Mutual Fund Chief Compliance Officer Compensation

Transcription

1 Mutual Fund Chief Compliance Officer Compensation THE 2015 MPI ANNUAL SURVEY November 3, 2015 (First released June 25, 2015)

2 Today s Speakers Susan Wyderko President & CEO, Mutual Fund Directors Forum (Moderator) Meyrick Payne Sr. Partner, Management Practice Jay Keeshan Partner, Management Practice 2

3 Agenda Introduction/Survey Methodology Participant Details Executive Summary/Trends/Highlights CCO Compensation/Structure Other Benefits Organizational Practices 3

4 Survey Methodology 10 th Annual Survey- Since 2006 Data collection in spring, delivered in June Mailed/ ed to database, distributed at ICI conference Full confidentiality assured 60 participants in 2015 Representative sample 4

5 Participant Details Participating CCOs represented a total of $2.8 trillion in assets under management. All regions of the U.S. were represented in the survey. Northwest 4% West 20% Midwest 31% Northeast * 12% Boston 8% New York 15% Southwest 6% Southeast 4% * excluding Boston/NYC 5

6 Participant Details 100% of participants are CCOs who are employed full time. 59% serve as CCO to both the funds and the advisor. The average age was 48. Respondents had the following qualifications: Complex assets were represented as follows: 15% were CPAs 45% were lawyers 20% have MBAs 66% had some form of securities licensing most common were the Series 6, 7, 24, 26, 27, 63, and 65 18% have SEC/other regulatory experience 24% 17% 27% 32% $75 Billion+ $15 Billion -- $75 Billion $4 Billion -- $15 Billion < $4 Billion 6

7 Participant Details Independent contractors and fund only CCOs were in the minority; the majority of CCOs were full-time, salaried employees and performed duties for advisors as well as the funds. 3% 97% 41% 59% Independent Contractors Salaried Employees Fund Only Fund & Advisor 7

8 Survey Summary / Trends After holding relatively flat through the financial crisis, many CCOs have now seen steady increases over the past few years. In this year s study the 60 participants received average total compensation of $389,402, versus $361,110 last year, a gain of 7.8%. A subset of the survey participants, which includes 31 participant CCOs for whom data exists for two years (2013 and 2014), saw an increase in total compensation of 13.1% over the previous year. Bonuses for CCOs typically range from 25% to 100% percent of base pay. While some of the highest-paid CCOs received as much as 200% or more before the market meltdown, that number has been decreasing and in 2014 the average bonus for large-fund CCOs was 59% of their base pay. 8

9 Total Compensation 9

10 Range of Compensation The range of CCO compensation for the reporting fund families was very wide and depended on many variables. Geographic location, number of funds and portfolios, retail or institutional distribution, number of sub-advisers, and mix of insurance related products were among the numerous variables affecting pay levels. Many CCOs had been long term employees of the management company, or had had many years of experience at another fund company. As a result, CCO compensation is often correlated with age or length of experience. 10

11 SEC Comments Chief of Staff Buddy Donohue recently provided his top 9 considerations for CCOs in a speech at a compliance conference in San Diego. 1. Laws, Regulations and other Requirements 2. Organization and Operations of the Firm 3. Conflicts of Interest 4. Clients of the Firm 5. Compliance and Other Systems 6. Policies and Procedures 7. Markets and Business Practices 8. Culture of the Firm 9. What DON T I Know? 11

12 Bonus as a Factor in Total Compensation While base salaries are relatively stable, bonuses are a significant factor in total compensation. The proportion of bonus as a percentage of total pay often grows with the size of the complex. CCOs at the largest complexes $75 billion and above received higher percentage bonuses, typically about 50% to 100% of base pay. $600,000 Average CCO Compensation $500,000 $400,000 $300,000 $200,000 $100,000 Bonus Base $0 $0 to $4bn $4bn to $15bn $15bn-$75bn Above $75bn 12

13 CCO Total Compensation: Assets up to $4 Billion CCO Total Compensation (AUM < $4bn) The average for this group was $300,032 with a range of $179,634 to $420,429 within one standard deviation. The full range was from roughly $140,000 to $550,000. Bonuses for this group averaged approximately 38% of base pay and 26% of total pay. $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 13

14 CCO Total Compensation: Assets $4 Billion to $15 Billion CCO Total Compensation (AUM $4bn - $15bn) The average for this group was $314,533 with a range of $202,174 to $426,891 within one standard deviation. The full range was from roughly $170,000 to $630,000. Bonuses for this group averaged approximately 37% of base pay and 24% of total pay. $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 14

15 CCO Total Compensation: Assets $15 Billion to $75 Billion CCO Total Compensation (AUM $15bn - $75bn) The average for this group was $506,946 with a range of $297,999 to $715,892 within one standard deviation. The full range was from roughly $165,000 to $925,000. Bonuses for this group averaged approximately 57% of base pay and 30% of total pay. $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 15

16 CCO Total Compensation: Assets $75 Billion + CCO Total Compensation (AUM > $75bn) The average for this group was $570,800 with a range of $379,950 to $761,650 within one standard deviation. The full range was from roughly $300,000 to $900,000. Bonuses for this group averaged approximately 59% of base pay and 30% of total pay. $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 16

17 Influence on Bonus The vast majority of full-time CCOs (95%) receive a bonus as a part of their total compensation. Management companies and increasingly fund boards each have a strong influence in setting bonuses. Factors Influencing Bonus for Full Time CCOs % 78% 68% 66% 70% 70% 96% 91% 17% 9% Fund Performance Corporate Performance CCO Workplan Board Discretion Management Discretion 17

18 Compensation Comparisons CCOs with different duties and backgrounds on average receive varying levels of compensation. Average Total Compensation $389,402 $316,958 $437,007 $437,268 $320,696 $355,221 $369,703 Participant Average Fund-only CCOs Advisor & Fund CCOs Lawyers CPAs Non Lawyer/CPA SEC Exp. 18

19 Other Benefits 19

20 Employee Benefits The CCO position benefits are typical for an officer of his/her salary grade (Full-time salaried employees). Defined Contrib. Plan/401K Defined Benefit Pension Deferred Comp. Perqs. For Equiv. Pay Grade Retirement Health Benefits Current Health Benefits Vacation for Eq. Pay Grade Stock Options Restricted Stock 26% 19% 34% 25% 33% 32% 22% 25% 13% 29% 33% 46% 57% 79% % 98% 92% 98% 20

21 Organizational Practices 21

22 Additional Duties The majority of participant CCOs perform other functions for the funds, management, or both. Legal Support Risk Management Support 51% 52% 54% 71% Internal Audit Global Responsibilities 32% 35% 36% Board Support 72% 83% 22

23 CCO Internal Reporting 44% of CCOs report internally to the CEO; 22% to their general counsel. CEO 44% General Counsel/CLO Advisor/Parent/Global CCO 19% 22% COO 8% CFO President 3% 4% 23

24 Compensation Source There has been a growing trend toward sharing the cost of the CCO between the funds and the manager. This year 50% reported some or all of their compensation being paid by the funds. CCO Compensation Split How Much the Funds Contribute (if they do contribute) 28% 14% 50% 50% 10% 48% Fund Pays All or Part Advisor Pays 100% Up to 25% 25% to 50% 51% to 75% 75% to 100% 24

25 Management Practice Inc. 216 West Hill Road, Suite 200 Stamford, CT Phone: (203) Jay Keeshan Meyrick Payne 25