Bonus season not looking bright for private equity, Wall Street: report

The financial community may not have a happy holiday as this year’s bonus season may not look anything like last year.

Wall Street compensation consulting firm Johnson Associates is flashing a caution signal to fund managers, bankers and brokers when the time arrives for those annual checks.

Payouts for private-equity fund managers could drop as much as 15% this year compared with 2021 while public equities investment managers could endure cuts of as much as 25%, according to the Wall Street Journal.

Investment bankers at the largest institutions stand to absorb the sharpest cuts of as much as 40%, the firm added.

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Wall Street sign with cash background. (istock / iStock)

The forecast said the declines stem partly from inflated incentive payments coming out of last year’s record level of activity for private equity, investment bankers and others on Wall Street.

By comparison, last year was a banner year for bonuses where private-equity managers last year stood to see increases of as much as 20%, and investment bankers were expected to enjoy 30% to 35% increases in their annual incentive payments, according to Johnson’s forecast in November 2021.

Wall Street trading floor

A wall street firm’s trading floor. (KBW)

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Other reasons for the estimated decline included slower fundraising to a drop in deal making and valuation declines.

The firm said wealth advisers who would see 15% to 25% bonus cuts could blame it on plunging equities and bond prices as well as asset outflows as investors sought safety in money funds and cash.

NYSE trading floor

NYSE trading floor ((Kearney Ferguson/NYSE via AP, File) / AP Newsroom)

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Hedge-fund managers might see smaller declines averaging 10%, but the firm cautioned that there would be wide variations depending on fund size, strategy and performance.

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