There is a good reason top mutual fund managers are making good money - they are generating big money for their employers, a new study suggests.

The top 20 portfolio managers, as measured by the amount of mutual fund assets they manage, generate a collective $2.9 billion in annual revenues for their firms, according to an analysis from Financial Research Corp. of Boston, the fund tracking and consulting firm. The top 20 managers account for 13 percent of the mutual fund industry's estimated annual fee revenue of approximately $21.8 billion, according to FRC.

Robert Stansky, manager of the Fidelity Magellan Fund, was the top revenue-generating fund manager based on FRC estimates. Stansky generates an estimated $361 million in annual revenues and that estimate is conservative, according to FRC.

The study shows the importance for fund companies of keeping top portfolio managers from departing, said Raymond Liberatore, the FRC senior analyst who wrote the report. The report, included in a monthly FRC newsletter, was made public Jan. 10.

The FRC analysis is based solely on fees raised from mutual fund assets, excluding money market funds, Liberatore said. Managers in some firms generate additional fees by managing private accounts, he said.

Fund companies usually do not make the salaries of their portfolio managers public. The median annual compensation for a domestic equities fund manager at a mutual fund firm last year was $365,000, according to a survey by the Association for Investment Management and Research of Charlottesville, Va. and Russell Reynolds Associates of New York. Annual compensation for the top 10 percent of domestic equity managers exceeds $1.4 million annually, according to the survey.

The FRC report also highlighted how fee income varies among asset classes and investment strategies. For example, William Gross, the renowned fixed-income fund manager for PIMCO Funds of Newport Beach, Calif., oversees the fifth largest amount of mutual fund assets of any manager, roughly $35 billion, according to FRC. Nevertheless, low margin fixed-income fund fees meant that Gross generated only $91 million in fee revenues for his firm, according to FRC. That made Gross eighteenth in fund revenues generated among the top 20 managers, FRC reported.

Similarly, the 18 low-fee index funds that George Sauter oversees for the Vanguard Group of Malvern, Pa., generated only the third highest level of fees among managers, according to FRC. That is despite the fact that Sauter managed the highest level of assets. Sauter's funds generated $191 million in fee revenue on $154 billion in assets, according to FRC.

The FRC report did not attempt to estimate the margins or profitability of firms. Such an analysis would require proprietary information about such factors as a firm's overhead costs and distribution expenses, Liberatore said. Using average calculations would produce meaningless estimates, he said.

FRC, however, did estimate gross revenues among the top 20 revenue-generating firms. Fidelity, the largest mutual fund company, generated approximately $2.6 billion in revenues on roughly $524 billion in mutual fund assets, FRC estimated. Fidelity's mutual fund assets represent 11.7 percent of the market, according to FRC. Vanguard, the second largest fund group, with $401 billion in assets, was fifth in fee generation at $818 million, FRC reported. (See accompanying charts, this page and on page 8.)

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