There’s an adrenaline rush to finance. Perhaps it’s because finance is primordial, being as old as civilization itself.
Or perhaps it’s because there is a subconscious connection our mind makes with eccentric mathematical geniuses and charming stock market crooks when it thinks of finance.
Think Jordan Belfort from The Wolf of Wall Street. Think Michael Burry from The Big Short.
No matter how you think of it, finance has an aura of inscrutability to it.
Little wonder then that finance attracts the best and the brightest at all the top B-schools. At Stanford’s Graduate School of Business (GSB), finance remains by far the most sought after concentration with over 34% of the class of 2020 and 33% of the class of 2021 specializing in it.
MBAs in finance also have traditionally commanded the highest salaries. In the US for instance, the highest reported salary for the graduating class of 2021 among all B-schools was $3,75,000, bagged by a Wharton graduate who specialized in finance.
But what exactly does a finance professional do to be paid so much?
Below we list the five highest paying finance jobs worldwide, and what makes them so special. Make sure you read on till the end, because the last entry on the list is going to surprise you.
5 Highest paying finance jobs in the world
1.Hedge Fund Managers
Hedge Fund managers are the pop stars of the finance world. Everyone has heard of at least one famous hedge fund manager.
Michael Burry of The Big Short fame became a household name after the movie. George Soros will always be known to history as “the man who broke the Bank of England”. David Tepper lends his name to Carnegie Mellon’s B-school. Ray Dalio is like Richard Branson and Elon Musk rolled into one and put in charge of a hedge fund.
So what do hedge fund managers do that makes them so famous?
They manage hedge funds, of course.
A hedge fund is a fund into which a large number of investors pool their money and hire a skilled manager to invest it for them in return for a fee.
But there’s a caveat – almost all hedge funds deal exclusively with ultra high net worth individuals (UHNIs).
The bigger hedge funds typically manage assets running into billions of dollars. Which is why they only hire the best and the brightest from the most reputed institutes around the world.
Compensation for hedge fund managers varies, but there’s a widely accepted industry-wide norm of two and 20 – a 2% commission on the sum total of the assets they manage and 20% of all profits in a given year.
How much of this is pocketed by the manager depends on the size of the hedge fund. Hedge funds come in all shapes and sizes, and there are thousands of hedge funds in the world today with collective assets under management of over $ 4.53 trillion in 2021.
However, most hedge funds are small, typically managing anything between $10-100 millions under assets.
Hedge fund manager salary, then, like in most other fields, has a pyramidal structure. Those at the very top make astronomical amounts. In 2020, for instance, the top 25 hedge fund managers took home over $32 billion in compensation.
The average hedge fund manager makes a more modest $145,437 per year. However, given the commission based pay structure of most hedge funds, there is no upper limit to how much hedge fund managers can make, and that’s what puts them at the top of our list of highest paying finance jobs.
Here’s how to get Hedge Fund jobs after MBA.
2.Investment Banking
If hedge fund managers are the pop stars of the finance world, investment bankers are its urban legends – mythical beings pulling the strings of the global economy from the ivory towers and gilded chambers of the world’s financial nerve centers.
The foundations of much of what we think of as modern finance were laid down by pioneering investment bankers such as J.P. Morgan, Marcus Goldman, Samuel Sachs to name a few. Each of them has given his name to institutions that control the flow of global capital. Which is why investment banking jobs are so lucrative.
Most MBAs join investment banks as analysts or associates depending on their experience level.
In 2021, the median salary of an MBA fresh out of a top American B-school and joining an investment bank was $200,000. In general, most graduates of good B-schools can expect to take home around $142,000 for entry-level roles at top investment banks.
Learn more about Investment banking
3.Private Equity Firms
Private Equity (PE) firms are like a more sophisticated version of hedge funds. Where hedge funds merely pool money from several investors and invest them into asset classes, PE firms actually help operate the businesses they invest in.
Which means to succeed in PE requires not just investment acumen, but also business acumen. Because of this highly specialized skill set, PE firms are very selective about who they hire, and once they find the right hire, are known to break the bank to bring them on board.
