Star fund managers sparkling

Asset management stars are radiant (and earning more money than ever), but it's just a cyclical aberration, says one headhunter.

"There's been a polarisation in pay for big names and not such big names," says Peter Harrison, chairman of hedge fund firm MPC Investors. "Unless you're starting with an experienced portfolio manager, it's difficult to launch a fund these days."

Harrison should know. He's trying to grow MPC's funds under management from a current US$1.4bn to a target of US$10bn. Two or three big-name fund manager hires are on the cards, plus related juniors.

A salary survey by Russell Reynolds reported in the Financial Times last week, suggested base salaries for senior investment professionals typically range from 120k to 200k , with bonuses from 150k to 600k and up.

Harrison tells us the star players he's seducing are looking for more than just hefty pay packages. All eyes are now on the potential to earn long term money via an ownership stake in the company. "It's about equity participation and generational wealth rather than an additional 50K to 100k a year."

Why are stars so alluring? Harrison highlights funds of funds, which he says have become less willing to take a risk on unknown managers. It's also down to improved techniques for differentiating alpha (portfolio appreciation due to star managers' skill) from beta (less skill-indebted appreciation due to an upwards drift in the market).

But one headhunter says stars' ascendancy is a cyclical affair. "The star mentality comes out in a buoyant market," says Rebecca Austin, head of asset management at search firm Veni Group. In a bear market, she says, stars are seen as culturally undesirable and emphasis tends to be on the team. But in a bull market, worshipping stars becomes de rigueur, "It's considered more acceptable."

Shine now, or forever regret it.