M&A advisors and asset managers are on track for higher pay this year. But fixed income and equities professionals should perhaps think twice before booking a long vacation in the Hamptons.
In his latest quarterly analysis of pay trends, Wall Street pay expert Alan Johnson says M&A advisors and asset managers will see total pay rise 10% in 2005. By comparison, he says pay for people working in fixed income and equities is set to fall 10%.
Johnson's forecasts are based on his analysis of market trends. He says a strong pipeline of M&A deals will enhance M&A bankers' pay packets. For example, major deals to be booked in the second half include MetLife's $11.5 billion purchase of Travelers Inc. from Citigroup. The sector is already off to a promising start: data provider Thomson Financial says worldwide M&A exceeded $589 billion in the first quarter of 2005, making it the third best ever.
Asset managers are also set to benefit from favourable market conditions and a rise in assets under management, says Johnson. According to Lipper, the fund information provider, inflows into US funds were $67.7 billion in the first four months of the year, versus an outflow of $340 million during the same period of 2004.
Less promisingly, Johnson says equities pay is set to suffer from poor volatility and compressed margins, while fixed income professionals will lose out due to higher funding costs and slowing conditions after a strong 2004. However, he says higher prime brokerage revenues, and higher commodities-related and proprietary trading revenues, could offer a reprieve to equities and fixed income respectively.
Hold off on that Coney Island hostel
Before booking a cheaper vacation, it's worth bearing in mind that recruiters are casting aspersions on Johnson's predictions. The general consensus is that it's too early to make a call.
"We're seeing a lot of hiring activity and people moving for higher packages, but anything could happen before the end of the year," says Darryl Adachi, a partner specialising in asset management at the New York City office of Heidrick & Struggles,
Burke St. John, head of the global financial services practice at Christian & Timbers, says he roughly agrees with Johnson's forecasts, but calling the direction of annual pay moves is premature in May.
"So far it looks like pay in equities will be down," says another senior consultant, "But who knows what will happens later in the year."