Wall Street asset managers set for 10 per cent rise in bonuses, report claims
10 per cent rise for wealth managers to be offset by a 15 per cent cut for traders, report claims
Wall Street's bonus pool may rise as much as 10 per cent this year for asset managers, while fixed-income traders could see a 15 per cent cut, according to consultant Johnson Associates.
Incentive pay would probably rise the most in investment-banking advisory services, at private-equity firms and prime brokerages and for asset and wealth managers, Johnson said in a report.
Financial firms were poised to increase assets under management and benefit from an uptick in mergers and acquisitions, and independents facing fewer regulations might win business from larger banks, Johnson said.
"This is really a sea change," said Alan Johnson, founder and managing director of the New York-based consultant.
"It's been coming and coming and now it's finally apparent that the largest paycheques don't come from Wall Street banks," he added.
Firms including the Goldman Sachs Group and Bank of America are facing a slump in trading revenue that eroded first-quarter results. JPMorgan Chase said this month that fixed-income and equity trading revenue might fall about 20 per cent from last year's second quarter amid "a continued challenging environment and lower client activity levels".
The largest investment banks shrank pay pools for traders and bankers by more than two per cent last year and set aside a smaller portion of revenue for total compensation.
The bonus pool across all of Wall Street rose 15 per cent to US$26.7 billion in 2013, fuelled by deferred pay, New York state comptroller Thomas DiNapoli said in March.
"Many asset-management firms pay the same or better than the big banks, and this year that gap will get even bigger," Johnson said.
The report found that advisers in mergers and acquisitions may see their bonus pool expand by as much as 15 per cent. Johnson's estimates are for incentive compensation, which does not include salary.
Bonuses for equity traders may fall as much as 10 per cent from last year, the report found. As Wall Street profits continue to shift from trading to investing, so will compensation, according to Johnson.
"There's going to be even more emphasis on managing other people's money," he said.