A Union flag, also known as a Union Jack, left, flies next to a European Union (EU) flag outside the European Commission building in Brussels, Belgium, on Monday, Dec. 4, 2017. Brexit talks risk being torpedoed by the taboo issue of the European Court of Justice, a senior British official said, as the U.K. downplayed expectations of a breakthrough when Prime Minister Theresa May meets European officials in Brussels on Monday. Photographer: Dario Pignatelli/Bloomberg
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Pay for UK asset management employees flatlined last year in a sign of how uncertainty around Brexit has left fund houses reluctant to boost salaries, even while investment professionals globally received bumper rises.

According to data from Emolument, the salary benchmarking company, the average total pay of an asset management employee globally rose by 5 per cent last year to $134,000, as buoyant stock markets drove up revenues and in turn remuneration for investment industry professionals.

But UK fund staff pay lagged behind their peers, with remuneration flat over the year. UK employees took home an average £99,000 ($134,000 at the year-end exchange rate) in 2017, the same figure as 2016.

Marcus Williams, asset management specialist at Morgan McKinley, the recruitment company, suggested that the uncertainty around Brexit had hit asset management salaries, with fund houses attempting to keep tight control on their cost base until it becomes clearer what impact the UK leaving the EU will have on their profit margins.

“There is the uncertainty around Brexit, and people have started to offshore some functions to different European countries. They are asking, ‘should we keep our highest paid individuals in the UK or relocate them elsewhere?’” he said.

According to Emolument, which analyses data on almost 11,000 asset management staff, the average pay for US employees last year was $161,000, up 7.3 per cent from $150,000 the year earlier.

In Europe, average pay for fund professionals jumped to €111,000 ($133,000 at the year-end exchange rate) from €106,000, driven by a rise in base salaries.

Tim Wright, a partner at PwC, the consultancy, said pay for asset management staff globally rose on the back of a good year for the industry.

“Markets performed very strongly and many [asset management companies] delivered excellent investment returns for their clients. In addition a large number of firms increased the level of assets managed [by] attracting new flows,” he said.

“As a result many fund managers and sales professionals will have been deemed to have performed strongly resulting in increased incentive payments.”

Jonathan Doolan, head of Europe, Middle East and Africa at Casey Quirk, the asset management consultancy, agreed that the global growth in salaries was linked to a “better than excepted year for asset managers”.

“Last year was a really good year for the industry. The market rose quite nicely. And overall organic growth was much higher than people had initially anticipated,” he said.

The MSCI World Index, a benchmark of global markets, returned more than 22 per cent last year, although stock market performance has been patchy in 2018.

Alice Leguay, co-founder of Emolument, said asset managers globally were being forced to increase pay to attract and retain staff.

“The financial sector at large is facing stiff competition for talent from technology giants,” she said.

“While banks and asset managers are putting in place medium to long term plans to try to provide an attractive culture, they are trying to bridge the gap with higher pay packages, hence the recent hike in pay in the asset management industry since 2016.”

Asset managers, such as BlackRock, have attempted to make their companies attractive to younger workers by introducing casual dress policies and other initiatives.

BlackRock paid $4.3bn in employee compensation and benefits last year, up nearly 10 per cent on 2016.

Mr Williams predicted salaries in the UK could increase marginally in 2018. He added hiring in the fund industry in the UK had increased year on year so far in 2018.

But Mr Wright questioned whether current level of high pay in the industry globally could continue, as the sector’s profits come under increased pressure. The rapid rise of passive funds has piled pressure on active managers and driven down fees.

“Although firms have delivered strong performance in many areas, they have also faced a significant squeeze on profit margins with downward pressure on fee rates and a shift into lower margin products,” Mr Wright said.

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