Asset managers close pay gap with the banks

ASSET managers’ compensation levels are set to creep up on their investment banking peers this year, as weak trading results and lower client activity hit the bank bonus round.

Incentive compensation at asset managers and hedge funds is expected to rise by 5 to 15 per cent in 2010, according to a report by US consultancy Johnson Associates, as assets under management grow and hedge funds exceed their high water mark.

By contrast, investment bankers are likely to see a net fall in their end-of-year compensation, with equities and fixed income traders coming off worse than those involved in underwriting and advisory activities.

Equities may see a drop of 20 to 25 per cent due to lower client activity, while fixed income staff could see their pay fall by up to 30 per cent on the back of unfavourable comparisons with an extremely strong 2009.

Underwriting compensation is likely to be flat due to mixed results, though M&A advisers may see a pick-up of five per cent as the deal pipeline begins to improve, the report shows.

But investment banks still pay more as a percentage of net revenue, doling out 42 per cent on average so far this year, compared to around 37 per cent for asset managers.