Comp scales with AUM?

I've been looking into buyside research for a while now, and I've noticed that most reports of street-level pay are coming from the largest firms (eg Fido, BlackRock, T Rowe, etc).

Does this mean that smaller firms (<100B AUM) generally pay below street, or are compensation reports from larger firms just vastly more prevalent?

Given the fee structure of traditional asset managers, it would make sense for pay to be loosely correlated with AUM. Without performance fees, I would imagine smaller firms struggle to compete as far as compensation is concerned.

Can anyone with experience shed some light on this? And do compensation schemes significantly differ between equity and FI firms? I am referring to junior level (ie not PM) roles here.

Comments (16)

Feb 13, 2012

I got a couple of offers from some prominent buy side shops, including a couple of the ones you mentioned, and I never really encountered IBD all-in Analyst pay (I'm assuming that's what you meant by Street-level pay). Base is usually the same as IBD, though -- possibly just a tad lower, depending on the shop. It makes sense, of course: In IBD, you're basically getting paid to be a slave/give up two of your prime years, so you need to be compensated somewhat handsomely for that. Your value to the firm is derived from your being a bitch, whereas Buy Side Analysts are in the business of critical thinking. This, in turn, means you're essentially useless for your first year on the job, so they're really investing in you.

Anyway, now that overly long qualification is over:

I'm sorry I can't be of more help regarding the small vs. large debate, but I can answer your question regarding FI vs. Equities: My offer in FI was literally the exact average of my Equity Research offers, so at least at the junior level, I don't think there's any discernible difference. Even long term, I think the other factors that determine compensation (PM pay is, of course, exceedingly variable, even for PM's at the same firm) are more important than whether you're Fixed Income or Equity.

    • 1
Feb 13, 2012

Right, by street level I meant base. I realize you are not going to get IBD pay at the entry level anywhere but IBD, with few exceptions. Otherwise, who would do it?

Thanks for the information on FI versus equities. I am looking at a few smaller firms that work exclusively in one or the other.

Feb 13, 2012

I'm a junior finance major at a target coming on as a summer equity research intern at a small (think 15-20b AUM) asset management firm. The pay is 70k prorated if that helps. I doubt the bigger firms pay more than that. No idea what pay is as you move up.

Feb 13, 2012

I can go ahead and confirm that the big guys aren't paying much more than that; there may be a couple of firms that pay about 2-5k more, but the majority are actually going to pay a bit less.

Feb 13, 2012

Atomic do you or anyone else know what kind of pay/comp structure there is as one moves up? First year associate pay? Associate Analyst? Analyst? Is most of the comp from base or bonuses and how to the bonuses work?

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Best Response
Feb 13, 2012

Yeah, I'm fairly well-versed in the compensation structure -- well, at least as well-versed as an undergraduate can be. Keep in mind that what I'm going to say varies from firm to firm, and even from individual to individual. Also, keep in mind that asset management, whether it be the traditional firms or the hedge funds, is far less rigid than investment banking or private equity, where there's very well-defined titles, and a more rigid compensation structure (at least until the senior levels). This is both a blessing and a curse. A valuable Associate can quickly find himself given Analyst-level responsibility, and a Research Analyst who proves himself can quickly move up the Research ranks, and even jump to the Portfolio Management side if he so chooses (and there's a need). Then again, there's a chance you may be spending a longer amount of time at a particular level than your colleagues in "Up-Or-Out" IBD.

At most firms, compensation is going to look something like this:

--> You come in as a bright-eyed Associate. At this level, they know you're completely and utterly useless, so you're probably getting a base of 65-70k, and you're looking at a bonus that's 0.25x salary. Since bonuses in this industry are performance-driven, it's hard to justify anything above that.

--> You eventually make it to the ranks of full-fledged Analyst ("Post-MBA Level"). At this point, depending on the firm, you're probably looking at around 100-150k, but it's here that your bonus increasingly defines your compensation. At this point, you're looking at 1.0x your base: To give it a number, let's call it $240k all-in.

--> Assuming you're a good performer, you'll eventually make it to the VP/Senior VP Research Ranks, or become a PM. PM pay is highly variable, so it's hard to discuss. Of course, valuable PM's are invaluable, and it's quite common for the stars at a company to be clearing millions of dollars in any given year. VP Research Analysts are paid pretty damn well -- I think here, you're looking at a base of $220k and up, and your bonus is going to be 2.5x that.

Obviously, things are happening in between these levels that I'm not quite as knowledge about. For example, if anyone could shed some light on the steps in between the Associate and the Analyst role, and the average time it takes to progress, I would definitely be happy to hear about it.

