2015 Mid-Year Review - Options Group...2015 Mid‐Year Review COMPENSATION DATA ANALYSIS METHODOLOGY...

2015 GLOBAL MID‐YEAR REVIEWCOMPENSATION & HIRING TRENDS

[ T Y P E T H E C O M P A N Y A D D R E S S ]

COMMODITIES

RATES

FOREIGN EXCHANGE

CREDIT

SECURITIZED PRODUCTS

EMERGING MARKETS

CASH EQUITIES

EQUITY DERIVATIVES

PRIME SERVICES

INVESTMENT BANKING

RISK MANAGEMENT

QUANT RESEARCH & ANALYTICS

ELECTRONIC TRADING

INFORMATION TECHNOLOGY

PRIVATE WEALTH MANAGEMENT

HEDGE FUNDS

ASSET MANAGEMENT

PRIVATE EQUITY

AUGUST 2015

2015 Mid‐Year Review

COMPENSATION DATA ANALYSIS METHODOLOGY

The Options Group 2015 Mid‐Year Review is the culmination of five months of work contributed by over 120 global consultants and research professionals. It is intended to enable our clients to make informed compensation decisions in 2015. OGiQ has collected information on global business performance, key talent moves, recruitment trends and compensation practices through its extensive global database of over 500,000 industry professionals, interviews with senior executives across the industry, and various other data sources. Compensation figures in this report, unless otherwise noted, are in US dollars and represent total compensation. Total compensation is defined as base salary plus cash and noncash bonus. Our estimates represent recorded annual pay packages in 2014 for professionals based on our survey results and our proprietary candidate database, and exclude the top one percent of compensation ranges. The average change in compensation excludes professionals who reported receiving contractual bonus guarantees in 2014. The candidate survey was conducted from January 29 to March 9, 2015. This report provides an analysis of historical data and current trends collected through our discussions with candidates, consultants and clients and offers forward‐looking compensation projections by product and geographical region. Percentage changes in compensation are based on employees’ expectations and Options Group’s perspectives on current trends.

DATA CONTRIBUTORS

ABS Alert, Alternative Investment News, Alpha Magazine, AsiaMoney, Bloomberg, Bond Week, The Boston Consulting Group, BusinessWeek, Credit Suisse, Dealogic, Derivatives Intelligence, Dow Jones, eFinancial, EuroMoney, Financial News, Financial Times, Fortune, Investment Dealers’ Digest, The New York Times, PE Week, Risk, SEC filings, Thomson Reuters, The Wall Street Journal ABOUT OPTIONS GROUP

Founded in 1992, the Options Group is a leading global executive search and strategic consulting firm for the financial services industry. Since 2000, we have maintained a local presence in five continents and have placed thousands of mid‐ to senior‐level professionals in all areas of the financial services industry in a range of institutions. With over 120 consultants and market intelligence analysts worldwide, Options Group has a thorough knowledge of key competencies in the financial industry and is at the cutting edge of global hiring services and compensation trends for securities, investment banking, hedge funds, asset management, and information technology. Options Group possesses a track record of consistently providing expeditious and comprehensive executive search and market intelligence services to clients. For additional information, please contact Jessica Lee at [email protected] ABOUT OGiQ

OGiQ is the consulting division of Options Group. Its primary role is to provide unique, value‐added advice, products and human talent management solutions to our clients. OGiQ is responsible for developing the firm’s intellectual capital and proprietary products, advanced analytical tools, and databases used to provide these solutions. Our mission is to enable clients to make more informed decisions by creating global research products that seamlessly combine the firm’s proprietary tools, information and research capabilities.

WWW.OPTIONSGROUP.COM


MANAGING PARTNERS

Michael Karp [email protected] New YorkBob Reed [email protected] New YorkCarlos Mejia [email protected] New YorkSimon Satanovsky [email protected] New YorkDavid Korn [email protected] LondonRaveen Shah [email protected] LondonVinicius Bolotnicki [email protected] Sao Paulo

DISCLAIMER

All material presented in this report, unless indicated otherwise, is under copyright to Options Group. None of the material or its content, or any copy of it, may be altered in any way, transmitted to, copied, or distributed to any other party, without the prior written permission of Options Group. The materials presented in this report are provided for information purposes only. Moreover, the information and opinions presented in this report have been obtained or derived from sources believed to be reliable by Options Group; however, Options Group makes no representation regarding their accuracy or completeness. Options Group accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Options Group. This report is not to be relied upon in substitution for the exercise of independent judgment. UNDERSTANDING COMPENSATION TABLES IN THIS REPORT

