The annual Asset Management Operations and Compensation Study, with sponsorship by Advent and the Investment Adviser Association, is conducted by the Advent Users Group (AUG), an independent forum of Advent product users. The purpose of the survey is to provide investment managers with benchmarks to guide their strategic decisions in an increasingly competitive and challenging marketplace. The study provides in-depth data and analysis covering two critical assets of investment firms: their technology and their people.
For the 2008 study, 147 firms were surveyed, ranging in size from $100 million to more than $50 billion in assets under management, with an average employee headcount of 37. The compensation survey gathered data on 1,057 individuals representing 41 positions from administrative support to CEOs.
IT and Operations Investment Highlights
Client expectations, competitive pressure, and regulatory requirements continued to fuel demand for advanced systems that help firms increase efficiency, control costs, and manage an increasingly complex asset mix. More than two-thirds of the firms surveyed said their IT and operations spending were increasing in 2008, although at a slower rate than in 2007.
Firms cited the need for IT consulting and outsourcing, disaster recovery solutions, and research management systems as key drivers of the increase in spending. Product proliferation continued to be a factor as well, with more firms having to manage and account for a wider array of instruments. Most firms, however, said they did not plan to add new asset classes to their mix next year, signaling a possible slowdown in product proliferation in the wake of this yearâs market volatility.
The survey also affirmed that most firms rely on outside technology partners to provide the majority of their systems, with portfolio accounting and reporting systems accounting for the biggest share of the IT budget.
Reflecting a difficult year for the financial markets, 44% of the firms surveyed predicted either no increase or a decrease in their IT expenditures in 2009, up significantly from 31% the previous year. Still, a majority of firms expect that they will increase their investments in new technology to sustain or widen their competitive advantage.
âIn a volatile market, thereâs an even greater premium on increased efficiency, cost control, and superior client service, which technology can help achieve,â said Anthony Sperling, Senior Vice President of Services at Advent and AUG Board Member. âThis survey gives investment advisors useful benchmarks showing them where they are and where they need to be relative to their peers.â
Looking at the compensation side of the equation, the survey captured data on salaries, incentive pay, and ownership distributions to arrive at total cash compensation figures. The results indicate that cash compensation across the 41 positions surveyed rose an average 15% over the previous year. Exceptions to the trend were sales staff, who saw their compensation decline in the face of lower asset flows from clients.
One noteworthy increase was for Chief Compliance Officers (CCO), whose total compensation rose an average of 24% over the previous year from $165,000 to $205,000. This reflects the growing importance of the CCO position in the face of more stringent and complex regulation.
Average CEO compensation held relatively steady, at $883,000, while the average for Chief Investment Officers climbed some 25% to $869,000. Senior portfolio managers averaged $500,000, and senior traders $172,000.
The study found a continuation of the trend to âshare the wealthâ more broadly throughout a firm through incentive systems that encourage specific behaviors. Incentive programs often include such objective measures as profitability, growth in assets under management, and investment performance.
âIn a challenging environment, firms are going to be competing for the best talent and demanding more from their people,â Sperling noted. âCompensation and reward systems are often a struggle for money managers. This survey answers a lot of questions about everything firms are doing to attract and retain people, not only monetarily but also through their benefits and vacation policies.â
The full study compares firms according to asset size, geography, and a host of other criteria, providing managers with a detailed and robust set of data for making IT, operational, and compensation decisions. Firms that participated in the survey will receive the full report automatically.