Top-paid mutual fund manager Richard Woolnough set for major fall in remuneration

M&G’s Richard Woolnough set for pay cut  after money flees his fund

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The Independent Online

One of Britain’s best-paid fund managers is facing a drastic pay cut after investors pulled billions out of his flagging funds last year.

Richard Woolnough, fund manager at Prudential’s M&G, saw a 37 per cent fall in the size of his flagship “Optimal Income” bond fund in 2015 – a slump will hit his pay when the figure is revealed at the end of March.

Mr Woolnough’s pay has been closely watched since it emerged he earned more than Pru’s then-chief executive Tidjane Thiam in 2013, picking up £17.5m. Last year, his payout was £15.4m, making him Pru’s top earner and one of the City’s best-paid figures.

Fund managers earn money from management fees based on the size of pot they look after, plus performance fees if they hit certain targets. Mr Woolnough’s Optimal Income fund shed £9bn last year to £15bn from £24bn, meaning that management fees are likely to see a similar fall. 

Performance related-fees, which impact Mr Woolnough’s pay to a larger degree, are also likely to lag after the fund lost 1.1 per cent over the past 12 months, according to Trustnet.Prudential declined to  comment. 

The FTSE 100 giant is forced to disclose the figures in line with stock-market rules in Hong Kong, where it has a  secondary listing. The rules force companies to inform investors of the five highest-paid employees. 

Pru’s annual figures show M&G performance fees shrank by a third last year to £22m from £33m. Fee income also fell to £934m from £953m. The group is currently undergoing a change a leadership with boss Mike McLintock heading for the exit to be replaced by Aberdeen’s Anne Richards. 

Mr Woolnough, who also manages M&G’s Corporate Bond fund, has been a victim of the US Federal Reserve’s first interest rate hike for seven years. The move has prompted investors to shun bonds in favour of stocks over the past 12 months.

Optimal Income was the best selling fund in 2014 and had an incredible run, attracting £4.32bn from investors. But it has been on the receiving end of the recent sharp shift in sentiment. 

Mr Woolnough’s pay highlights the incredible riches on offer for City fund managers if their funds rise in size.

While hedge fund managers usualy dominate attention with their super-sized payouts, mutual fund managers working for pension and insurance companies are quietly picking up vast sums often exceeding the salary and benefits of FTSE 100 chief executives. 

The Financial Conduct Authority is currently undertaking a market analysis of the fund management sector to see whether it offers customers value for money. The report, due later this year, could conclude that the industry is not competitive enough and the FCA said it may intervene to boost competition. 

In his most recent update from last September, Mr Woolnough sounded an optimistic note about the Optimal Income fund’s prospects. 

“Our core view continues to be that Government bond yields are overvalued, and will rise gradually from here. Conversely, we believe this improving economic environment will support businesses and, in turn, corporate bond valuations,” he wrote.

But the fund had produced an negative total return over the preceding 12 month period and underperformed its  peer group of comparable  bond funds.