Knowledge Center: Publication
2020 North American Alternative Asset Management Marketing and Investor Relations Professional Compensation Survey6/30/2020 Graham Beatty, Paul Charles and John Hindley
Welcome to the report on our latest North America alternative asset management marketing and investor relations professional compensation survey. Together with our surveys of private equity investment and operating professionals, this report provides a comprehensive picture of the compensation that North American executives in the hedge fund, real estate, and private equity industries currently receive.
For this report, Heidrick & Struggles compiled compensation data from a survey of 300 alternative asset management marketing and investor relations professionals in North America who are employed in private equity, hedge funds, or real estate. (See sidebar, “Methodology”).
Alternative asset management market context
This year’s survey of compensation of marketing and investor relations professionals in the hedge fund, real estate investment, and private equity industries was set against a backdrop of shifts within these sectors, and in the world at large, prior to the COVID-19 pandemic. How professionals were paid in a particular year has generally indicated how they will be paid in the following year, but it is far from clear as of this writing that that will be the case in 2020.
The hedge fund industry is mature, and assets under management (AUM) have remained flat, globally, for the past several years now. This has made it challenging to raise assets, which in turn has had a detrimental effect on compensation. However, during the same period, real estate and private capital have seen remarkable levels of inflows that have reshaped compensation at firms in those sectors and made them ever more attractive, especially to more junior professionals.
Overall in 2019, institutional investors showed a willingness to explore investing in alternative investment strategies, which led to dynamic and robust capital-raising activity in private equity, venture capital, and private credit. Increased competition for capital has meant that firms have broadened their coverage for capital beyond pension funds, endowments and foundations, and sovereign wealth funds and into funds of funds, family offices, registered investment advisers, and insurance, among others. Platforms continued to expand their product capabilities both organically and inorganically. And real assets enjoyed a notable edge in fundraising, which has positive implications for both capital flows and talent attraction. Finally, the continued globalization of asset raising led to more funds tapping international asset pools in 2019, with a particular focus on Asia.
Growth equity was particularly attractive in 2019, with venture capital firms doing larger deals and private equity firms raising specialist growth funds. The number of new funds continued to increase as a result of prolonged strong market performance, especially in technology. While preferred large placement agents dominate the sector, boutique firms have continued to perform while facing the challenges of fee pressures and a highly competitive market for capital.
Currently, many managers of alternative assets are actively fundraising as a result of the COVID-19 crisis, whether it is for distressed and special situation funds or simply to take advantage of buying opportunities that might appear in the light of market corrections. However, we expect a slowdown in capital-raising mandates in the near term and a shuffling of the performance-return league tables, which will redirect capital flows to certain managers.
Hiring and compensation
As a complement to a slowdown in capital-raising mandates, we expect an uptick in the number of investor relations positions, with client communications, reporting, and focus at their core. Over the past year as a whole, we have seen high demand for fundraising and investor relations talent, as greater competition in the industry has led alternatives firms to acknowledge their strategic and tactical importance. Recently formed funds are hiring investor relations professionals earlier in a firm’s development, sometimes at fund I and pre–fund II capital-raising stages. We have seen that as firms mature, they become more interested in adding marketing and investor relations roles, particularly firms with $1 billion to $5 billion in AUM. It’s also notable that in 2019, real estate firms refined and expanded fundraising and client services teams, leading them to compete with other alternatives firms for the same talent.
We have also observed a continued trend of the development of fundraising and investor relations teams that are increasingly specialized in terms of product representation, geographical coverage, and functional alignment. Many larger firms continue to develop dedicated fundraising and investor relations teams, and the importance of investment consultants in the capital-raising process continues to grow. In parallel, fundraising and investor relations teams are becoming increasingly sophisticated, consisting of professionals who can demonstrate deep product knowledge and have the ability to clearly differentiate messaging verbally and visually—which allow firms to deploy more consultative, knowledgeable, and sophisticated marketing strategies.
