(May 14, 2014) — Asset managers can look forward to bigger bonus checks this year, according to consulting firm Johnson Associates.
The firm’s first quarter trends and year-end projections found incentive pay for money managers is likely to rise as a delayed effect of a boost in assets under management, through flows and market appreciation. Managers can expect a 5% to 10% increase on 2013 levels.
The report said bonuses for private equity managers could bump as much as 15%, largely due to strong payout activities and improved fundraising. Incentive pay among hedge funds, however, could vary anywhere between down 5% or up 10% from last year because of mixed performance across strategies, despite increasing assets.
“Incentives are generally expected to continue on a moderately positive trajectory across financial services,” the report said. “Business mix and cost management, speed of economic recovery, and ongoing uncertainty in world markets continue to be key 2014 incentive drivers.”
Equities and fixed income managers especially are due for a somewhat disappointing paycheck, Johnson Associates predicted, possibly seeing a cut of 10% and 15% respectively from last year’s compensation due to lagging trades.
According to the New York state comptroller’s office, New York City financial firms paid out $26.7 billion in cash incentives last year, bonuses averaging $164,530 per employee. However, these figures were below those of pre-financial crisis years. In 2006, a typical Wall Street bonus check was for $191,360.
The bonus pool for investment and commercial banks is expected to remain flat for the remainder of the year and mediocre projections for 2014 could negatively impact morale at banks, the report said. As a solution, the consulting firm suggested “improving work environment culture to somewhat counteract potentially lower compensation prospects for the future.”
Firms focused on mergers and acquisitions, however, could see incentive pay jump from 5% to 15% this year, the report said, due to industry-wide improvements.
“Big banks are no longer top payers,” the consulting firm said. “Asset management and alternatives now provide similar/higher compensation opportunities.”
This phenomenon may be particularly true for independent firms, according to the report, as they may be able to bypass certain regulations, taking business from larger banks.
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