INFORMATION TECHNOLOGYMIDDLE OFFICE/OPERATIONS

MANAGING DIRECTOR

Top 10% $850K ‐ $1,100K $900K ‐ $1,400K $640K ‐ $960K $560K ‐ $880KAverage $660K ‐ $740K $600K ‐ $720K $520K ‐ $580K $400K ‐ $480KBottom 25% $430K ‐ $520K $400K ‐ $460K $350K ‐ $400K $280K ‐ $360K

BANKS HEDGE FUNDS ASSET MGMT TECHNOLOGY FIRMS

Corporate Titles Managing Director (MD) – Managerial or non‐managerial role, typically over fifteen years of experience Director ‐ Managerial or non‐managerial role, typically between nine and fourteen years of experience Vice President (VP) ‐ Non‐managerial role, typically between six and nine years of experience Associate ‐ Non‐managerial role, typically between three and six years of experience Top 10% ‐ The highest top 10% compensation ranges, not the compensation paid at the top firms Average – The Average of all compensation for a particular title and firm type Bottom 25% ‐ Does not represent the bottom 25% of individual performers. Compensation ranges represent pay levels at smaller firms or firms that rank below the top 15 by market share or revenue. The lower quartile of compensation for a particular title and firm type can be used to bridge in‐between titles. For example, the compensation range for the Senior Vice President is the bottom 25% range for Directors.



TTAABBLLEE OOFF CCOONNTTEENNTTSS Introduction ...................................................................................................................................... 4 FICC Commodities ........................................................................................................................................... 13 Rates ....................................................................................................................................................... 16 Foreign Exchange .................................................................................................................................... 19 Credit ...................................................................................................................................................... 22 Securitized Products ............................................................................................................................... 27 Emerging Markets ................................................................................................................................... 30 Equities Cash Equities ........................................................................................................................................... 33 Equity Derivatives ................................................................................................................................... 36 Prime Finance ......................................................................................................................................... 39 Investment Banking ........................................................................................................................ 42 Risk, Quant, & Analytics Risk Management ................................................................................................................................... 49 Quantitative Research & Analytics ......................................................................................................... 52 Electronic Trading ................................................................................................................................... 55 Technology .............................................................................................................................................. 58 Private Wealth Management .......................................................................................................... 61 Hedge Funds ................................................................................................................................... 64 Asset Management ......................................................................................................................... 68 Private Equity ................................................................................................................................. 70 Spring 2015 Candidate Survey Summary ......................................................................................... 73



IINNTTRROODDUUCCTTIIOONN “I did not recruit extraordinary people. I recruited people who had extraordinary potential and then I trained them. There are no good people waiting to be hired. All of the good people already have good jobs.”

‐Admiral Hyman G. Rickover Father of the Nuclear Navy

In general, hiring demand appears to be weighted towards junior professionals. For senior professionals, hiring will be mostly opportunistic ‐ to fill in gaps in coverage or as replacements. Additionally, as approval to hire senior professionals has become a lengthy process, firms attempt to ensure a perfect fit with candidates before moving to the offer stage. Legal, regulatory, and compliance costs continue to be weighted on the financial services industry, not just banks. Global financial services messaging provider, SWIFT, published a report earlier this year highlighting the challenges of the investment management industry. In the report, the following line summarizes some of the largest issues affecting the entire industry: “The sheer number and diversity of regulatory obligations, and the frequent lack of clarity over implementation requirements, combined with fixed deadlines and the fear of incurring financial penalties for non‐compliance, are impacting investment managers’ organizational structures, investment budgets, recruitment and data management priorities.”1 In addition to these compounded issues, growing concerns over market instability due to illiquidity and implementation OTC derivatives reform have created new risks for all parties. In an Oppenheimer equity research report published in March, the analyst estimates that dealer corporate bond inventories as a percentage of the total outstanding dropped from 2.49% in 2007 to 0.49% in 2014. The average between 2001 and 2003 was 1.25%. Although there has yet to be any known optimum level, under CCAR, broker‐dealers will be forced to maintain higher capital ratios or further reduce inventories it is a similar story in Europe. According to estimates by the Royal Bank of Scotland, liquidity in credit markets in Europe has declined by 90% since 2006.2 The negative effects are not only impacting banks, but hedge funds are also voicing their concerns. In May, BlueMountain Capital senior partner Jes Staley warned that the contraction in credit‐default swaps trading has created “potential systemic threats to the financial system.”3 In light of these changes, those that are more trading oriented have opted for highly liquid products. Apparently, some are cautious regarding this as well. Howard Marks, co‐founder of Oaktree Capital, warned clients regarding liquid‐alternative vehicles and ETFs. He suggests that the source of increased liquidity is “usually illusory, fleeting and unreliable, and it works (like a Ponzi scheme) until markets freeze up.”4 To further explore these concerns, Options Group conducted a flash poll in early May and received over 600 responses.

