Reasons to believe asset management bonuses may not be particularly great in Scotland

There are signs that bonuses for fund managers in Scotland could be decidedly smaller this year.

In the last three months house prices in Edinburgh have slipped by 9%, according to new figures from Lloyds TSB, with one of the main drivers being the fact that reduced incomes in the capital's financial sector has led to muted sales.

Coincidentally or not, this follows an 8.7% rise in the previous quarter, before speculation around bonus payments for 2010 would have begun to emerge. Are we therefore to assume that they're not particularly optimistic able variable pay this year?

As we've alluded to before, in the banking sector Lloyds Banking Group anticipates paying bonuses for 2010, but these amount to an average of 1k, which is hardly going to inspire a foray into the housing market. Similarly, any big payouts at RBS will largely benefit City investment bankers in its global markets division.

In Scotland, big bonuses predominently benefit the asset management sector and it's therefore worth looking into what they're expecting this year. In Europe generally, compensation consultants are predicting a 20% rise in asset management bonus payments on last year, but sadly this optimism isn't shared north of the border.

"There has been movement within the asset management sector this year, but most of this has been very localised, and there's been very few growth-orientated opportunities," says Graeme Knox, director of Scottish asset management headhunters Knox Consultancy. "In some places bonuses have been practically non-existent for the last two years, so the baseline has shifted and expectations have been curtailed."

Scottish Widows Investment Partnership has, of course, lost a number of key people this year and has also been busy replacing them. Martin Currie has been actively recruiting, and Standard Life Investments has made some key hires.

Still, while this has resulted in a little pressure on base salaries, overall remuneration in the Scottish asset management sector is still down substantially from the highs of 2007, suggests Knox.

One area where fund managers should perhaps be confident of improved bonuses, though, is global equities.

"Global equities is an area where a number of houses are looking to build, but one where supply of skilled candidates is limited," he says. "There's a nervousness that people will move in the year, and therefore bonus payments are expected to be generous to prevent this."