Risk experts at alternative investment funds were far better paid last year than their peers at institutional funds and insurance shops.
A survey of 225 risk managers at institutional fund firms, hedge funds, funds of hedge funds and insurance firms conducted by New York-based executive search firm Risk Talent showed that the total compensation for chief risk officers and managing directors at the alternative funds came to $937,707 in 2009 compared to $841,426 in 2008.
For associates, analyst and risk managers at alternative firms the total package grew to $364,800 last year from $299,611 in 2008. Mid-tier vice presidents, senior vice presidents and directors of risk management received a total compensation of $505,521 in 2009 compared to $429,521 in 2008 in large part due to hefty increases in non-cash bonuses.
By contrast, managing directors and chief risk officers at “traditional asset management” firms received a total compensation of $822,330 in 2009 compared to $806,631 the previous year. For vice president, senior vice president and directors, the total compensation dipped to $389,377 from $393,727. Associate, analyst and manager level risk managers also saw their total compensation decline to $197,739 from $206,518.
Risk managers at insurance firms were compensated the least and the highest ranking officials actually saw a decline in total compensation. Managing directors and chief risk officers had a total compensation of $604,286 last year compared to $654,571 in 2008 largely due to a decline in non-cash bonuses. Vice president, senior vice president and directors saw their total compensation rise to $299,040 from $275,981 while associates, analysts and managers saw their total compensation grow to $163,800 from $157,840.
The discrepancy in total compensations came largely from hefty bonus payments. The most senior risk specialists in alternative investment funds saw a pretty sizeable increase in their non-cash bonuses — restricted stock, stock options and deferred cash compensation – in 2009.
For vice president, senior vice president and directors of risk management at hedge funds and fund of hedge funds the non-cash bonus rose to $110,000 in 2009 from $31,250 the previous year. Managing directors and chief risk officers saw their non-cash bonuses grow to $221,667 from $188,000 while the lowest level risk managers saw non-cash bonuses grow to $100,000 from $62,500.
The survey also found that despite their higher salaries, managing directors and chief risk officers had the slowest growth in total compensation—about four percent in 2009 over the year-earlier period. Bonuses as a percentage of compensation were higher for titles from analyst through director- ranging from 40 percent to 55 percent in 2009 compared to 38 percent to 44 percent in 2008.
Enterprise risk specialists received the highest compensation, followed by market risk and credit risk. The least well paid: operational risk executives.
“Enterprisewide risk specialists are typically the most senior ranking executives while operational risk executives have typically been transferred from other business line units,” says Michael Woodrow, president of Risk Talent Associates.
Market risk and credit risk specialists were the second- and third-highest paid.