Bonuses Make Up a Quarter of Investment Executive Comp

October 19, 2007 ( - The 2007 CFA Institute Member Compensation Survey found compensation for U.S. investment professionals varies by occupation and years of experience, but bonuses generally account for more than 25% of total compensation for investment executives and buy-side professionals and more than half of compensation for sell-side research analysts, traders, and sales positions.

According to a press release on the survey results, the majority of respondents (72%) also reported they saw their total compensation increase from 2005 to 2006 and their cash bonuses were largely determined by individual performance.

Ninety percent of U.S. respondents were eligible for a cash bonus in 2006. Forty-six percent said their bonus is primarily tied to their individual performance, 27% said bonuses were tied to overall firm performance, and 22% said bonuses are driven by business unit/division performance, the release said. Less than half (42%) were awarded long-term incentives.

Globally, 91% of respondents, on average, were eligible for a bonus in 2006. 

At all levels of experience, U.S. portfolio managers (equities) reported a considerably higher median total compensation ($456,000) than respondents in other occupations, followed by investment bankers ($275,000), and sell-side research analysts ($195,000).  Buy-side research analysts’ (equity and fixed income) compensations fall in the middle of the range at all levels of experience.

The survey found the pattern for cash bonuses is affected by years of experience. There is little variability in median cash bonuses for those with less than five years of experience, however, the gap widens at five to 10 years of experience. At all levels of experience, portfolio managers (equities) ($200,000) and investment bankers ($185,000) reported cash bonuses that are more than double that for most other occupations.

At investment management firms, median total compensation for U.S. buy-side research analysts (fixed income) is $128,000 for those with less than five years of experience, versus $220,000 for analysts with five to 10 years of experience, and $285,000 for analysts with more than 10 years of experience, according to the survey results.

At 10 or more years of experience, U.S. respondents in all occupations included in the survey earned more at investment management firms than investment banks, commercial banks, and brokerage firms, except for portfolio managers (indexed/other), for whom median total compensation at 10 or more years of experience is comparable across the types of organizations.

The 2007 survey was conducted among the 11 countries with the greatest concentration of CFA Institute members: Australia, Canada, China, Germany, Hong Kong, Japan, Singapore, South Africa, Switzerland, the United Kingdom, and the United States. A total of 13,562 responses were usable, representing 18% of the CFA Institute membership in these countries.

The Summary Report for the survey is here .