blow-ups in recent years, in which funds that were not properly assessing their levels of exposure suffered large losses.

MacKay said a typical analyst starting out will have a very good numerical degree - math ideally - with many also boasting PhDs. Typical salaries are around 50,000, rising to around 80,000 after four years or so; bonuses are very performance-related, with payments above 100% possible in a good year for analyst and fund.

Richard Fraser of RJF Global Search said that those with over five years of experience can look forward to above-100% bonuses plus some equity.

So aside from having a good head for numbers, what other attributes should the investment risk analyst have? Fraser stresses the need for extensive cross product knowledge and a very good understanding of risk, to be skilled in the risk-monitoring of foreign exchange, bond, credit, equity, derivatives and treasury products as well as other hedge funds.

'He or she will be producing daily and weekly reports, daily market risk calculations and analysis; they will be monitoring investment trading limits, breaking down daily/weekly/monthly changes in positions and producing market data assessing the impact on the risk profile of the hedge fund,' he says, adding that liasing with traders/fund managers and providing on the spot valuation analysis is also part of the risk analysts' day.

All of which makes him or her a very valuable individual. After the last few bumpy years, with an underperforming equity market pushing fund managers to consider ever more risky ways to boost returns, risk analysts are absolutely key.

'The reports they produce - algorithmic data etc - may seem dull stuff to you or me but it is essential to the institutional or pension fund managers who are investing millions and want reassurance they are doing the right thing,' said MacKay.

He and Fraser agreed that the future is bright for risk analysts in hedge funds. Market volatility is increasing but the desire to secure higher returns from investment has never been higher - this means taking bigger risks and making greater use of hedge funds as a part of that.

'In the current increasingly volatile environment, I anticipate continuous and growing demand for investment analysts,' Fraser predicted.

Which suggests that the risk analysts' matrix may have a longer life than The Matrix series endured by moviegoers.

Pay estimates and commentary by RJF Global Search and Penna Consulting