Executives at traditional asset management firms can expect to see bonuses drop by 10% to 15% from year-end 2019 despite a recovering market and stable asset flows, said a report from compensation consultant Johnson Associates.
The report, released Monday, attributes the decline to investors continuing to seek investment strategies that charge lower fees, which affects revenues. Added to that, asset management firms are facing increased technology and infrastructure costs.
"It's not just where the markets are, it's the fees you collect," said Alan Johnson, managing director of Johnson Associates, in a phone interview. "We have these systemic changes within the market. We've moved from active to passive; we've moved to ETFs."
Mr. Johnson added that the decline is only "moderately worse" than estimates made earlier in the year because of the systemic changes. "We thought it would be down this year, anyway, so this is much better than anyone thought it would be," he said.
In November, Johnson Associates predicted money management professionals could expect to see 2019 year-end bonuses to be flat to down 5% from bonuses for year-end 2018, which were about where they ended up.
At alternative managers such as hedge funds and private equity firms, professionals can expect to see 2020 year-end bonuses to range from 5% to 15% lower, the report found.
Despite it being a "normal down year" in terms of year-end bonuses with pay being "down moderately," Mr. Johnson noted that increased layoffs within the industry and the effects of the coronavirus pandemic will make the end of the year difficult for most asset management professionals.
"There's going to be a fair amount of job insecurity," Mr. Johnson said. "Firms found that they don't need as many people as they thought they did. And adding the tragedies and stresses of the pandemic, it's going to be a very difficult year-end."