America’s Most Lucrative Portfolio Management Jobs II’s second annual All-America Buy-Side Compensation report breaks down how much U.S. portfolio managers expect to earn this year. Amy Whyte November 08, 2018From All-America Buy-Side Compensation 2018 ranking hedge funds, of course. But employees at mutual funds and investment advisory firms reported sizable paychecks of their own inInstitutional Investor’s second annualAll-America Buy-Side Compensationsurvey. For instance, the average mutual fund portfolio manager expected to earn $1.37 million this year — just shy of the $1.42 million reported by their hedge fund counterparts. Last year, mutual fund portfolio managers said they earned $938,955 on average, all in. [IIDeep Dive: Here’s What Hedge Fund Managers Will Earn This Year] Among the best-paying firms were mutual funds managing between $10 billion and $30 billion. Portfolio managers in this category expected to earn an average of $1.59 million in total 2018 compensation, including $1.36 million in bonuses, options, and commissions. LDI Strategies for Managing the Risks You CAN Control [/paste:font] That same AUM bracket also proved the most lucrative in wealth management. Portfolio managers at these investment advisory firms earned an average of $1.13 million in total, with base pay of $480,716. Even in the lowest-paying AUM bracket — advisory firms running $500 million to $1 billion — portfolio managers reported total compensation of $448,311 on average. Overall, wealth management PMs anticipated $805,583 in total compensation for 2018, up from $527,163 last year. IIalso surveyed research analysts and investment professionals with dual roles as PMs and analysts. Outside of hedge funds, the best-paying jobs for buy-side analysts were at the largest mutual funds (defined as upwards of $75 billion). Analysts at such giants reported average income of $455,308, including $192,359 in base pay. Overall, the typical mutual fund analyst expected to make $388,675, up slightly from $382,907 last year. For analysts at investment advisory firms, meanwhile, total compensation averaged $308,967, down from $324,424 in 2017. Roughly 900 buy-side professionals from hedge funds, mutual funds, and investment advisory firms responded to the survey. https://www.institutionalinvestor.com/article/b1bqjg6550pbbj/America-s-Most-Lucrative-Portfolio-Management-Jobs?utm_medium=email&utm_campaign=The Essential II 11918&utm_content=The Essential II 11918 Version A CID_45e4b536a5da0163b512e9aeede35bb2&utm_source=CampaignMonitorEmail&utm_term=Americas Most Lucrative Portfolio Management Jobs
A fair question to ask is ... did these money managers make more money for their clients than they earn for themselves? This year is a bad year for the markets. If most of these money managers underperform cheaper passive benchmarks or even lose money, why do they deserve to earn so much above the national average? Are compensation structure for money managers fair to clients?
90% of PMs do not bet the S&P 500 index. So their bonuses must be hurdled with some lower benchmark. Still, being an analyst or PM is an intense job of reading, phone calls and even travels. Requires very high level of organization and energy. Base salaries of 300-400K are about the same as specialist doctors who do get weekends off, while PMs usually are still working or throwing efforts.
To be fair to clients, I don't think clients should pay analyst or PM well simply because they work very hard, sacrifice their weekends, travel a lot and expend lots of energy. If I am a patient and I have a doctor who works very hard but simply cannot cure me, I will be very unhappy if he charges me an arm and a leg for his useless treatment. Likewise, why should clients pay money managers well simply because they work hard? It is a failure of the free market when money managers who under-perform take so much of their clients' money.
Things like money, life, health etc. command good specialist service and thus payments. Ex: Airline Pilots with responsibility of 300 passengers. A plane is put on autopilot within minutes of takeoff and remains there until minutes of landing. Everyone can complain that Pilots get 200K for sitting around but if some emergency type situation happens then everyone prays for a human pilot to save them. Same as police, firefighters etc. Sit around but when need arises not many can do their jobs. PMs work is deeply intense to the point of madness. Many cases of investment guys jumping from the 15th floor to end it all. Today's technology only helps a little bit in research. So base salaries are justified IMHO. However, 20% bonuses or incentives given without beating the common indices are wrong. Btw, analysts making 200K in first year in top firms might only be after bonus etc. Base is more like 80-100-120K in top firms and you are a graduate of Top 20 program nationwide and might even have experience in some other field.
Investors should not interfere in determining or question on how much the PMs are being paid. If they think the PMs are being paid too much and taking a significant portion of their profits and could not outperform the index. They should pull the funds out and invest somewhere or invest themselves. No obligation.
That is how the free market works. For some reason, when it comes to salary for money managers, the free market fails to work. In other professions, most humans would have lost their jobs or have their wages severely depressed if they under-perform passive and cheaper machine algorithms. Don't see the same thing happening to money managers.
So you should ask the question why is this the case? There’s no cartel. There’s no government regulation inflating manager compensation. There’s no union. It’s about as free market as you can get. So why are they paid so well?