New York / June 8, 2006 – A new professional compensation survey by Risk Talent Associates, a leading risk management executive search firm, reports that risk managers in asset management took home an average of 18% more in compensation in 2005, as compared to 2004. Cash and non-cash bonuses (including stock and options) were the major contributors behind this growth, increasing 20% and 30% respectively. The survey was conducted across risk professionals in alternative investments, traditional asset management and insurance.
Salary ranges were relatively even across all sectors surveyed but total compensation, driven by large bonus packages, was substantially higher at alternative investment firms (hedge funds and funds of funds). The difference, Risk Talent Associates explains, is that alternative investment firms are drawing top risk managers away from traditional investment banks and are paying more to do so. One-third of survey respondents reported changing jobs within the last two years, the majority from investment and commercial banking.
According to Michael Woodrow, President of Risk Talent Associates, “Hedge funds continue to draw talent from the sell-side investment banks. As risk managers make this move from traditional financial services firms to the newer alternative asset managers, they look for a step up in compensation to offset the career risk of moving to a less established firm.” Looking ahead, he advises, “We noticed, however, that capital markets’ firms are paying bigger compensation packages themselves to risk professionals so hedge funds will need to dig a bit deeper into their pockets in 2006 to attract or retain top talent.”
Not to be outdone, traditional asset managers also value strong risk managers. “While alternative asset firms tend to get the most press, asset managers such as BGI and BlackRock continue to add talent and upgrade their analytics and risk management capabilities to remain ‘best of class’,” says Woodrow.
In a developing trend, more and more risk professionals reported high cash and non-cash bonuses earlier in the careers. Risk Talent Associates argues that for the past several years, hedge fund founders’ have been distributing risk management responsibilities to chief risk officers, group heads of risk or managing directors to keep pace with changing business requirements. “Now, these risk professionals are building out their teams. During the next few years, with many new hedge funds opening, existing firms becoming more established, and assets under management hitting all-time highs, the market for risk professionals is, and will continue to be, very tight,” explains Woodrow. “The brightest risk managers are being signed quicker than normal to more senior positions where their exceptional quantitative, trading, risk management and business skills add great value.”
Risk Talent Associates also will publish compensation surveys in 2006 for risk professionals in financial compliance, as well as the energy, consulting, software and corporate sectors.