A survey of the salaries and bonuses of London-based risk professionals suggests quantitatively-focused risk specialists earn the most.
Salaries for vice presidents and associates working in risk methodology and modelling range between 100,000 and 200,000 while 2004 bonuses averaged 100%, according to a new survey by recruitment firm the PSD Group.
This compares very favourably to salaries of 70,000 to 120,000 for VPs in market risk, credit risk and operational risk, where bonuses averaged 70%, 60% and 40% respectively, the survey found.
Figures were derived from conversations with 40 investment banking recruiters and 40 candidates between March and May 2005.
Gail Connolly, a senior consultant in the banking and finance team at the PSD Group, says salaries for quantitative risk staff rose 17% during 2005. "It's a question of supply and demand," she says. "Quant staff need as a minimum a Masters in a mathematical subject such as econometrics or statistics although a PhD is preferred. Consequently, there are fewer candidates available"
Demand is greatest for quants to build credit models looking at the effects of Basle II, says Connolly: people with these skills can command an additional premium of 10%.
However, Adrian Marples, a risk management specialist at headhunter Sheffield Haworth, disputes the notion that quant-focused risk specialists are the highest earners. He says risk managers working alongside traders in front office market risk roles can earn more: "The highest paid risk managers are ex-traders who manage market risk very proactively: these are people who will restructure trades in anticipation of events."
The PSD survey also found bonuses for vice presidents and directors working in market risk rose 25% to 50% in 2005 compared to 2004. Connolly attributes this to poor bonuses for risk managers in 2004, better trading results and strong demand for mid-ranking staff.