2007 Bonuses to Jump For Investment Bankers and Equity Traders: Study
While bonus projections on Wall Street may be worrisome for many this year, incentive payouts for investment banking groups remain on track to climb as much as 20% above last year’s levels, according to a new study conducted by compensation consulting firm, Johnson Associates. This year’s payouts will be bolstered by stellar profits from the first half of the year, says Alan Johnson, Managing Director at Johnson Associates. But individual firms’ payouts will vary significantly by business area and their degree of exposure to troubled mortgage and credit markets
Investment bankers and equity traders may receive incentive payouts as much as 20% above 2006 after an “excellent” first eight months, Johnson says. Although revenue from fixed-income sales and trading is declining for most firms amid the credit market turmoil, fees from investment banking, providing brokerage services to hedge funds and trading stocks are increasing, according to Bank of America Analyst, Michael Hecht.
Executive search firm, A.E. Feldman, says hedge funds have become a major source of revenue for many leading investment banks, and the growing demands placed on prime brokerage firms have created opportunities, including sales jobs, marketing jobs and portfolio risk management jobs. The recruiting firm also reports that demand is on the rise for alternative investment professionals who have a comprehensive understanding of the risks and benefits of the various asset classes and investment strategies.
Other Wall Street sectors that stand to benefit from double-digit bonus jumps this year: prime brokerage (15% higher), equity asset management (10-15% higher), high net worth (10% higher), equity derivatives (20% higher) and private equity (20% higher).
In keeping with those numbers, A.E. Feldman says that senior portfolio managers, responsible for managing the assets of high net worth individuals and families are in growing demand. Need is also growing for financial advisors with expertise in business development and relationship management.
Moreover, the Johnson Associates study indicates that even fixed-income derivatives are projected to pay out 10% more per bonus than last year. Meanwhile, bonuses for commercial and retail banking groups, including senior management at commercial banks, are expected to be largely unchanged from 2006.
Individual firms’ payouts however, will vary significantly based on their degree of exposure to troubled mortgage and credit markets. The Johnson study states that the sub-prime fallout will weigh heavily on bonus pools for “plain-vanilla” fixed-income departments.
