Basic HTML Version
22
|
2013 Business Expense Benchmark Survey
to only $186,934 for firms with >$10.0 billion AUM.
New products being added tend to fall into the long-
only or regulated alternatives categories where there
is a wider pool of talent fromwhich to draw experienced
personnel. Trade and portfolio support for regulated or
long-only products is much less complex than for most
privately traded hedge fund strategies and there are
expansive operations teams’ at large asset managers
that can be mined for experienced employees.
Overall technology spend also increases sharply
by $8.2 million—33% of the total $24.7 rise in
expenditures. The bulk of that gain can be traced
to higher data costs for firms with >$10.0 billion
AUM. Data costs rise to $9.0 million for these firms,
up from an average of only $3.0 million for firms
at the $10.0 billion AUM threshold. Regulated and
long-only products require daily pricing and
performance attribution, both of which require the
firm to bring in substantially more data than when
their product suite focused almost exclusively in the
hedge fund space.
The final area where spend spikes higher is in the
marketing realm; overall marketing expenses rise
by $7.9 million. There are two ways in which the
marketing team grows. The number of individuals
focused on marketing and investor relations grows
from 10.6 to 31.7, but the seniority of the team erodes
as evidenced by the decline in average compensation
noted in our model. The per head compensation for
marketing and investor relations professionals at the
$10.0 billion AUM firms averaged $615,907 versus
$364,125 at the firms with >$10.0 billion AUM.
The other facet of marketing where there is
significantly more spend is on third party marketers.
Firms with $10.0 billion AUM spent on average $2.0
million for this support whereas managers with
>$10.0 billion AUM spent $4.3 million. Accessing
new channels for regulated alternative products or
making inroads into the long only allocators requires
a dedicated focus and there are often firms better
suited to make those initial introductions than having
the manager themselves invest in building out an
overly large team.
While it is informative to see how expenditures change
as firms surpass the $10.0 billion AUM threshold, it is
clear that this increased spending is being done to
support a shift in firm strategy. What prompts this
shift in strategy will be explored in the coming section.