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Compensation Projection: Bonus Bump in 2012 for Money Managers

<em>Incentive compensation for the asset management industry is projected to increase moderately, according to Johnson Associates. </em>
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(May 18, 2012) — The asset management industry is expected to benefit from a moderate incentive compensation increase in 2012, thanks to economic recovery and varying impact of regulation despite ongoing uncertainty in world markets.

Johnson Associates projects Wall Street bonuses in 2012 will increase 10% to 15% for traditional managers of equities, with bonuses for fixed-income managers rising 15% to 25% due to improving stability of the asset class. The firm predicts bonuses among hedge fund firms will rise 5% to 15%, citing improved performance off of a challenging 2011.

Bonuses among private equity firms, however, may not be as stellar, as the consulting firm predicts an increase in incentive funding of only up to 5%, since the private equity landscape still remains cautious.

The forecast for bonus payouts by traditional and alternative money management firms comes from Johnson Associates, which recently released its first quarter trends and year-end projections on Wall Street incentive pay. According to the firm, asset under management levels are expected to increase primarily from market appreciation as net flows remaining stagnant. 

Meanwhile, investor sentiment remains uncertain, the consulting firm says, noting that projections are mindful of European turmoil but do not reflect a significant worsening of the current environment.

The latest forecast from the consulting firm is notably more optimistic compared to its forecast in August, when it asserted that money manager incentive pay was “down considerably” from three to six months prior.

According to the August report, while asset management and alternatives businesses were generally stable, the report noted that year-over-year growth in asset under management levels from market appreciation. At the same time, low interest rates continued to hinder fees. Additionally, the firm noted that hedge funds surpassed their high-water marks with asset inflows, but a solid first quarter was eroded by second quarter declines.