Incentive compensation, or bonuses, paid to professionals in the asset management industry are expected to decline broadly on a year-over-year basis in 2022, according to a report Thursday by Johnson Associates, a compensation consulting firm.
Excluding the impact of inflation, bonuses paid to professionals in traditional asset management firms are projected to fall by 10% to 15% by year-end 2022 compared with the prior year-end, due to assets under management and revenues falling on "market decline and moderate outflows as clients de-risk," the report said.
For professionals at mega-size private equity firms, bonus payments should be flat compared with last year, the report said, while those employed at mid- to large-size private equity firms are likely to see their bonus payouts fall by 5% to 10%, the report noted, partly due to a "slowdown in fundraising and fewer realizations."
Mega private equity firms are those with at least $50 billion in AUM, while midsize to large are firms with between $5 billion and $50 billion AUM, said Chris Connors, vice president at Johnson, in an email.
Among hedge fund professionals, bonus payments are slated to avoid declines and be flat on a year-over-year basis, the report said, citing that "market volatility leads to strong inflows" and "investors seek returns in challenging public market environment."
Bonus payments to professionals serving high-net-worth clients are expected to decline by 10% on a year-over-year basis as "positive flows" will be "offset by poor market performance."
With respect to other aspects of the traditional asset management industry, Johnson projects "moderate outflows in equities while fixed income, multi-asset, and cash management balances increase." The consulting firm also expects to see "buildout and investment in alternative strategies with higher fees and investor interest."
Moreover, Johnson expects hiring at traditional asset managers to slow down as "firms look to control expenses during down year."
With respect to the alternative asset management industry, Johnson said it expects sustainable investing and infrastructure strategies will "garner significant investor interest," while venture capital firms will undergo a "fundraising slowdown and fewer deals amidst weaker markets."