1http://www.swift.com/investmentmanagers/resource_centre/docs/Operational_challenges_facing_the_Investment_Management_Industry_2015.pdf 2 http://www.bloomberg.com/news/articles/2015‐05‐06/bond‐dealers‐face‐brain‐drain‐in‐london‐as‐analysts‐go‐to‐funds 3 http://blogs.wsj.com/moneybeat/2015/05/07/how‐fewer‐derivatives‐could‐pose‐a‐threat‐to‐the‐financial‐system/ 4 http://www.finalternatives.com/node/30376

WWW.OPTIONSGROUP.COM 4

2015 Mid‐Year Review Introduction

Allow proprietary trading 12%

Rise in US interest rates 18%

Reduce costs associated with market making activities 51%

More regulations/ oversight of non‐

banks 10%

Other 8%

Break‐up/reduce banks 1%

Professionals at Banks in the US




Less regulations 1%


banks 8%

Other 15%


Professionals at Alternative Investment Firms in the US





banks 12%

Other 9%


Professionals at Banks in the UK and EU





banks 30%

Other 25%

Professionals at Alternative Investment Firms in the UK and EU

Allow proprietary trading 12%Rise in US interest

rates 14%


Less regulations 8%


banks 20%

Other 12%


Professionals at Asset Management Firms





banks 18%

Other 12%

Professionals at Banks in Countries Other Than US, UK, and EU


2015 Mid‐Year Review Introduction

US EMEA ASIA* JAPAN BRAZIL INDIA ANDEAN

Commodi es† ❸ ❸ ❹ ❹ ❷ ‐ ‐

Credit ❸ ❷ ❶ ❶

❶

❶ ❶

❶ ❶❶

❶❶ ❶ ❶

❶ ❶ ❶❶ ❶

❶

❹ ❸ ❸1

Rates ❸ ❹ ❸ ❸ ❸ ❹Foreign Exchange ❸ ❸ ❷ ❸ ❸ ❹Securitized Products ❸ ❸ ‐ ‐ ❹ ‐ ‐

Emerging Markets ❷ ❸ ❷ ‐ ‐ ‐ ‐

Cash Equities ❷ ❸ ❷ ❸ ❹ ❷ ❸Equity Derivatives ❷ ❸ ❸ ❹ ❹ ❷ ‐

Prime Services ❸ ❸ ❸ ❹ ‐ ‐ ‐

Investment Banking ❷ ❷ ❷ ❷ ❷Private Wealth Management ❷ ❷ ‐ ‐ ‐

Information Technology ❷ ‐ ❸ ‐ ‐

Electronic Trading ❹ ❷ ❷ ‐ ‐ ‐

Quantitative Research & Analytics ❸ ❸ ❷ ❸ ‐ ‐ ‐

Risk Management ❸ ❸ ❷ ❹ ❷ ‐

Operations ❷ ❸ ❷ ❸2

US EMEA ASIA* JAPAN BRAZIL INDIA ANDEAN

Investment ❷ ❷ ❷ ❷ ❷ ❸ ❷Distribution ❸ ❷ ‐ ❷Operations ❷ ❷ ‐ ❸ ‐

Information Technology ❸ ❷ ❷ ‐ ❷ ❷ ‐

* Asia = Hong Kong and Singapore† Commodi es hiring ac vity includes physical trading and energy firms.1 Andean Region‐ Fixed Income2 Andean Region‐ Compliance

= High Activity ❷ = Moderate Activity ❸ = Low Activity, Mostly Replacement Hires

1H15 GLOBAL HIRING ACTIVITY HEATMAP ‐ BY REGION

BUY‐SIDE ‐ HEDGE FUNDS, ASSET MANAGEMENT FIRMS, PRIVATE EQUITY & PROPRIETARY TRADING FIRMS

SELL‐SIDE ‐ BANKS, BROKER‐DEALERS & BOUTIQUES

❹ = No Activity = Headcount Reductions Likely

❺❺

❺

❺


2015 Mid‐Year Review Spring 2015 Candidate Survey Summary

• There is a high correlation between one’s job satisfaction and one’s satisfaction with their group, except for in wealth management, which is typically a less team‐oriented role.

