Fund management bonuses set to bounce up

While many of London's investment bankers are busy spending their bonuses for 2005, Scotland's fund managers have several months still to go before payday. It should be worth the wait.

Recruiters say Scotland's major fund management employers, such as Scottish Widows Investment Partnership (SWIP), Britannic Asset Management, and Standard Life Investments, delay paying bonuses until March. Among the investment banks, only ABN Amro, UBS and SG Securities are similarly late in distributing payouts.

Scottish money managers do at least have something to look forward to. After a strong year, the general expectation is that bonuses will come in higher, perhaps even significantly so. "Scottish businesses have done well this year," says the head of HR at one Edinburgh-based fund manager. "Bonuses will obviously be better than last."

The recent performance of some of Scotland's listed fund managers is cause for optimism. Profits at Aberdeen Asset Management rose 70% in 2005, discounting any contribution from Deutsche Asset Management.

Funds under management at Standard Life Investments rose 3bn in the three months to September, and Lloyds TSB recently said SWIP had seen "significant" growth in unit trust and open-ended investment company sales this year.

One for you, two for me

However, headhunters warn against putting a deposit down on a Ferrari or flat in Edinburgh before confirming the size of bonus cheques: fund managers may have had a good year, but the takings will not be evenly distributed.

"Bonuses this year will be all about differentiation," says Kim Yates, co-head of the asset management practice at Principal Search. "Those who performed well will do better than in previous years. But there is a counterbalance that those who didn't deliver in terms of performance will not be paid."

A Scottish rival puts it a little more frankly: "There will be some very disappointed people this year. Pay is going to be increasingly polarised between those who did well and those who didn't."

Will Scotland's fund managers need to pay a premium to retain their staff in 2006? Richard Fletcher of Edinburgh headhunter Fletcher Jones, thinks they will: "There's more demand for people and more moving around. Employers will need to pay to keep hold of good staff."

Others disagree. According to the head of HR at one firm, the Scottish market is still awash with out-of-work money managers following Abbey National's decision to pull out its fund management business out of Glasgow in 2003.

"There's certainly no shortage of fund managers in Scotland," he says. "If there's any overheating, it's in the back office administrative areas."