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MONEY MANAGEMENT

Active outflows, fee pressure point to flat compensation for traditional managers — report

Incentive compensation for traditional money manager professionals is expected to be flat for 2017 while alternative money managers should see more of an uptick, according to a financial compensation report from Johnson Associates.

The projection for year-end incentive funding is based on first-quarter trends. Traditional money management firms are projected to see somewhere in the range of a 5% drop to 5% increase in incentive compensation compared to 2016.

While market appreciation has increased overall assets under management, according to the report, business fundamentals — such as active outflows, fee pressure and increased costs — are still strained. Net flows, meanwhile, are mixed, with fixed-income inflows offset by equities outflows.

The report paints a better picture for private equity managers and projects an increase in incentive compensation for 2017 between 5% and 15% above 2016. Those drivers are primarily better returns and asset inflows, but the report notes that higher market valuations are creating fewer investment opportunities.

Hedge fund managers are projected to have flat incentive compensation as well, between 5% less and 5% more than in 2016, reflecting fee pressures and capital outflows.