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Salary is of course a crucial factor. There are three components to compensation: base salary, bonus and carry. The first two are very much dependent on a firm’s size and its AUM, says Stuart Paterson, Senior Consultant, Finance and Operations at PER.
“If we combine the two figures, the CFOs in the larger funds may well receive more than twice as much in total annual cash than those in smaller funds. Fund size is the biggest single factor affecting compensation,” Paterson says.
Time in the role also plays into an employee’s salary, and as CFOs tend to stay for many years, there is real opportunity to develop their career and their compensation, he adds.
Carry is becoming ever more important. Back-office staff know they are taking home less than their investment team peers, but there is a degree of competition among firms to offer the best package to new staff. This is increasingly including a bigger share in investment profit, Paterson says.
“Carry is an indicator on how they are viewed, as an employee or an integral member of the team that will benefit from the long-term success of the business. For a high-performing fund this could be millions,” he says
This was echoed by Paterson, who adds: “They want to know whether they are a head of back office or a board member/partner in the fund. The latter will attract the best talent.”
Building on this point, Paterson says a CFO is now the CFO, COO, CCO and in some cases the head of IT and human resources.
“It is no longer enough just to be able to crunch the numbers. Process and system automation is becoming more and more important, they also need to learn the legal, compliance, deal/fund/tax structuring etc. The breadth and demands of the role naturally dictate the hiring needs.”
CFOs of small funds, under £1 billion ($1.34 billion; €1.14 billion) in AUM, will do everything that isn’t investment. The CFO of a £10 billion-plus fund will likely have a reasonable-sized team below them, but will still have oversight of these functions, Paterson adds.
“In a recent meeting with a CFO of one of the larger funds, she explained to me that she had just completed a large office move that took over two years to complete. This involved everything from identifying a suitable office space to ordering the stationery.”
On that particular day, she had ordered pens, reviewed tax structures in multiple geographies, assisted with the setup of an overseas office, looked over AIFMD documentation and performed carry waterfall calculations for a new fund, and of course, met me, he adds.
“This is a very typical day for a CFO; they literally have to be a Jack (or Jill) of all trades,” Paterson says.
Paterson said those working at an accountancy firm that have been exposed to other areas of the business put themselves in a strong position. While they may have been in a fund accounting role, for example, they may have also been involved in the corporate and management accounting side.
By Claire Wilson, Private Funds Management