Pension funds staff at wage list top

Tõnis Oja
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Illustration: Pm

Average salary at Danske Capital is five times the Estonian average, and thrice the average of financial sector.

In asset management, salaries are among the best in Estonia. The pension funds managed by these companies, however, face criticism due to results.

In the Äripäev wage-payer top list published today, asset management companies are at leading positions. With employees at four funds, salaries exceed even law firms.

Top wages of 2012 went to folks employed by Danske Capital, average wages per employee amounting to €4,668 a month. That’s five times the Estonian average, and more than thrice the average of financial sector. In wage-earners top list, Danske Capital is placed 11th, SEB Asset Management (Varahaldus) 19th, Swedbank’s investment funds 39th and Nordea Pank 69th.

The smallest average wages – €1,115 a month – are paid at LHV Asset Management; even so, the figure isn’t pure gold as 15 of the 29 wage earners of the most successful asset manager of late worked part-time; therefore, the real average is obviously much higher.

As explained by Angelika Tagel, head of Nordea Pensions Estonia managing the Nordea pension funds, explains that the wage level is high as the managing and increasing assets requires specific knowhow and expertise, only possessed by a few on labour market.

«Asset managers must pay competitive wages to their experts, to motivate them to use their knowledge on home market,» said Ms Tagel. «As compared to average wages of asset managers in Europe, the Estonian wages are still considerably lower.»

SEB Varahaldus board member Sven Kunsing added that their wage spending isn’t only linked to salaries of pension fund chiefs. «The fact that SEB Varahaldus fund managers in our Tallinn office are managing the entire SEB group’s East-Europe-oriented asset and securities investments in Luxemburg, Sweden and Estonia, isn’t widely known,» underlined Mr Kunsing. «Still, most of the people on our payroll are dealing with just that, and are competing with global financial centres where, I’m sure, the average wages are remarkably higher.»

«The Eastern-European business is almost not linked to local pension funds nor with their management and marketing costs. At the same time, it has a very significant impact on our average wage level,» added Mr Kunsing.

High wages ought to be accompanied by work well done; still, in that regard, the funds stand to much blame. According to OECD report published at the beginning of November, Estonian pension funds are the most expensive and the worst in European Union. During 2008–2012, the average yield of Estonian pension funds was the worst in  OECD countries.

Financial Supervision Authority has also criticised pension funds for their excessive salaries. As pension funds’ portfolios contain lots of investments funds shares (both those listed and those actively traded) and we have essentially to do with funds of funds, then the management fees of the pension funds ought to be lower.

According to Sven Kunsing, as the volumes have gone up, management fees have gradually been lowered – and will probably continue to do so.

«Some fees, like the entrance fee for instance, have been dropped altogether as the system has developed,» said Mr Kunsing. «The fastest assets growth has so far been shown by some funds with higher fees, which have invested heavily in marketing. Probably, these have the greatest potential to lower their fees.»

Angelika Tagel added that the size of wages has no impact on rates of asset management fees. «Asset management fees of pension funds are determined by volumes of assets managed, and by investment activities,» said Ms Tagel.