eFinancialCareers

A panel of headhunters gives its assessment of typical London pay packages: Base salary: £60,000-£70,000: Bonus: variable, closely linked to performance but up to 120%.

Whatever happened to the old certainties? There was a time not long ago when a combination of rising inflation and falling growth would have raised eyebrows, yet that is what Britain’s economy is now experiencing. Similarly, in capital markets the conventional wisdom was that with rising equity markets, fixed income should be in the doldrums – and vice versa. Yet today, despite continuing advances in the FTSE index, fixed income markets look very healthy.

“The market has been performing strongly over the last year (with) investment in derivatives and more specifically credit derivatives proving popular amongst fund managers,” says Emily Ayre, a consultant at Morgan McKinley’s asset management division. She adds this sustained performance has bought about noticeable increase in demand for fixed income professionals.

Richard Fraser of RJF Global Search agrees, noting there has been quite a degree of movement amongst junior, intermediate and senior professionals, and some poaching too, as institutions seek to recruit individuals with the most impressive track records.

So just what exactly - in the year 2005 - does a junior or intermediate fixed income fund manager do? Well, much the same as their counterparts 20 years ago, but on a much larger quantitative scale, utilising a much broader and more complex range of fixed income instruments. Typically the individual will come from a fixed income or credit research background, have a good quantitative degree and ideally be armed with a relevant CFA qualification. Key skills?

“Analytical and numerical skills are imperative. Individuals must have the ability to pre-empt change in the markets and react to it. Also, they must have the ability to work independently and perform well under pressure," says Ayre.

The fixed income fund manager’s clients could be private - wealthy individuals – or institutional (pension, insurance or mutual funds): all will want their fund manager to somehow outperform the market. To do this, the individual will be familiar with everything that generates a higher than average rate of return.

“Products that pay a specific interest rate include bonds, money market instruments or preferred stock; the fund manager will invest in bonds (corporates, government, treasury, municipal, agency, zero-coupon and junk bonds) and in money market instruments - short term debt securities, commercial paper, repo’s and negotiable certificates of deposit,” says Fraser.

So assuming the individual has become fully au fait with fixed income instruments and has a good handle on the market, how much should he or she be worth? For juniors with, say, one to two years' fund management experience Fraser says a base of around £65,000 is fairly standard, particularly at the larger houses, rising to around £85,000 for intermediate level fund managers – those with three to five years track record.

Morgan McKinley’s Emily Ayre is more sanguine, suggesting a junior could earn anywhere between £60,000-£80,000 with intermediates pulling in between £80,000-£100,000. Jamie Risso-Gill of Robert Walters is cautious, suggesting base salary for a junior fund manager could start at £40,000 though he puts the range up to £60,000.

It is bonus that fund managers write home about, however, although payout will be highly dependent both on individual and team performance, as well as perceived future potential. Risso-Gill says 100% of base salary is standard whilst Fraser says 120% is common, with high-achieving intermediate fund managers sometimes taking home total compensation up to £200,000.

So the old certainties no longer hold. But with such money in your pocket, who cares?

Figures and commentary by Morgan McKinley, RJF Global Search and Robert Walters.