Asset managers have ramped up bonuses and locked in top performing staff with greater deferrals this year, but this may not be enough to convince them to stick around. Firms have earmarked funds for senior hires in 2014, and headhunters and compensation experts are anticipating a flurry of post-bonus movement.
Bonuses for asset management professionals have increased by 10-15%, according to analysis from both compensation consultants Johnson Associates in the U.S and PwC in the U.K provided to eFC. Those in senior positions, or top performers, would have easily exceeded a 20% uplift in bonus payments for 2013, according to Alan Johnson, managing director of Johnson Associates.
“Asset management firms used to tie up around a third of pay in either deferred stock or investment in their own funds, but this is now 40-50% of bonus payments,” he says. “I wouldn’t say everyone is happy with this year’s bonuses despite the uplift, but people have a lot more to lose if they want to move on.”
While most investment banks have continued to cut compensation costs, the large asset management firms have upped pay. Blackrock added $925m to its compensation bill in the final quarter of 2013, due to “higher incentive compensation”, to pay an average of $318k per head for the year and hired 900 new employees. Morgan Stanley increased compensation its asset management division 41%, while Aberdeen Asset Management paid hiked up pay per head from $258k in 2012 to $290k last year after increasing comp costs by £92m ($152.9m). JPMorgan, meanwhile, hired 1,583 people into its asset management business last year, but increased pay by just 2% at $243k per head.
Part of this is paranoia – after the high-profile departures last year of ‘star’ fund managers like Richard Buxton from Schroders to Old Mutual and Neil Woodford from Invesco to run his own fund, asset managers are keen to ensure that talent (and consequently assets under management) are given as little incentive as possible to leave. This is unlikely to work, however.
“Asset managers are going to the market to recruit and will offer to buyout bonuses for the right people,” says Richard Parkhouse, director of asset management remuneration at PwC. “The job market is heating up and people will move even if they have more to lose.”
However, not all fund managers have been left with a warm and pleasant feeling about their bonus payments for 2013. Many firms have paid their top staff and kept payments modest for those further down the career ladder in order to “keep their powder dry” for potential hires after bonus season, believes Chris Sevenoaks, asset management consultant at Baker Noble.
“People have been denied bigger bonuses, as well as promotions – and therefore pay rises – so that asset managers have the money to bring in some heavy-hitters,” he says. “They want senior staff who can generate new business and have cut back on pay elsewhere in the organisation in order to fund this.”