REUTERS/Jason Reed
BlackRock CEO Larry Fink.
- Asset management compensation will increase 5% this year, a new study says.
- But there are still major challenges within the asset management industry and things could get worse in 2019.
Asset managers are likely to receive a small bump in their overall compensation this year - around 5%, according to a new report. But that uptick masks some of the larger challenges within the industry, as market volatility, the reallocation of bonus pool dollars to technology investments and declining margins eat into industry profits.
Overall compensation for equities-focused traditional asset managers is expected to average around $710,000 this year, compared to $490,000 for fixed income-focused managers, according to a survey of more than 1,000 professionals by consulting firms Greenwich Associates and Johnson Associates.
But those figures could fall, as markets have moved lower in recent weeks.
"Volatility and slowed business momentum has added uncertainty and introduced an element of downside risk that could push final pay numbers lower if markets remain unsettled," the report cautioned.
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Compensation will be strongest at firms that have the scale to maintain strong profits or the technology platforms to keep costs low, including managers that focus on passive products and exchange-traded funds.
Despite industry pressures, overall headcount increased in 2018 for both public and private managers, specifically in technology, product development and international markets. But this trend likely won't last.
Next year, things are looking worse, with planned job cuts coming as soon as the first quarter of 2019.
"Unfortunately, the hiring trend is likely to be reversed in 2019. Many firms are already planning for reductions during the first quarter of 2019 through both attrition and terminations," warns Francine McKenzie, managing director at Johnson Associates.
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