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Bonuses for traders, hedge fund managers falling in 2016

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(Bloomberg) — Bonus pools could decline by as much as 20 percent for some Wall Street workers this year, with incentive pay falling at almost every type of financial-services firm, according to compensation consultant Johnson Associates Inc.

The sharpest drop probably will be in fixed-income sales and trading, as well as investment-bank underwriting, which may tumble 15 percent to 20 percent from a year earlier, Johnson Associates said Tuesday in a report. Those in investment-banking advisory services and management positions at banks could see declines of 10 percent to 15 percent, the consultant said.

Wall Street firms including Goldman Sachs Group Inc. and Bank of America Corp. have been trimming jobs and cutting costs across business units as they try to weather slumps in trading and dealmaking. Hedge funds also have been squeezed, with more firms being liquidated in 2015 than were opened for the first time in seven years, according to Bloomberg Intelligence.

“Our clients believe that there really is no light at the end of the tunnel,” Alan Johnson, founder and managing director of the New York-based consultant, said in a phone interview. “People no longer believe this is cyclical; it’s a systemic change in the business. For the results to get better, we’re going to have to do a lot more cost-cutting.”

Hedge fund firms may cut bonus compensation by as much as 15 percent, while other asset managers probably will see a drop of 5 percent to 10 percent in their compensation pools, Johnson said. Private equity firms and high-net-worth managers are expected to scale back slightly less, paring bonus pay 5 percent.

Retail and commercial bankers are the only ones who should expect bonuses to increase, with incentive pools in that business increasing as much as 5 percent, Johnson said.

Wall Street’s average bonus fell 9 percent to $146,200 in 2015, the biggest drop since 2011, according to estimates by New York State Comptroller Thomas DiNapoli. The bonus pool was $25 billion, down 6 percent from a year earlier, even as the industry added 4,500 jobs in New York City, DiNapoli said in March.


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