Compensation consultant Johnson Associates projects a sharp year-end decrease in incentive pay across the financial services sector.
Traditional asset management incentive compensation is down significantly following the drop in both equities and bonds in 2022. Relative to 2021, the firm projects that bonuses will fall approximately 20% to 25% this year.
Pressure on asset management segment is highlighted by a decline in assets under management due to the market sell-off, outflows in active equity strategies, a remarkable level of correlation between the bond and equity markets—both of which are down significantly in the wake of interest rate hikes—and the build-out of alternative and technology platforms.
In the alternative investment sector, private equity and hedge fund incentive compensation fell, as outflows pressured hedge funds, large private equity funds moved down modestly and private equity and venture capital fundraising and dealmaking slowed substantially from a rapid 2021 pace, the firm reports.
Bonuses are expected to drop 15% to 20% in hedge funds, the firm wrote, though this may not be the case for all hedge funds. The outperformance of macro-strategy hedge funds in 2022 led Johnson Associates to predict incentive compensation for macro-strategies will be up 10% to 20% from 2021.
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