Financial crisis benefits asset managers

Asset managers now earn on average $263,000 (£170,999) compared with $288,000 for investment bankers, an analysis of the public records of 12 investment banks and 18 asset managers conducted by the think-tank New Financial has found.

Tighter regulation has curbed the ability of investment banks to trade with their own money while tougher capital requirements designed to prevent another crisis have reduced their revenues and profits.

Asset managers, meanwhile, have seen revenues and profits per employee rise at a faster rate than pay, with assets under management per employee increasing twice as much since the crisis, as central banks have flooded the market with liquidity causing asset prices to rise to record highs.

Asset managers have benefited from these inflated prices, with fees based on their assets under management (AuM) rising in tandem.

“Pay at investment banks is taking up a shrinking portion of a shrinking pot,” William Wright, managing director at New Financial wrote in the report.

“At asset management firms, it is taking a constant portion of a growing one.”

Pay has fallen from around half of revenues at investment banks before the crisis to around 40 per cent now.

At asset managers, that pay has remained relatively constant at 35 per cent of revenues.

Asset managers have also benefited from ultra-low interest rates since the financial crisis that has prompted yield-hungry investors to look for riskier ways to invest their money.

The prospect of bankers pocketing large cash sums at a time when many people were hit by pay freezes and high unemployment prompted the European Union to cap bonuses of bankers earning more than 500,000 euros (£409,617) a year.