Advent Software, Inc. (NASDAQ: ADVS), a leading provider of software and services for the global investment management industry, today released the results of the 2010 Asset Management Operations and Compensation Study, which tracks key industry trends in technology and operations, as well as employee compensation. The survey found that a majority of respondents increased their operations budgets in 2010 and expect further increases in the year ahead. Meanwhile, total compensation for executives, portfolio managers, traders and analysts was significantly down from 2008 levels.
The Advent Users Group (AUG), an independent forum of Advent product users, conducted the study with sponsorship by Advent and the Investment Adviser Association. The results are based on a survey of 136 investment firms that range in size from less than $100 million to more than $30 billion in assets under management. The compensation survey gathered data on more than 1,000 individuals, from CEOs to receptionists.
Anthony Sperling, Senior Vice President and General Manager of Adventâs Investment Management Group, commented, âThe results of this survey bear out something that we have long maintained: operational efficiency gained through technology can be a firmâs greatest asset when markets are volatile and margins are squeezed. Asset managers continue to search out technology solutions that will help them address greater business complexity, increasing regulatory demands, and rising client expectations as they stabilize their operations in the wake of the financial crisis. And the fact that profit margins are stable while the IT investment is increasing suggests that firms are reaping the benefits of more streamlined operations.â
Market Turmoil Hits Financial Performance
In the AUGâs first full year survey since the beginning of the market crisis in Fall 2008, average revenue among respondents rose a modest 1.7% from 2008 to 2009 year-end, as asset levels recovered in tandem with rising markets. Not all firms have bounced back, and a quarter of all firms reported revenue declines of 15% or more. During the same period, overall fee realization slid from an average of 70 to 53 basis points. However, average profit margins for 2008 and 2009 were virtually identical at 23.7%, suggesting that many firms were successful in containing costs to offset falling revenues.
Technology and Operations Highlights
In the wake of the market turbulence, 63% of the survey respondents say their operations budgets increased in 2010, and a majority of firms of all sizes anticipate additional increases in 2011. Disaster recovery was the factor cited most often as a driver of budget increases, and also ranks high on the list of firmsâ near-term priorities.
Portfolio accounting and trading continue to claim almost 40% of average IT and operations spending. Most respondents rely on outside solution providers for their core portfolio accounting, reporting and trade order management systems.
Survey respondents cited portfolio accounting and client reporting, disaster recovery, and client service contact management as the top priority IT initiatives for 2011.
Firms reported a variety of changes in their compensation plans in 2010, ranging from minor to substantial. The general trend has been toward more discretionary rewards and greater emphasis on long-term incentives. Compared to two years prior, a greater number of firms reported offering profit sharing plans, stock purchase plans, and equity grants.
Compensation levels for many positions were down from those reported in 2008, particularly among senior executives and investment professionals. Median chief executive officer pay fell 15% from 2008 to $383,000, with an average of $614,000. Chief investment officers (CIO), typically the second-highest paid executive, earned an average $442,000. Four out of ten CIOs saw their compensation fall during the past year. Median compensation paid to other investment professionals fell by double-digit percentages since 2008, but more than half reported compensation starting to rise over the past year. Senior operations staff saw median compensation rise slightly from two years earlier.
âStaffing levels and compensation are areas where adjustments obviously had to be made, and weâre seeing a return to stability,â Mr. Sperling noted. âHere again is where technology can help firms do more with less and derive more value from employees at all levels.â
The full study compares firms by AUM size, geography and other criteria, providing managers with detailed data for making IT, operational and compensation decisions.