Mutual Fund CCO Compensation in 2013 Print E-mail
Written by Jay Keeshan   

MPI recently completed its ninth annual Survey of Mutual Fund Chief Compliance Officer Compensation and Organizational Practices. This bulletin summarizes the findings and is based on the submissions of 60 mutual fund CCOs from all regions of the U.S., representing funds with $2.1 trillion in assets.  This year’s study found that 62% of the participants were full-time employees and serve as CCO to both the fund and the advisor. 


Mutual fund CCOs continue to see pay increases in recent years after holding relatively flat through the financial crisis.  While the average for the entire group of participants grew just 0.7%, to $361,110, this does not reflect the exact same group of CCOs as in last year’s report.  A subset of the survey participants, which includes 34 CCOs for whom data exists for two years (2012 and 2013), saw an increase in total compensation of 8.6% over the previous year.  
The vast majority (97%) of CCOs receive a bonus as a part of their total compensation, typically ranging from 25% to 100% percent of base pay.   While some of the highest-paid CCOs received as much as 200% or more before the market meltdown, that number has been decreasing and in 2013 the average bonus for large-fund CCOs was 64% of their base pay.  The majority of CCOs reported that their bonus is influenced by management (93%) as well as the board (72%).  81% reported that corporate performance is a factor.  

The range of CCO compensation for the reporting fund families was wide—$125,000 to $800,000—and depended on many variables, such as geographic location, number of funds and portfolios, retail or institutional distribution, number of sub-advisors, and mix of insurance related products. We also found that many CCOs were long term employees of the management company, or had many years of experience at another fund company. As a result CCO compensation was sometimes correlated with age and experience.

As the true costs and benefits of compliance have become clearer over recent years, there has been a trend toward splitting the cost of CCO compensation between the funds and the manager.  57% of CCOs reported being paid at least in part by the fund in 2013. 

Benefits for CCOs have seen some fluctuation since the financial crisis.  Those qualifying for a matching defined contribution/401k plan were once as high as 72% in 2008, but this had decreased to 53% two years ago as many corporations eliminated or suspended their matching programs.  Last year saw the number climb back to 61%.  Just 20% of CCOs are eligible for defined benefit plans versus 38% before the crisis.  Restricted stock plans have remained at about the same level—31% in 2013 vs. 29% in 2007.  However, stock options, once reported by 25% of participants, have now dropped to just 10%.  
In addition to their compliance responsibilities, most participating CCOs perform other functions for the business. We found that 85% of the reporting CCOs perform analytical functions directly for the fund board, which might include involvement in the 15(c) contract renewal process or monitoring soft dollar expenditures.  Also notable in this environment is a continued number of participants reporting “Risk Management Support” as an additional duty, at 71% in 2013, up from 54% in 2007. 48% reported involvement in “Legal Support,” and 37% reported having “Global Responsibilities.” 

The increasingly complex regulatory environment appears to continue to affect the typical background and skill sets of fund CCOs.  This year 48% of the respondents were lawyers, up from 34% in 2007.  Also on the increase were CCOs with at least some form of securities licensing, up to 62% from 53% in 2007.   CPAs, on the other hand, represented just 15% of the participants, down from 34% in 2007. 

Internal reporting—apart from the board—saw an increase in CCOs reporting directly to the CEO, at 51% up from 38% last year.  25% report to the general counsel or CLO (Chief Legal Officer) and 16% report to a higher-ranked CCO at the advisor or parent company, with the rest reporting to the COO, or the CFO.

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