Workers at traditional asset management firms can expect even smaller bonus payments than last year, against a backdrop of rising interest rates, inflation and disparate performance across sectors, compensation consultancy Johnson Associates forecasts.

Despite increases in assets under management across traditional firms and efforts to rein in costs, Johnson Associates projects a 5% to 10% decline in 2023 incentives from 2022 levels.

“It’s a little counterintuitive,” said Alan Johnson, managing principal at Johnson Associates. “Stock markets are up some, not universally, but up moderately, and incentive pay is going to likely be down.”

Employee sweeteners at alternative shops won’t contract as much as their traditional counterparts, the consultancy predicts.

“As a group, they’ll probably stay flat [in terms of incentive funding],” Johnson said. “Commercial real estate has taken a huge hit; valuations are way down. People are beginning to realize that the habit of people being in the office in 2019 is not coming back.”

ohnson Associates has also predicted a modest increase in base salaries this year: 3.5% to 4%.

“Some salaries are moderately higher, but they’re not at all on par with, certainly, inflation in the last couple of years,” Johnson said. “Inflation is not a direct driver of pay, and the reality is many employees have lost ground in the last couple of years.”

The smaller bump follows a year when firms hiked base pay by 5%, 6% and more to compete in the tight labor market. The attention to base pay was at a level not seen “even [during] the financial crisis,” Johnson told FundFire in April 2022.

FundFire / May 9, 2023