PAY for fund managers is rising more quickly that profits, according to research by PricewaterhouseCoopers (PwC).
Asset managers have been rewarding staff with increased bonuses in order to keep top talent from moving elsewhere, despite profits rising at a slower pace.
Compensation costs as a percentage of net revenue have increased by four per cent over the last financial year, according to 22 firms surveyed by PwC. Yet two thirds of firms said they had experienced a fall in profits.
Annual bonus spend as a percentage of pre-bonus operating profits also rose substantially, with a nine per cent increase on average and as much as 20 per cent for some firms.
Many firms were found to have lifted pay freezes imposed following the financial crisis to avoid losing top talent, in the hope that keeping the best staff will lead to increased profits in the future.
Forty per cent of asset management firms increased bonus pools last year and a third reduced bonus spend.
However, more than half of the asset managers surveyed said they had deferred bonus payments for staff, with payments being made in shares and funds to align reward with business performance.
PwC renumeration director Tim Wright said: “Despite many firms spending more than the previous year on bonuses, base salaries are still being negotiated up.
“Ultimately asset management and banking share much of the same talent pool and new hires expect base salaries to be aligned. This in turn is pushing existing employees to demand pay hikes as they notice market rates have increased.”