It’s not just the markets that went volatile this year. Asset manager paychecks will also vary “widely” in 2018, according to a new report by market intelligence provider Greenwich Associates and Johnson Associates, a compensation consulting firm.
Overall compensation will increase by 5 percent this year, the firms concluded, but pay trends diverged significantly by asset class and product type. In this rising tide, some asset management professionals projected pay cuts.
According to the report, total compensation at long-only equities managers will average about $710,000 this year. This is an increase over 2017, when senior professionals at traditional equities firms earned $680,000.
Within fixed income, traditional asset managers are expected to take in $490,000, up from $470,000. Greenwich Associates and Johnson Associates interviewed more than 1,000 U.S.-based investment professionals for the report, and combined those findings with proprietary pay data.
The report described the projected 5 percent raise as a “respectable year-on-year increase.” But recent market performance could lead to lower bonuses at year-end, warned William Llamas, institutional relationship manager at Greenwich. “Volatility and slowed business momentum have added uncertainty and introduced an element of downside risk that could push final pay numbers lower if markets remain unsettled,” he said in a statement.
At least some asset management professionals can remain optimistic. According to the report, the biggest raises await those in “hot” areas such as growth equity funds, exchange-traded funds, high-risk fixed income, and private equity.
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Within organizations, roles in technology and product strategy and development held the greatest promise of pay raises.
“The determining factor across this spectrum will be performance — but not necessarily investment performance,” the report stated. “Some professionals may be underestimating the pressures their firms are under and the impact that pressure will have on their own 2018 compensation.”
Cited pressures included fee compression and technology spending, which the report suggested could absorb dollars that “may have otherwise ended up in incentive compensation pools.”
In addition to predicting traditional asset manager compensation, the Greenwich/Johnson report also made estimates for hedge funds and “other organizations” such as banks, pension funds, and endowments.
Among hedge fund employees, those working in fixed income were projected to earn $1.09 million. Equities-focused hedge fund staff can expect $900,000 on average, according to the research.
As for the clients of those hedge funds — staff at retirement systems, endowments, and banks — they are on track to earn in 2018 what their managers had made by about June or July. For these asset owners and intermediaries, average expected pay amounted to $520,000 for fixed-income professionals and $430,000 for equities staff.