Partner Domenick Pugliese was quoted on the average increase in compensation arrangements enacted by some fund boards in 2019 compared to those from the prior year.
Dom said that this could be in response to boards having previously paused or reduced raises in past years.
“From my perspective, I think what you’re probably seeing is some fund groups may have hit the pause button for a number of years,” he said. He noted that the decision could also have been because of consolidation, a decrease in assets or fewer funds, “This year because of increased workload, they are looking at it again and making an adjustment.”
When reviewing compensation rates to determine adjustments for the future, many fund boards rely on data from the Investment Company Institute (ICI), which includes benchmarking on number of funds overseen and complex-wide assets. However, Dom said this data may be unreliable since it’s based on information from the prior year.
“If you want to be at the median, you try to project out where the median will be. It’s an inexact art form,” he said. “The comparability of what competitors are getting is only one factor. The good boards take [the ICI data] with a grain of salt because it’s two years old.”
Despite larger percentage raises at some boards, Dom expects overall director pay to be flat or increase only modestly in 2019.
“I think the fee pressures in the industry are just too significant and the consolidations in the industry are too significant” to support much of an increase, he said.
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