2023 stock market gains might not boost fundsters' bonuses much, but the picture has improved since the first quarter, according to the folks at a financial services-focused compensation consulting firm based in New York City.
The team at Johnson Associates predicts
, in the "Financial Services Compensation Second Quarter Trends and Year-End Projections" report that they released
on Monday, that "incentive funding" (aka bonuses) at traditional asset managers will be between five percent higher and five percent lower (on a headcount-adjusted basis) than in 2022. That's an improvement from back in May 2023, when the Johnson team predicted
(based on Q1 2023 data) that fundsters' bonuses in 2023 would be between five percent and ten percent lower than last year.
The Johnson puts their flat projection for fundster bonuses levels in the context of the "delinking of assets under management and revenue." They note that years of fee compression, plus net flows into lower fee products (thanks in part to the broader shift from active to passive products), is stressing asset managers' margins: despite a 2023 equity market surge, net flows for active equity funds are negative. The team notes that, in aggregate, analyst are now predicting that this year asset managers' earnings per share (EPS) will fall five percent from 2022 levels.
Overall, the Johnson team projects that fundsters' bonuses will be flat in 2023 when compared with 2022, which would mean that bonuses would still be down about 13 percent from 2021 levels and still slightly below 2020 and 2019 levels. They expect "moderate headcount reductions and slowed hiring as firms trim costs" in light of the margin press. And, the team adds, watch for fundsters to use "bolt-on products" (like alternatives and technology platforms) to "generate higher fees and diversify revenue streams."
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