MF sector eyes better pay hikes

Assets under management have hit new highs and fund houses are seeking to retain talent

M Saraswathy and Sachin P Magmata, Last Updated at 00:50 IST, Mumbai March 24, 2014

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Girish Shah, a senior fund manager with one of the top 10 mutual fund (MF) houses, has not made any flashy purchases in recent times and can’t think of anyone who has.

This is in sharp contrast to 2007, when the best fund managers drove around in high-end luxury cars and lived in the best neighbourhoods in the city. “Markets were up, a bull run was on and it was not unusual for a fund manager to have doubled his salary,” recalls Shah.

The global financial crisis put an end to those heady days. The big pay rises ended and salaries have been largely stagnant for the last two or three years. But things are about to change for the better.

The MF sector is likely to see better pay rises this April than in recent years, as assets under management (AUMs) hit new highs and fund houses seek to beat competition from rival sectors to retain talent.

The rises are likely to be much better than previous years and could hit as high as 20 per cent for the more profitable fund houses, according to personnel experts and industry officials.

“For top performers, the hikes could be in the range of 15-18 per cent in the MF industry, while that for the average performers could be in the 10-15 per cent category,” according to Sunil Goel, director, GlobalHunt. But, there could be room for some more bargains for the cream of high-flying professionals.

“It will be better than in the last two to three years. There has been some consolidation and average hikes could be as much as 20 per cent for bigger profitable funds,” said the chief executive officer of one of the top three fund houses.

In contrast, average performing executives were offered a hike of 8-10 per cent, while high performers were offered up to 12 per cent last year. Aditya Narayan Mishra, president-staffing, Randstad India, said better prospects in allied sectors, especially in the services domain that is looking up, might also be a factor.

“In this period, MF houses do not want employees to quit and, hence, are going liberal on salary hikes this year,” said Mishra.

Interestingly, this would mean the mutual fund sector’s pay rises are in fact better than the rest of India Inc.  Global human resource firm Aon Hewitt, in their annual salary increase survey, has said that Indian firms have projected a 10 per cent salary increase in 2014. The survey said top performers are projected to receive an average 15.3 per cent increase in 2014.

The rises come even as AUMs for the sector have grown 25 per cent over the year, to a record high of Rs 916,393 crore as on February 28. However, a large proportion of the growth has been concentrated amongst the top players. The top 10 firms account for three new quarters of the AUM and 95 per cent of the profits last year.

Salary rises are also likely to be concentrated among these top 10 since 22 of the 43 firms were loss-making in the last financial year.

Niranjan Risbood, director (fund research), Morningstar India, suggested this was likely to result in a larger trend of the scarce talent in the mutual fund sector exiting smaller AMCs in favour of larger, better paying ones.

“Profit-making AMCs will be in a better position to reward their employees. This will create a virtuous cycle for these players, wherein those fund houses which are able to offer higher remuneration will attract good people. This, in turn, will lead to better performance and higher profitability for such AMCs,” he said.

For people like Shah, 2007 is perhaps looking closer than it has in some time.