‘There are two key drivers contributing to the decrease,’ said Chris Connors, VP at Johnson Associates, ‘The primary driver is the market decline this year.’

Among fears of recession and rising inflation, major indices in the US are down this year, with the S&P down about 14% and the Bloomberg Aggregate Bond index down about 8%. Both have recovered since mid June when they were down some 23% and 12%, respectively.

Connors’ second factor, which is related to market falls, is the outflows suffered by many asset managers this year, especially from active equity funds. Investors pulled $408bn from active funds in the first six months of 2022, with $91bn of that leaving in June, according to data from Morningstar.

‘So the combination of those two things has led to a decrease in revenues in the asset management space, and bonus pools will decline as well,’ said Connors.

‘The purchasing power of the dollar is down because inflation is running rampant. So, if incentives are down 15% to 20%, and inflation is also at 8%, then your incentives are down more than 15% to 20%,’ said Connors, ‘So we think firms should be cognizant of this in terms of the salary increases, the impact of headcount going into the end of the year, and restructuring going into 2023.’

Citywire / August 5, 2022