You know, it's pretty strange... For a finance site, WSO doesn't really seem to give a lot of love to the buy side research path. I think it's a combination of things: (1) Investment banks are much better at advertising their analyst positions, and since everyone is gunning for the same thing, there ends up being a certain level of groupthink that says, "You need to do X, Y, Z, that way you can work at a Private Equity fund, make your parents proud, etc." (2) Buy side research is fucking hard to break into. The interviews I had for these roles were by far the most difficult. Someone who wasn't genuinely intelligent and passionate about the public markets would get annihilated. (3) There just aren't many positions, and IBD is by far the "safer" route for someone hoping to make a career in finance. It keeps your options open in a way that buy side research simply will not. (4) Private Equity.

EDIT: Publicly-traded firms (a la T. Rowe Price) are going to pay out their bonus as a mix of cash and restricted stock, probably vesting over 3 years or something similar.

    • 3
Feb 15, 2012
atomic:

You know, it's pretty strange... For a finance site, WSO doesn't really seem to give a lot of love to the buy side research path. I think it's a combination of things: (1) Investment banks are much better at advertising their analyst positions, and since everyone is gunning for the same thing, there ends up being a certain level of groupthink that says, "You need to do X, Y, Z, that way you can work at a Private Equity fund, make your parents proud, etc." (2) Buy side research is fucking hard to break into. The interviews I had for these roles were by far the most difficult. Someone who wasn't genuinely intelligent and passionate about the public markets would get annihilated. (3) There just aren't many positions, and IBD is by far the "safer" route for someone hoping to make a career in finance. It keeps your options open in a way that buy side research simply will not. (4) Private Equity.

Overall this is a pretty accurate post, although the entry level numbers are a little low, especially if you are talking about the very biggest and/or most prestigious IM shops. Also, you have to realize that most of these jobs aren't in NYC, so the cost of living is a good deal lower. From my experience, you're looking at 65-80k
+ 5-10k signing bonus/relocation + 25-40% bonus for the first year, with ~10% increase per year until you get to the next level (Analyst/Jr PM/whatever the structure at your firm is for post-MBA hires) at the high end.

As for why it isn't mentioned as much: In my opinion, it's just because there are far far fewer spots for undergrad hires compared to banking, or even sell side research, at least for the companies that have structured research associate programs. Even at firms with the biggest classes (Blackrock/Wellington/Fidelity/T Rowe/Putnam/maybe a few others), only ~10 research associates are hired each year. That's compared to something like 100 per BB in IBD (with a bunch of other spots at boutique and MM banks), and even ~25 per bank in equity research. Naturally there just aren't as many people to talk about it, especially at the undergrad level. Once you get to the post-MBA level, there are a lot more spots because the smaller hedge funds open up to you, but they rarely take undergrads because there just isn't the scale to have a really structured training program.

I'd also disagree a little bit about the interview process. I interviewed with a bunch of places, and I didn't see any real difference between interviewing for buy-side or sell-side equity research jobs, and from what I saw I the interviewers weren't looking for anything different. I guess the buy-side places were more likely to have longer superdays, and were more likely to ask you to prepare a stock pitch ahead of time, but you basically needed one or two of those to be successful at a sell-side interview too. Personally, I thought that my investment banking interviews were more difficult, and I had a much better offer rate with research (the rate for me was about the same on the buy-side and the sell-side.) However, this is probably just a personal thing for me, because I found it difficult to get excited about investment banking and pretty much knew that I wanted to go into research. This also might just be my own experience, but I thought that people in research were generally friendlier and came off as more "intellectual" than those in banking, so I clicked better with them.

Feb 15, 2012
Alibi:
atomic:

You know, it's pretty strange... For a finance site, WSO doesn't really seem to give a lot of love to the buy side research path. I think it's a combination of things: (1) Investment banks are much better at advertising their analyst positions, and since everyone is gunning for the same thing, there ends up being a certain level of groupthink that says, "You need to do X, Y, Z, that way you can work at a Private Equity fund, make your parents proud, etc." (2) Buy side research is fucking hard to break into. The interviews I had for these roles were by far the most difficult. Someone who wasn't genuinely intelligent and passionate about the public markets would get annihilated. (3) There just aren't many positions, and IBD is by far the "safer" route for someone hoping to make a career in finance. It keeps your options open in a way that buy side research simply will not. (4) Private Equity.

