If you want to get paid in an investment bank for 2018 there is apparently one place to work: equities. The equities traders who put up eye-popping revenue totals during the first two quarters are in line for huge bonuses come year-end.
Incentivized compensation for equities traders should increase by as much as 20% compared to 2017, according to Wall Street pay consultancy Johnson Associates. This is hardly a surprise. As the chart below shows, it's been a good year for equities. To the extent that percentage revenue increases are a measure of percentage bonus increases, we'd suggest that equities bonuses should rise the most at Barclays, Citi and BofA.
If equities salespeople and traders are going to get a big lift, the picture is more muddled in fixed income, where there has been more variability in performance across banks. Still, Johnson expects fixed income traders to see their bonuses rise between 5% and 10% for 2018.
Those working at private equity firms are the other winners – they too will see a 5%-10% bump in incentivized comp. And that’s not including potential carried interest from previous years. “The industry has been on a fundraising and realization high,” Alan Johnson, managing director of Johnson Associates, said of private equity.
Bonuses for hedge fund managers should remain relatively flat, according to Johnson, though variability is always a major factor when looking at hedge fund performances. The only sector that could see a drop in incentivized comp from 2017 is advisory, according to the report. While U.S. firms like Goldman Sachs, J.P. Morgan and Morgan Stanley had exemplary first-halves in M&A, poorer performances in Europe and Asia will drag advisory bonuses down modestly for the year. Johnson predicts as much as a 10% dip in incentivized comp.
Asset managers are doing just fine, though they can thank market appreciation for a predicted 5%-10% uptick in bonuses. Inflows are still up, but are “wavering,” while fees continue to drop. With Fidelity launching two zero-expense funds earlier this morning, you can expect that trend to continue.