Average Salary: $115,200
Expected Lifetime Earnings: $4,809,000
Not as much as a hedge fund manager makes, but still roughly 10 times the amount of the average American. But you should be making that much more than the norm. You are not average, no siree, Bob. Managing people's life savings is simply more important than being certain that their cuticles are evenly pushed back—so you get paid more. Duh. While the economics of a hedge fund are 2-20 (that is, the people who manage the money get a 2% per year fee and then 20% of the profits), a mutual fund manager gets roughly 1% of the assets under management (very broadly speaking). That fee structure might seem like a paltry fraction of the compensation a hedge fund manager gets, but the expectations for hedge funds is that they compound at a very super mega high rate—like 20-30% per year. And if they don't, they get fired. A mutual fund "just" needs to be the market–call it the S&P 500. If they do, the money usually stays in and the fees keep getting collected. And while a big hedge fund might be a billion dollars, mutual fund complexes get larger than Trillions of dollars and yes that's with a Texas "T."
So think about the ranges—one person, splitting maybe a secretary with another partner and with the help of 3-4 junior analysts each making $200,000 a year can manage maybe a billion bucks of mutual fund money. That's a billion dollars at 1% or $10 million of revenues to the management company associated with it. On that $10 million, there are all kinds of costs associated with distribution—i.e., getting the brokers to encourage their clients to buy into your mutual fund. Maybe that's 25% or more of your total. Call it $7 million remaining to pay the bills. One big bill is your junior analysts. With office space and human resource services and insurance and travel and benefits, call 'em costing a million bucks. So now you have $6 million in quasi operating profits associated with your piece of the money that you are managing. If you do poorly, the assets under management shrink, clients redeem their investments and, as your billion AUM turns into half that, everything craters.
They don't make Earth like they used to.
You get fired. Your junior players eat the meat off of your bones and hope to...do better with their pieces they hope to manage from whatever is left of your leavings. But if you do well, money follows—that is, if the market is up 10% and you are up 20% in your fund, it's not like next year you have $1.2 billion to manage—tons of money flows in as you are perceived as a "hot" manager. Maybe next year you have $2 billion or $20 million in revenues associated with your AUM. The good news is that you are "hot." The bad news is that you are "hot." Heat seeks levels and generally regresses to the mean. And yeah, it's pretty mean when it does. Read the hedge fund missive if you wanna see REALLY mean.