- Why this is important: Most family offices hire professionals as CIOs and compensate them through a mix of strategies
Boosted by good performance and increased demand for investment talent, chief investment officer salaries at family offices increased 14 percent in 2018.
The majority of CIOs were paid a mix of discretionary and formulaic bonuses and received additional non-cash benefits.
Seventy-eight percent of CIO roles were held by non-family members. Ninety-two percent of the CIOs were male.
That was the upshot of the Global Family Office Report 2018 released by UBS in partnership with Campden Wealth Research. The report surveyed 311 family offices worldwide with an average of $808 million in assets under management.
Family offices’ total portfolio returns doubled to 15.5 percent in 2017 from 7 percent in 2016, the report said.
The strong performance was a reason for increased CIO salaries, said Rebecca Gooch, director of research at Campden. “There was more fruit in the basket to share,” she said.
The increased interest in hiring investment professionals also played a part in the salary increases, Gooch said.
Family offices paid their CIOs an average base salary of $312,000 in 2018, up 14 percent from $275,000 in 2017, the report said.
Meanwhile, North American family office CIOs earned an average salary of $405,000, Gooch said.
However, the figure needed to be viewed with caution, she said. A few high earners skewed the sample upward, so the number seemed inflated, Gooch said.
“There is an amazing lack of consistency in CIO salaries in the U.S. family offices,” said Charles Skorina of Charles Skorina & Co, which helps recruit board members, CIOs and other personnel for institutional investors and financial institutions.
Generally, family offices were secretive about this information, which made benchmarking and comparisons difficult, he said.
Usually though, the source of a family’s wealth defined how well they paid their CIO, Skorina said.
Wall Street-owned family offices paid Wall Street-comparable salaries, while others paid less, he said.
Family offices also paid their CIOs an average bonus of 24 percent, the report said.
Bonuses were at the discretion of the family member/professional the CIO reported to or formulaic, based on goal-achievement parameters, or a mix of the two, Gooch said.
More than a third (almost 35 percent) of family-office CIOs received a mix of the two. Thirty-three percent of CIOs earned a formulaic bonus, and 20 percent earned a discretionary bonus in 2018. About 12 percent of the CIOs received no bonus, the report said.
“Formulaic makes sense for the investment professional because it is measured against goals achieved,” Gooch said.
Around 30 percent of North American family offices paid discretionary bonuses to their investment staff, which included CIO, CEO, chief operations officer, chief financial officer, traders and portfolio managers, the report said.
Twenty-eight percent paid formulaic bonuses, 24 percent paid a mix of the two and 18 percent paid no bonuses to their investment staff, the report said.
Excluding base salaries and bonuses, 35 percent of family office professionals said they received non-cash benefits. Thirty percent of the personnel received participation and entrepreneurial bonus, 21 percent received deferred compensation and 14 percent received other compensation that was not specified in the Campden report.
The family office employees were overwhelmingly male, the study said. Ninety-two percent of the CIOs were male, 91 percent of CEOs were male, 61 percent of chief operations officers, 62 percent of CFOs, 87 percent of traders and 86 percent of all portfolio managers at family offices were male.
The silver lining, according to Gooch, was that 14 percent of all family offices said they had diversity targets.
Action Item: Read more on Campden’s report here https://bit.ly/2IkAVMb