BDMs feel the heat amid alternatives popularity

External pressure on fund managers is meaning reduced bonuses for their business development managers (BDMs), but salaries remain high in the space. 

The annual Fund Management Distribution Salary Survey from Kaizen Recruitment found senior BDMs can earn between $200,000 and 270,000 in the retail and wholesale space, and $220,000 to $320,000 in the institutional space. 

The retail and wholesale client space represents the majority of the distribution market.

For a head of distribution, this rises to as much as $450,000 in the institutional space and $350,000 in the retail and wholesale space. At the junior level, there is less variability between the two fields, with retail and wholesale BDMs earning $110,000 to $150,000, and insto ones earning $130,000 to $160,000. 

These figures include superannuation but exclude any allowance or potential bonuses, which Kaizen said can be as much as 100 per cent of a BDM’s salary.

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However, pressure on fund managers lately, especially those operating in the active management space, has meant bonuses are no longer as lucrative as they may once have been. Those BDMs that did report receiving a high bonus of around 80–100 per cent of their salary worked in firms with high-performing funds or alternative strategies in private markets.

Others received alternative types of benefits such as additional leave (48 per cent of respondents), education allowance (48 per cent) and health and wellness allowance (41 per cent). This tallies with findings by recruitment firm Robert Half last month that employees are open to accepting benefits such as flexible working at the expense of a pay rise when they receive a promotion.

Kaizen said: “One of the most common questions this year is about funds management distribution professionals’ bonuses. We have identified that retail/wholesale on average was 20–40 per cent of base salary depending on performance. On the other hand, institutional on average was 50–60 per cent of base salary depending on performance.

“External market pressure on funds management firms, especially those with traditional strategies, has proven tough to raise capital and we noted a trend where several distribution professionals, unfortunately, were not able to meet their targets, hence bonuses in some cases have not been as lucrative as previous years.”

Differentiation 

The retail and wholesale client space represents the majority of the distribution market and is experiencing the most hiring activity, the firm said, with firms specifically looking for candidates who have experience working with wealth managers and family offices.

On the other hand, those working in the institutional space may find teams are becoming “leaner” as there is a strategic shift towards efficiency and specialisation.

Equities and fixed income remain the primary asset classes distributed at 62 per cent and 60 per cent across all three channels, but Kaizen flagged they are “under scrutiny”.

Earlier this year, First Sentier Investors (FSI) announced it is closing four of its investment teams covering Australian Fixed Income, Global Credit, Equity Income and Emerging Companies. These four teams encompassed 10 funds affecting $14 billion in assets under management.

Similarly, Perpetual has detailed challenges it faces as an active manager and recently negotiated a deal with US private equity player KKR for its wealth management and corporate trust business.

“The December quarter was a difficult period for active asset managers globally, being the worst quarter in 15 years for active equity fund flows,” chief executive Rob Adams said in January after the firm reported $4.3 billion in quarterly outflows. 

These two traditional asset classes were followed by infrastructure (52 per cent) and real estate (50 per cent), then private markets products as investors seek alternative exposure, which Kaizen said is experiencing “rapid growth”. 

“In this environment with a strong demand for alternative investments, squeezed margins, consolidation of the Australian institutional market and fierce competition, not all fund managers will survive.

“Fund managers need a compelling value proposition, strong performance and a solid brand and reputation. Additionally, these strategies are often the first to be transitioned to passive management by wholesale and retail investors.”

Research by RIVA Recruitment earlier this year found BDMs working in private equity and private credit were among those experiencing higher bonuses as well as those intermediary BDMs targeting financial advisers with managed accounts.