Wall Street WARZONE
Mutual Fund Portfolio Managers: He Made $436,500? And You Lost How Much? Not Fair!
by Paul B Farrell, JD, PhD
| Discuss | | 5/1/2010

Nice work if you can get it! Americans invest over $10 trillion in mutual funds. There are about 70,000 portfolio managers. Average compensation was around $436,500 annually a few years ago. With 10 years experience, the average jumped approximately $1.8 million annually. Unfortunately, in spite of their fabulous compensation, they still hate indexing even though each year 75-85% of them cannot beat their indexes, and only one manager has been able to beat the S&P 500 every year for the past fifteen years. His streak ended in the credit meltdown. Thanks to a network of highly effective lobbyists, a protective Congress and a pro-management SEC, managers continue “stealing” one third of Main Street investors’ returns in broad daylight, with no serious legislative and regulatory oversight.

The Economist magazine offers a textbook description: “Imagine a business in which other people hand you their money to look after and pay you handsomely for doing so. Even better, your fees go up every year, even if you are hopeless at the job. It sounds perfect. That business exists. It is called fund management. … The average profit margin of the fund managers that took part in a survey by Boston Consulting Group was a staggering 42%. In part, this is because most fund managers do not compete on price.” (More)