I'd also disagree a little bit about the interview process. I interviewed with a bunch of places, and I didn't see any real difference between interviewing for buy-side or sell-side equity research jobs, and from what I saw I the interviewers weren't looking for anything different. I guess the buy-side places were more likely to have longer superdays, and were more likely to ask you to prepare a stock pitch ahead of time, but you basically needed one or two of those to be successful at a sell-side interview too. Personally, I thought that my investment banking interviews were more difficult, and I had a much better offer rate with research (the rate for me was about the same on the buy-side and the sell-side.) However, this is probably just a personal thing for me, because I found it difficult to get excited about investment banking and pretty much knew that I wanted to go into research. This also might just be my own experience, but I thought that people in research were generally friendlier and came off as more "intellectual" than those in banking, so I clicked better with them.

That's pretty strange --

In Investment Banking interviews, I thought so long as you knew your valuation and accounting, nothing was ever that surprising. I never really felt like I was thinking on my feet, or being even the tiniest bit creative. Neither of those qualities are all that necessary for IBD Analyst work, of course, so I suppose it makes sense. I'm thinking about two company's interview processes in particular that really stuck with me. My interviewer and I really got into it -- my pitch was about a company from his sector (I had no idea who I would be interviewing with beforehand, or else I probably wouldn't have gone that route), and I spent almost the entire time defending my thesis, explaining my assumptions, commenting on my company's strategic positioning within its sector, etc., etc. Not in an antagonistic way, mind you, it was just a sort of mental sparring session: It was actually a lot of fun, and at the end, I was relieved to hear that he'd made the same recommendation a couple of months prior.

Anyway, I suppose with interviews, it's mostly luck of the draw, so it's hard to make general commentary. I think you're right on in your salary comment (Fidelity, in particular, pay along those lines), I was just trying to find a happy medium between those guys and the smaller ones.

I definitely, definitely agree with the "intellectual" characterization, though. You don't get that "Master of the Universe" vibe that's impossible not to notice when speaking with IBD MD's and VP's, which, again, makes sense, since if you think you're better than the market, it's going to humble the fuck out of you.

Feb 27, 2012
Alibi:
atomic:

You know, it's pretty strange... For a finance site, WSO doesn't really seem to give a lot of love to the buy side research path. I think it's a combination of things: (1) Investment banks are much better at advertising their analyst positions, and since everyone is gunning for the same thing, there ends up being a certain level of groupthink that says, "You need to do X, Y, Z, that way you can work at a Private Equity fund, make your parents proud, etc." (2) Buy side research is fucking hard to break into. The interviews I had for these roles were by far the most difficult. Someone who wasn't genuinely intelligent and passionate about the public markets would get annihilated. (3) There just aren't many positions, and IBD is by far the "safer" route for someone hoping to make a career in finance. It keeps your options open in a way that buy side research simply will not. (4) Private Equity.

Overall this is a pretty accurate post, although the entry level numbers are a little low, especially if you are talking about the very biggest and/or most prestigious IM shops. Also, you have to realize that most of these jobs aren't in NYC, so the cost of living is a good deal lower. From my experience, you're looking at 65-80k
+ 5-10k signing bonus/relocation + 25-40% bonus for the first year, with ~10% increase per year until you get to the next level (Analyst/Jr PM/whatever the structure at your firm is for post-MBA hires) at the high end.

As for why it isn't mentioned as much: In my opinion, it's just because there are far far fewer spots for undergrad hires compared to banking, or even sell side research, at least for the companies that have structured research associate programs. Even at firms with the biggest classes (Blackrock/Wellington/Fidelity/T Rowe/Putnam/maybe a few others), only ~10 research associates are hired each year. That's compared to something like 100 per BB in IBD (with a bunch of other spots at boutique and MM banks), and even ~25 per bank in equity research. Naturally there just aren't as many people to talk about it, especially at the undergrad level. Once you get to the post-MBA level, there are a lot more spots because the smaller hedge funds open up to you, but they rarely take undergrads because there just isn't the scale to have a really structured training program.

I'd also disagree a little bit about the interview process. I interviewed with a bunch of places, and I didn't see any real difference between interviewing for buy-side or sell-side equity research jobs, and from what I saw I the interviewers weren't looking for anything different. I guess the buy-side places were more likely to have longer superdays, and were more likely to ask you to prepare a stock pitch ahead of time, but you basically needed one or two of those to be successful at a sell-side interview too. Personally, I thought that my investment banking interviews were more difficult, and I had a much better offer rate with research (the rate for me was about the same on the buy-side and the sell-side.) However, this is probably just a personal thing for me, because I found it difficult to get excited about investment banking and pretty much knew that I wanted to go into research. This also might just be my own experience, but I thought that people in research were generally friendlier and came off as more "intellectual" than those in banking, so I clicked better with them.

