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January 3, 2011

Buyside Should See Rise in Pay

By Michael Scotti

Investment professionals in equities on the buyside should expect to see a 15 percent bump in their compensation for 2010, according to a new study compiled by two industry consultants.

The study was co-authored by the consultancy Greenwich Associates and Johnson Associates, a compensation consulting firm that specializes in financial services.

Greenwich interviewed more than 1,000 investment professionals at money managers during the year for the study.

Johnson Associates, using Greenwich's compensation figures, then made projections based on follow-up interviews with the money managers. It is the first time the two consultants have worked together on a compensation survey. The survey included chief investment officers, portfolio managers, analysts and traders.

More than 150 equity traders at both traditional managers and hedge funds participated. The survey's projections are an average and not weighted according to assets.

Here's what matters: A head trader in equities, with a 15-percent raise, should expect to earn an average of $427,800 in total compensation for 2010. Meanwhile, an equities trader, on average, should expect to see $262,200 in total compensation this year, according to the report's findings.

"Assets are up, and the forecast for compensation is up," said Kevin Kozlowski, a product manager in equities at Greenwich Associates. "It is a positive picture--maybe not as much as some had hoped, but it is still progress."

The news comes on the heels of some rough years for everyone on Wall Street. From 2007 through 2009, according to Greenwich, total compensation for both head traders and traders in equities was down just over 20 percent. The expected rise in comp for 2010 is a positive, Kozlowski said. "We're not back to the glory days, but we're well on the road."

At the height of 2007, a head trader's total comp was $548,000. A trader's total take-home pay that same year was $286,000 on average. The study also showed that trader comp at hedge funds today is well below 2007's levels and comp at traditional managers.

The study showed that deferred comp is on the rise for traders, as it is among other investment pros at money management firms. "It is something that has been used in the chief investment officer space, but now it is starting to trickle down to portfolio managers, analysts and traders," Kozlowski said.

In 2009, head traders saw their deferred comp rise to 13 percent of their pay. That was up from 10 percent just two years earlier in 2007. For traders, deferred accounted for 7 percent of their pay, while two years earlier, it represented 3 percent. While the study did not project deferred comp for 2010, Kozlowski said "it is definitely a trend we see growing."

Other investment professionals in equities should expect the same average increase of 15 percent for their 2010 compensation, according to the study. For 2009, the total compensation was $1.89 million for chief investment officers, $825,000 for portfolio managers and $320,000 for analysts, according to Greenwich. On the fixed income side, professionals there should expect to see a 10 percent increase on average in compensation for 2010, the study said.


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