The top compensation package was found among "category B" pension funds — private-sector plans that run at least 75% of assets in-house. Among the six pension funds providing sufficient data, the average in-house investment team size was 39.3 professionals, up slightly from 38.5 people in the 2021 survey.
Chief investment officers at these plans saw their average potential compensation package — comprising base salary and bonus — increase 21.1% over the two years to an average £877,013 ($1.1 million). Senior portfolio managers averaged a compensation package of £376,073, up 25.5% vs. the previous survey, while senior investment analysts could take home an average £193,752, up 16.1%.
Category A pension funds — private-sector plans where the majority or all assets are outsourced to external money managers, with 46 respondents to the survey — increased their average team size to 9.3 people, up from 8.7 in 2021.
The average CIO or head of investment compensation package increased to £360,740 per year, up 17% vs. 2021 figures. Senior investment managers could expect to take home up to £202,635, up 10.8% over the two years, while senior investment analysts could command up to £124,702 per year in total compensation, up 25.3%.
The final category — local government pension scheme pools, of which there were five respondents providing sufficient data for the survey — saw team size increase to 33 in 2023 from 29.6 in the 2021 survey.
CIO potential compensation grew 26.1% over the two years, to £312,004, while senior investment managers could take home up to £190,208 per year, up 17.1%. Senior investment analyst compensation potential increased 21.9%, to £78,530 per year across base salary and bonus.
Even taking into account that the report is biannual, pay has increased in most categories at a higher rate than in other industries, Leo Meggitt, a founding partner at Forster Chase who runs the asset management practice and is author of the survey, said in an interview. "In this survey in particular, (there's evidence of) a bit of a war for talent at the investment manager and senior investment analyst side of things. It does tally with the recruitment that we do — there's quite a lot of competition, both from the pension fund and provider sides, for that level."
The increase also relates to specialisms in a lot of cases — an investment manager looking after an alternatives strategy, for example, may command higher pay as they may come from a consultant or asset management firm.
The increased in-house team numbers and pay also tallies with a decrease in average consultant spend. In the 2023 survey, 36 pension funds said their average three-year consultant spend was £387,560, vs. £389,440 across 35 pension funds responding to the 2021 survey. That figure had already decreased from the survey conducted in 2019/2020, when three-year consultant spend was £463,270.
Mr. Meggitt also noted that there are many variables contributing to the findings, including the broad variety of pension funds even within categories. The survey is not designed to be a benchmark, he said, but rather a "snapshot" of the industry and pay.
"There will be some schemes that are very, very simple … with one guy there, probably in the run-off stage, there's not much to do with the assets. And there will be some in there where the CIOs are dragging (the average pay up). There's a range of pension funds … with lots of differences in sophistication — it's an average of all of those and you then, as a pension fund, have to work out where you sit in the scale of sophistication, complexity, how much you run in-house and scheme size."
Regarding industry trends that may have an impact going forward on in-house pay, Mr. Meggitt highlighted the move to outsourced CIO arrangement, which "does impact competition."
While CIO positions at pension funds have always been popular among candidates, he sees an impact in the next couple of years on the younger or more junior roles. A pension fund that plans to move to buyout soon may not be attractive to a junior looking for a stable role.
Questions are already arising about pension funds' plans in terms of buyout, for example. "If you're thinking of going to a pension fund, you don't want to risk — especially in this market — going there and in three years being out of a job. That will reduce the quality of the pool because people will be second-guessing whether they go to a pension fund," Mr. Meggitt said.