I can second most of what Alibi says here about 1. What separates buyside research and 2. Pay. I think the interviews are definitely more intense than IBD, but that if you really are passionate about the markets, you should do reasonably well with them naturally. IBD, on the other hand, requires a lot of accounting/valuation, while buyside research only requires some knowledge of it. I might be able to answer a few more questions, so PM me if you're still curious.

Feb 13, 2012

Thanks so much for this detailed answer. I agree, both my first and final round interviews at the buy-side firm I'm interning at this summer put every interview skill I've picked up to the absolute test; thinking back it was a performance I'm really proud of.

I'm guessing the 70k prorated intern pay indicates a 70k base for the equivalent full time position with probably a 15-20k bonus?

Feb 16, 2012

This post is regards to long only. I don't know a ton about entry-level but I don't think it sounds unreasonable to have a base of $70k and bonus of .25-.5x at a mid-sized shop whether Equity or FI. Obviously, the fees are lower per AUM on FI than equity but take less people to manage, so you have to adjust, probably only a small discount for FI in general. After entry-level, it's not really possible to generalize in this industry because it's too small and variable. I'd say comp in general as you move up the ranks will always be "banking-lite" (pre-crisis) compared for number of years experience in the business. I'd say analysts at the ~5 years (or post-MBA level) experience could expect ~200k-250k if performance/economy is good, maybe $150k-$200k if not so good. Larger firms will pay at the upper end of those ranges, and public firms will pay healthy percentage of bonus in stock-based comp. And finally, I would sayd it's harder than any of you think to move up to higher levels of responsibility and/or to make PM without going HF route.

Feb 16, 2012
IBPEHFVC:

And finally, I would sayd it's harder than any of you think to move up to higher levels of responsibility and/or to make PM without going HF route.

Agree in general with your thoughts on comp, but I disagree slightly with this point in that it depends entirely on your firm. I'd actually argue that it is easier to move from entry-level to PM in a large long-only firm than it is in a comparable hedge fund. Long-only firms tend to focus on developing their analysts, while there isn't as much of a focus on career development with hedgies.

I work at a mid-sized fund and we don't hire any new analyst unless we view them as partner material down the line, and thus obviously there is a clear path to PM.

Feb 17, 2012
Bowser:
IBPEHFVC:

And finally, I would sayd it's harder than any of you think to move up to higher levels of responsibility and/or to make PM without going HF route.

Agree in general with your thoughts on comp, but I disagree slightly with this point in that it depends entirely on your firm. I'd actually argue that it is easier to move from entry-level to PM in a large long-only firm than it is in a comparable hedge fund. Long-only firms tend to focus on developing their analysts, while there isn't as much of a focus on career development with hedgies.

I work at a mid-sized fund and we don't hire any new analyst unless we view them as partner material down the line, and thus obviously there is a clear path to PM.

Ok, I guess every fund is different, just seems to be from my experience. I've worked at one of the large firms mentioned in OP and at a 20bn firm, both of which use the centralized research model. In both cases, the path to PM is basically non-existent in my opinion.

Feb 17, 2012
Bowser:
IBPEHFVC:

And finally, I would sayd it's harder than any of you think to move up to higher levels of responsibility and/or to make PM without going HF route.

Agree in general with your thoughts on comp, but I disagree slightly with this point in that it depends entirely on your firm. I'd actually argue that it is easier to move from entry-level to PM in a large long-only firm than it is in a comparable hedge fund. Long-only firms tend to focus on developing their analysts, while there isn't as much of a focus on career development with hedgies.

I work at a mid-sized fund and we don't hire any new analyst unless we view them as partner material down the line, and thus obviously there is a clear path to PM.

This is definitely an important point to consider, and one I failed to mention in my all-too-brief summary of the industry. For example, the firm I ultimately signed on with paid slightly less than some other offers I was considering, but I came away exceedingly impressed by the people, the average tenure of the PM's, and the number of PM's that came up through the Associate/Research Analyst programs. A firm that's willing to have you grow with them, and guide you, skill permitting, to the top of their structure, was what mattered most to me.

Of course, anyone interested in long-only asset management and hedge funds must come up with their own weighting of the various decision-making criteria: Prestige, Pay, Possibility for Advancement, Business School Connections/Prospects, etc.

Feb 16, 2012

So what's considered a mid sized firm in this industry in terms of AUM? Small firm AUM?

Feb 17, 2012
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