Investment Professional Compensation on the Rebound

May 6, 2005 ( - Overall 2005 median total compensation for US money managers has jumped 17% since 2003 with a modest 3% base salary hike along with a more substantial 17% leap in bonuses, according to a new industry survey.

The results, released Friday by CFA Institute and Russell Reynolds Associates, show that senior investment professionals have seen even more accelerated growth rates in compensation for professionals with 10 or more years of experience rising by 20% (from $200,000 in 2003 to $240,000 in 2005). The top 10% of earners in this group bring in more than $750,000 annually, the survey said.

The 2005 study found that employers are willing to pay more for money managers with the Chartered Financial Analyst (CFA) designation. Among those with 10 years experience or more, those with the CFA designation out-earn their peers without the designation by 24%, according to the survey. The gap is even wider among all respondents, regardless of levels of experience; those with the CFA designation report compensation levels 54% higher than those without it ($180,000 vs. $116,850).

As for the value of the CFA designation compared to an MBA, the study shows that for professionals with 10 years experience or more, those with the CFA designation out-earn those with only an MBA by 18% (median of $236,510 vs. $200,000).

Survey findings indicated varying compensation practices according to the type and scale of employer. As with 2003, those professionals employed by hedge funds and mutual fund management firms out-earned their investment peers by wide margins. Those employed by hedge funds, in particular, earned 47% more than overall median compensation. While that still represents a sizeable gap, it is notably less than the 69% margin such hedge fund professionals earned in 2003.

The survey revealed a rise in compensation across almost all investment sectors and functions. Investment professionals responsible for operational, international and fixed income functions reported the sharpest increase in compensation. Chief Operating/Administrative Officers, in particular, saw their median compensation increase by 60%, from $200,000 in 2003 to $320,500 in 2005 – the greatest single increase among all job categories.

Equity Manager Growth Rates

There was also a sizeable year-over-year growth of portfolio managers of domestic equities employed by mutual funds. Mirroring NASDAQ growth rates, compensation for these stock mutual-fund managers grew by 48% (from $310,000 in 2003 to $460,000 in 2005).

Other compensation gaps remained noteworthy, particularly as they relate to gender-based pay. Overall pay inequity decreased from a gender gap of 15% in 2003 to 13% in 2005. Continuing a trend that surfaced in 2003, compensation gaps shrank as tenure grew. The trend was even more pronounced in 2005, as the gap between male and female investment professionals who have worked in the industry for over 20 years more than halved, from 13% to just 6%, the survey found.

The results of the 2005 Investment Management Compensation Survey are based on survey responses from more than 16,000 CFA Institute members (10,655 in the US), compiled by Harris Interactive. Surveys were conducted during February and March 2005.

These findings are part of the 2005 Investment Management Compensation Survey, an extensive global survey of investment professionals conducted jointly by the CFA Institute and global executive recruiting and assessment firm Russell Reynolds Associates. The survey examines the compensation of portfolio managers, securities analysts, pension officers and other senior-level investment professionals at investment management and financial service organizations. The 2005 survey compares compensation data with 1999, 2001 and 2003 studies.

An executive summary of the latest survey results is here .