Equity fund managers to get sky-high bonuses amid stellar asset growth

Mutual fund houses are likely to dole out higher bonuses and increments this year in a bid to retain and reward top performers.

Equity fund managers will be in the spotlight given the fast clip at which assets have grown in the past year, especially for the mid- and small-cap schemes. The managers may pocket bonuses in the range of 80-100 per cent of annual salary, on average, much higher than previous years.

Their peers on the debt side may not be as lucky. Barring managers at top AMCs, the bonuses are likely to be closer to 30 per cent or lower. That’s because the change in tax status has impacted asset growth for most debt funds last year except the larger ones where economies of scale have kicked in.

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Sales and marketing teams may get 30-40 per cent of annual salary, on average, as bonus.

“Talent retention as well as attraction has become a big issue for the industry given that private equity, venture capital and PMS players are offering much higher salaries and payoffs. The equity and sales teams have seen a fair bit of churn in the past year and they will have to be compensated suitably to ensure they do not jump ship,” said Nilesh Shah, MD, Kotak MF.

While equity assets grew over 54 per cent during the year, debt assets posted a 13 per cent growth. Key equity categories have returned 40-59 per cent in the past year. Equity assets are a lot stickier than debt assets and can add substantially to the profitability of fund houses given higher fund management fees.

Bonuses for sales and business development teams are typically proportionate to growth in assets and investor folios. Fund managers’ compensation, on the other hand, are largely linked to scheme performance.

To be clear, bonuses do not reflect overall compensation. Profit-sharing arrangements and employee stock option plans have become a big part of the remuneration, especially for the bigger AMCs, said Shah.

Increments will be generous as well — likely in low-to-mid double-digits, which is higher than the last few years and better than several other industries, said experts. Those with salaries below ₹15 lakh per annum may see a 25-50 per cent rise in compensation.

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“We are likely to see hiring across the board given the entry of newer asset managers and the migration of talent to AIF and PMS players,” said Swarup Mohanty, CEO, Mirae Asset MF. “The industry could also see the need for differentiated manpower looking at the changing landscape of communication in the digital world and the beginning of the passive business.”

“We will need to reach out to more people given the backdrop of how the industry has grown in the past year. All this needs to be done in the phygital mode and we will require more feet on street across the country for the same,” said DP Singh, deputy CEO, SBI MF.

The past year has seen senior equity fund managers Pankaj Tibrewal and Jinesh Gopani quit to set out on their own. Sohini Andani, who quit SBI Mutual Fund recently, is also rumoured to be leaving the industry.