Comp Expectations & Paid Fairly

Job Satisfaction & Satisfaction with

Group

Firm Satisfaction & Considering Switching Firms

Turnover Increasing &

Switching Firms

Considering Switching Firms &

Paid Fairly

Turnover Increasing & Firm

SatisfactionPhysical Trading/Energy Firm 0.73 1.00 0.36 0.58 0.32 0.29Regional/Local Bank 0.58 0.22 (0.57) (0.02) (0.51)

(0.43) (0.41) (0.01)(0.61) (0.27) (0.53)(0.47) (0.40)

(0.17) (0.26)(0.22) (0.30)(0.42) (0.09)

(0.50) (0.87)

PERCENTAGE CHANGE IN TOTAL COMPENSATION (TC) IN 2014 FROM 2013

Q1. What was the percentage change in your total compensation (base + bonus) for 2014 from 2013?

0.32Asset Mgmt Firm 0.56 0.68 0.27Broker‐Dealer 0.55 0.88 0.46Global Bank 0.43 0.64 0.19 0.05Proprietary Trading Firm 0.35 0.65 0.00 0.17Insurance Firm 0.26 0.25 0.00 0.32Hedge Fund 0.05 0.63 0.39 0.28Private Equity/Real Estate 1.00 0.22 0.00 0.17

CORRELATIONS BY SELECT FIRM TYPE, NON‐FRONT OFFICE* ROLES AND ALL REGIONS

* Non‐front office is defined as operations professionals, compliance officers, risk managers, human resource professionals, middle and back office technology professionals and corporate professionals. Excludes those who received a contractual bonus guarantee for 2014.

• Increased more than 30% • Increased between 10% and 29% • Between +10% and ‐10% • Decreased between 10% and 29% • Decreased more than 30%

Q2. Was your bonus guaranteed in 2014? • Yes, verbal • Yes, contractual • No, my bonus was not guaranteed • My position does not qualify for a bonus

Decreased 30%+ Increased 30%+ Bonus Guarantee No GuaranteeAsset Management Firm 2% 12% 11% 12%Global Bank 4% 12% 23% 9%Boutique 4% 21% 16% 25%Broker‐Dealer 6% 18% 30% 5%Hedge Fund 9% 21% 19% 13%Insurance Company 3% 10% 5% 6%Private Equity/Real Estate Firm 3% 20% 8% 17%Physical Trading/Energy Firm 3% 18% 16% 14%Proprietary Trading Firm 4% 15% 28% 7%Wealth Management 0% 13% 8% 8%Regional Bank 4% 9% 32% 4%Technology Firm 3% 7% 6% 6%* Excluding promotions & guarantees† Excluding promo ons

Average Change in TC† With…Firm Type*% of Population that Reported TC…


2015 Mid‐Year Review Spring 2015 Candidate Survey Summary

EXPECTED HEADCOUNT CHANGES

Q3. What is your best guess as to how the overall headcount of your group will look a year from now? • Increase by 5% or more • Increase by less than 5% • No Change • Decrease by less than 5% • Decrease by 5% or more

BY FIRM TYPE

* Responses are from professionals with managerial responsibilities only.

12% 12%4% 6%

13%4%

17%4%

4%17%

13%

2%

37%

31%32%

28% 20%

23%

13%

20%

8%

28%20%

23%

20%33%

52%

22%33%

47%

Global Bank Regional Bank Broker‐Dealer Physical/Energy Firm Wealth Management Boutique

Expected Headcount Change in 2015*Decrease by 5% or more Decrease by less than 5% No change Increase by less than 5% Increase by 5% or more

1% 3%11% 8% 3%

9%

21%

6% 17% 13%

42%41%

21%

33% 30%19%

19%17%

21%22% 17%

3%

28%38%

26% 31% 35%

61%

Asset Mgmt Firm Hedge Fund Insurance Firm Private Equity/Real Estate

Prop Firm Technology Firm

Expected Headcount Change in 2015*

Decrease by 5% or more Decrease by less than 5% No change Increase by less than 5% Increase by 5% or more


2015 Mid-Year Review - Options Group...2015 Mid‐Year Review COMPENSATION DATA ANALYSIS METHODOLOGY...

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