The increase in the number and importance of these roles has led to a highly competitive talent environment, with many people often receiving offers from multiple firms. There has been a particular increase in competition in strategies that are in greater demand, such as debt and infrastructure, where there is a small talent pool. Competition is particularly strong for people who have a proven track record of asset raising and a global network of relationships.
Firms are hiring a younger bench of investor relations talent. Concurrently, we also see experienced executives whose firms became large multiproduct asset gatherers interested in heading fundraising and investor relations on small- to medium-size platforms with fewer products. Many firm leaders remain averse to candidates who have changed jobs frequently, but, given market challenges, we are seeing greater leeway in this regard.
The larger the firm at which a marketing or investor relations professional works, the better his or her compensation is, our survey shows, and $10 billion in AUM is the clearest inflection point for this trend. The data also shows, as expected, that professionals at the largest firms or with the most experience are more highly compensated than those who are new to the profession or work at smaller firms. We also know anecdotally that working for a larger firm typically provides professionals with a broader range of products to sell, less volatile year-on-year earnings, and greater possibilities for career advancement.1
Base and bonus compensation trends, 2017–2019
Compensation for alternative asset management marketing and investor relations professionals in North America changed modestly—generally with small upticks—in 2019 from 2018 and 2017. Those with more experience at the smaller firms had only modest gains, if any. Bonuses generally trended upward each of the three years.
Viewed by industry sector for 2019, professionals in private equity surpassed their colleagues in hedge funds in median total cash compensation pay bands.
However, 2019 median cash bonus was more variable across the different sectors.
It is also notable that just over half the respondents worked in one dedicated sector, either private equity, hedge funds, or real estate, while the others worked in more than one. The survey shows that total cash compensation skews higher at the top end for those working only in private equity.
The data also shows that sales leaders across all sectors are typically among the most highly compensated people in the marketing and investor relations functions. In 2019, in private equity, for example, people in head-of-sales roles were 5.8 times more likely than individual producers to have a combined cash base and bonus of more than $1 million; though lower in hedge funds and real estate, the multiples there are still high.
- Heads of sales are 5.8 times more likely than individual sales producers, 1.8 times more likely than those in sales and investor relations roles, and 1.6 times more likely than those in other roles to make $1 million or more.
- Those who cover distressed lending/special situations are 28% more likely than those who cover venture and growth to make $1 million or more in total compensation.
- Heads of sales are 3.1 times more likely than those in sales and investor relations roles and 1.3 times more likely than individual sales producers to make $1 million or more.
- Those who cover macro products are 110% more likely than those who cover directional equity products and 120% more likely than those who cover arbitrage strategies to make $1 million or more in total compensation.
- Heads of sales are 2.6 times more likely than individual sales producers, 2.2 times more likely than those in sales and Investor relations, and 1.2 times more likely than those in other roles to make $1 million or more.
- Those who cover separately managed accounts and infrastructure equity are 39% more likely than those in real estate—open-end—equity and real estate—debt to make $1 million or more.
In an online survey in the field before the COVID-19 pandemic became widespread in the United States and Canada, we asked participants to provide their compensation data for 2017, 2018, and 2019. All data collected was self-reported by the survey respondents and has been aggregated to evaluate trends in cash base salary and bonus compensation packages.
About the authors
Paul Charles (firstname.lastname@example.org) is a partner in Heidrick & Struggles’ San Francisco office and a member of the Financial Services and Technology practices.
Graham Beatty (email@example.com) is a partner in the New York office and the Americas Sector Leader of the Real Estate Practice.
John Hindley (firstname.lastname@example.org) is a partner in the New York office and a member of the Financial Services Practice.
The authors wish to thank Mohd Arsalan and Akshat Singhal for their contributions to this report.
1 We are seeing some larger hedge funds creating roles, such as product development and chief operating officer for sales, with compensation that is harder to compare to any benchmark. In this report, we have not reported on these new roles, as the data points are few and many idiosyncrasies make benchmarking difficult.