PEs are also notoriously elite, known for their tendency to form an exclusive club among themselves. It is for this reason that top PE firms hire exclusively from only the best B-schools in the world. In 2020, nearly 15% of the graduating class at Stanford’s GSB went into PE.
So how much do MBAs fresh off the boat make in PE? (Why does Private Equity pay so much?)
According to this report by Fortune, in 2020 the median base salary for a Stanford grad taking up a role at a PE firm was $1,75,000. This was, to repeat, just the base salary. Employees received joining bonuses and other perks equal to $1,54,000 on average, taking the total median annual compensation to $3,29,000.
4.Venture Capital
Venture Capital (VC) is a subfield within the larger practice of private equity. The difference between the two lies in where each prefers to invest. While PE firms look for stable businesses to invest in, VCs look for startups to seed, incubate, grow, and exit.
Because of the similarities in the fundamental skill set required, VCs and PEs hire from similar schools. At Stanford for instance, a VC job is the second most sought-after profile after PE, with 15% of the graduating class joining one VC firm or the other.
Expectedly, Salaries at top VC firms come close to matching those at PE firms.
For instance, the gross average pay offered by VC firms to Stanford GSB’s 2021 batch was $2,24,000.
The only caveat with VC jobs is that there aren’t many of them around. Churn-rate at VC firms is low compared to high-stress, high-profile finance roles such as those at investment banks and hedge funds. Those who land the few VC jobs on offer tend to stick to them for a long time because of the great work-life balance they offer.
After all, even in the world of finance, money isn’t everything.
More here: Private equity vs venture capital vs hedge funds: Which is a better career choice?
5.Finance Professor
Last but not the least paying finance job is that of a finance professor.
Surprised?
We don’t blame you.
Most people likely think that the only time professors laugh their way to the bank is when they are robbing one, like the geeky ‘Professor’ in Money Heist.
After all, the popular stereotype of a professor is of a book-worn bookworm with glasses thicker than soda water bottle bottoms preaching fiery idealism, bloody mayhem, and the Riemann-Tiemann reaction to a room full of half-awed, half-bored adolescents.
And while that may or may not be an accurate picture, it certainly does not seem to apply to finance professors at top colleges around the world.
According to a Poets & Quants report from 2018, finance professors at leading B-schools take home, on an average, half a million dollars a year in salaries. And this does not include the remuneration they get from their consulting roles for the industry which they are not only entitled, but even encouraged to undertake.
And when you put a little thought to it, it does make sense.
After all, these are people who have dedicated years of their lives to studying the minutest intricacies of finance. These are, not to put too fine a point on it, doctors of finance. With their meticulous knowledge of finance, they could have bagged plum corporate jobs.
Instead they chose to stay back to give back to institutions they learned from. If the best B-schools need to groom the best minds in finance, they need to make sure their students learn from the best minds that already are. And to retain the best, they’d need to make it worth their while.
You don’t need a degree in finance to do the math on that one!
Learn more here: How much do top business school professors get paid?
You may be interested in: Best online courses in finance
To Sum Up
If money makes the world go round, finance is the art of throwing just the right amounts of it at the world to watch it spin without losing balance. No wonder then that some of the highest paying roles that MBAs land straight out of B-school are in finance.
And with a wide bouquet of profiles ranging from investment banking to academia, finance is a tent large enough to accommodate the mathematicians, the magicians, the mavericks and everyone else in between.
MBA Crystal Ball has helped many applicants get into the best MBA programs in finance. After graduation these MBA grads now work in high paying finance jobs across the world. If you’re planning to apply to business schools, drop us an email: info [at] mbacrystalball [dot] com
Also check out:
– [Video] McKinsey vs BCG vs Bain: Which one’s best for you?
– MBA application tips for investment banking applicants
– Best MBA programs in Finance
– Technology salaries in investment banking after MBA
– Top blogs on Finance careers | Investment banking | Venture capital and Private Equity
References: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 | Pic: Anthony Tyrrell
