Salary survey: Equity capital markets bonuses halve
The downturn in the equity capital markets has had a predictable effect on bonuses in the sector. They have roughly halved compared to a year ago, according to a survey by the Monks remuneration consultancy.
The decline was felt at all levels, but was offset slightly by increases in salaries.
Headhunters said the salary rises probably reflected smaller firms taking advantage of cutbacks and disenchantment at bulge bracket banks to hire high quality staff, sometimes on higher salaries than existing employees.
However Peter Smith, a consultant at the search firm Eban, said some smaller houses were compensating staff in a very different way.
'One strategy is to attract talent by offering high basic salaries with equity or a directorship as an incentive to help grow the firm. The other is for firms to have aggressive pay out ratio schemes, where employees expect low basic salaries compensated for by receiving 25% to 40% of revenue produced.'
Smith said the latter option was attractive to staff because of its transparency and because bonuses tended to be paid on a quarterly basis instead of annually.
But regardless of the style of remuneration, headhunters agree that hefty pay packages will remain a relic of the past as long as uncertainty looms over equity markets.
Monks' February survey, covering small and medium-sized firms in London, showed senior equity salesmen were hit hardest of all the roles surveyed. Their bonuses tumbled to 18% of salary compared to 56% last year.
Heads of equity trading also suffered a steep cut, from 84% to 44%. Equity traders registered a smaller decline, from 44% to 29%. All three categories won salary increases.
The decline in the equity markets has led to growing equity derivatives activity, as clients rebalance portfolios and hedge exposure. But equity derivative traders have not necessarily reaped the benefit of their increased revenue generation.
While they recorded a 9,000 gain in base pay to 76,000, their bonus levels fell to 87% of salary from 118% last year, the Monks survey found.
Smith said 'The problem has been how to reward the derivatives group, when the cash side of the business has been hit by falling commissions. One US firm paid half their derivatives sales and trading team zero bonus. To date not one member of the team has resigned.'
Recruiters say employers are using the grim outlook as an opportunity to keep pay low. Smaller than expected bonuses do not mean staff will walk, as their competitors are in the same boat and many have hiring restrictions.
Tom Buckett, senior consultant with the recruitment consultancy The Cresta Group, said HSBC set a precedent last year by deciding not to pay bonuses to many equities staff.
'Many institutions have been telling staff that their will be no bonuses this year and that employees should be thankful to hold on to their jobs,' he said.
