Fund houses turn to innovative remuneration to retain star staff

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Fund managers have been looking for alternative ways, such as bonuses or stock options, to reward employees and keep star players as the economic downturn has rendered cash a less attractive option, according to a survey by Armstrong International, the financial headhunting firm.

Bonuses for fund managers were generally down 20% to 40% from last year because of poorer performance as a result of market conditions. Star players were the exception, as they were offered multiple year guarantees to prevent them defecting to alternative fund boutiques.

Basic salaries are expected to remain stable for 2002.

For institutional sales, bonuses will be down between 20% and 50%, the survey said. In many cases with new hires, no guaranteed bonuses are being offered and maximum contract periods have been reduced. For client servicing roles, there is a trend away from discretionary bonuses to a performance-related system. For retail sales, bonus expectations have dropped from 300% to between 100% and 150% of basic salaries.

Hiring across traditional fund management has been opportunistic, the survey said, while hiring of retail people remains a priority. Back office and administration positions have been hit hardest by redundancies and these areas are still experiencing a hiring freeze.

The survey said the profile of private banking has increased over the past year, giving banks appetite for hiring, in contrast to many other areas. Banks have expanded their operations by buying whole businesses, with UBS acquiring Paine Webber, CSFB purchasing DLJ and Morgan Stanley buying Quilters & Co.

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