Buy Side is Doing Just Fine, Thanks

The asset management industry is enjoying a "very, very good" 2007, which bodes well for pay, says a compensation expert at Aon Corp.

Most large publicly traded asset management firms reported revenue up 15 - 20 percent for the first nine months of 2007 compared with a year earlier, according to charts presented by Aon to the New York Society of Security Analysts last Friday.

"Yes, the picture on the sell-side is different," said Aon's presenter, who asked not to be named by the media. "For publicly traded asset management firms, 2007 is shaping up as a very, very good year."

Taking the S&P 500 stock index as a primitive proxy for industry-wide assets under management, he said the average market value over 2007 is 12 percent above the same period last year. Since fees are based on daily average asset balances, the implication is that asset managers' aggregate fee revenue has been lifted 12 percent this year due to market appreciation alone, excluding revenue from newly gathered assets.

The NYSSA session was devoted to the results of this year's CFA Institute member compensation survey, released in October. As CFA Institute's contractor, Chicago-based Aon was heavily involved in creating, carrying out and interpreting the survey that included responses from some 13,500 members around the world.

Charting New York Area's Pay Advantage

The survey findings document the well-known fact that compensation packages for all levels of investment professionals are larger in New York than in the U.S. as a whole. For example, sell-side research analysts (primarily equity) with under five years' experience earn a similar median salary. However, due to bigger bonuses, the median total compensation was $185,000 in New York versus $150,000 for the full U.S., inclusive of New York.

Among portfolio managers, the gap was wider. New York portfolio managers with less than five years' experience enjoyed a median salary of $110,000 and total compensation of $170,000. For the entire U.S., the comparable figures were $85,000 and $115,000. In the five to 10 years' experience range, the New York medians were $130,000 salary and $248,000 total comp. That compares with a national salary median of $120,000 and total comp of $174,000. New York's pay advantage really stood out among the most experienced fund managers: $194,000 median salary and $511,000 total compensation, versus $150,000 salary and $245,000 total for the nation as a whole.

New York also topped compensation for other roles covered by the CFAI survey, such as buy-side research analysts and consultants.

New York even outpaced London in the CFAI data - a seeming anomaly, since recruiters say London pay well exceeds New York for comparable jobs. Part of the explanation is currency - the survey comparisons were based on average 2006 foreign-exchange rates of $1.84 per pound sterling. "If we do spot rates now, London is clearly the highest paid," Aon's representative said. Sterling now stands around $2.05, some 12 percent above last year's average.