Portfolio Manager Pay Down 30%

November 12, 2001(PLANSPONSOR.com) -In 2001 investment managers, operating in a market which has lost 20% of its value this year, will see a 30% contraction in pay compared to last year, a new study by Russell Reynolds shows.

The study, based on data collected by the firm?s worldwide recruiters, showed that as revenues and profits shrink in an environment of falling demand and market weakness, bonuses are expected to shrink from their previously high levels.

According to a previous study by the recruiter and the Association for Investment Management and Research, completed in the second quarter of 2000, the median total compensation for an equity portfolio manager at a US mutual fund firm was expected to be $436,500 this year, up 35% from 1999, when the market was still strong.

Fixed-income managers were expected to take home $330,000, up 25% from 1999.

According to the new study, compensation for hedge fund managers will be down significantly. Managers who made tens of millions of dollars in incentive fees during the bull market may take home salaries of “just” several hundred thousand dollars this year.

Although hedge funds were up 2% on average in the first nine months of the year – average returns are at five-year industry lows.

Fixed income products, boosted this year as investors switched from equity to debt, have risen by an average of 5.42% in the last five years, outperforming equity portfolios, which increased by 4.98%.

While hard times have hit Wall Street, the $6.7 trillion mutual fund industry has seen few layoffs, even though it has suffered its worst showing in 27 years.

– Camilla Klein                   editors@plansponsor.com