At traditional asset management firms, professionals can expect to see their 2019 year-end bonuses decline 5% over the previous year, according to a report from compensation consultant Johnson Associates.
The drop in incentive pay will largely be driven by the continued shift by investors into lower fee products, which has already detracted from strong equity markets and positive flows at most money managers in the first and second quarter, said the report released Tuesday.
"In the asset management world and other parts of financial services, the economy has been healthy and the market has been up (in the first half), but pay is still going to be down," said Alan Johnson, managing director of Johnson Associates, in an interview.
"So that's a little bit of a surprise," Mr. Johnson continued, noting later that when the economy is doing well, asset management has historically seen higher bonuses.
"With the changing (fee) environment and product moves, (incentive pay is) not as predictable as it once was. And what if the markets decline?"
In November, Johnson Associates predicted that money management professionals could expect to see a 5% increase in their 2018 year-end bonus payments. Due to rough markets in the fourth quarter, however, bonuses actually ended up being around 3% higher than the previous year, Mr. Johnson said.
At alternatives firms such as hedge funds and private equity, professionals can expect to see 2019 year-end bonuses to range from flat growth to 5% higher, the report found.
"Private equity has the benefit of a pretty stable fee base. (Also), they've done an enormous amount of fundraising in recent years, so they continue to benefit from (that)," Mr. Johnson said.
Across financial services, the professionals who are expected to take the biggest hit to their year-end 2019 bonuses are those in investment banking underwriting roles as well as professionals in equity sales and trading. Both are expected to see bonuses drop 10% to 15% over year-end 2018, the report found.