Mutual Fund Managers' Pay Continues To Soar

by Philip Morton, Investors offshore.com

11 June 2001

According to a recent survey conducted by Russell Reynolds Associates and the Association for Investment Management and Research (AIMR), pay levels for mutual fund managers are expected to be up 35% compared to two years ago. Compensation levels and methods for fund managers have been under a great deal of scrutiny of late, and given the recent hit that many stock-focused mutual funds have taken, this announcement may come as something of a surprise to mutual fund investors.

The data, gathered from over 10,000 AIMR members in the United Kingdom, the US, Canada, Hong Kong, and Singapore, showed that the median US stock portfolio manager working at a mutual fund company can expect to be making a total of around $436,500 this year, compared with $322,500 in 1999. However, the survey also noted that there were significant differences in compensation levels by country, and that although members in the United Kingdom and the States out-earned their peers by a wide margin, those surveyed in Canada and Singapore reported median compensation levels that trailed their counterparts in other countries.

Richard Lannamann, global head of the investment management practice at Russell Reynolds observed that the growing gap between mutual fund managers and money managers at other financial services funds such as banks and insurance companies was particularly noticeable, and said of the results: 'I am struck by what an attractive profession this is from a compensation standpoint.'

However, there is (apparently) a logic behind the persistent pay increases. 'Investment firms want the best talent at the helm,' explains James A.C. Kennedy, head of the equity division at T. Rowe Price 'so we'll continue to pay extremely generously those people who earn the money.' Another factor which can influence compensation levels is the length of the fund manager's tenure; given the recent adverse publicity about under-tenured skippers, many fund companies are anxious to hold onto managers with long track records, even if they have had a bad year.

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