According to Chris Connors, vice president at Johnson Associates, this year is unique due to declines in both equities and fixed income.

“There’s kind of a double whammy in that the equities markets are down significantly, but also the fixed income market is down significantly,” he said by phone Monday. “That in tandem is hard on the long-only strategies.”

Johnson Associates estimates compensation changes based on its public and proprietary data, according to Connors. Investment bankers who work on underwriting will likely have it hardest this year, with bonus compensation falling by 40 to 45 percent year over year.

Their colleagues working on the advisory side of investment banks will see compensation fall by 15 to 20 percent, as will staff at equities-focused hedge funds. Johnson predicts that private equity employees will see a decline of 5 to 15 percent, depending on the size of the firm.

“There’s obviously been pressure on fundraising; valuations for portfolio companies are down,” Connors said. “That cocktail of what’s going on in the macro environment has hurt portfolio valuations at PE shops and venture capital in general.”

Looking ahead to 2023, Johnson Associates expects that firms will actually increase salaries. “We’re seeing salary pools increasing by 4 to 5 percent for next year, which is even higher than the 3 percent historical norms as firms kind of look to battle inflation,” Connors said. 

Institutional Investor / November 15, 2022