NEW YORK — Wall Street firms are expected to dish out billions of dollars in bonuses this year, and compensation consultants and recruiters estimate that money management firms will likely pay out significantly larger bonus packages than they have in recent years.
The Options Group, a New York executive search and consulting firm, estimates that major U.S.-based financial firms will pay out a combined $17 billion to $20 billion in bonuses to employees for 2005.
While much of this pay will be geared to investment banking, trading and brokerage employees, investment managers will benefit from the booming bonus pool as well, said Paul Delucia, managing partner at Options Group, who concentrates on the investment banking, asset management and hedge fund industries.
Across the industry, investment managers will likely take home bonuses that are 10% to 15% greater than last year, Mr. Delucia said.
"Assets are up in a number of investment categories," he said. "But alternative and quantitative investment strategies appear to be the primary drivers behind the increase in bonuses."
Assets under management have bulked up considerably in both categories at a number of firms, according to Mr. Delucia, noting that these investment strategies pay higher compensation and bonus packages than other, more traditional asset management strategies, such as equity index management.
Debra Brown, managing director in the investment management practice at Russell Reynolds Associates Inc., New York, also said it appears this year's bonuses will generally be larger than last year.
"Across the board, people are fairly optimistic right now," said Ms. Brown, adding that declining equity markets over the first three weeks of October may have made managers a bit less optimistic than they were at the end of the summer. "Bonuses to portfolio managers or sales and marketing staff tend to be more objective now, so people have a good sense of what their bonuses will look like," said Ms. Brown."