Hopes of a bumper bonus season in the financial sector appear likely to be dashed in spite of the biggest surge in mergers and acquisitions since the height of the dotcom boom in 2000.
Only star performers in high-margin growth areas such as equity derivatives, investment banking and private banking will enjoy bonus increases of 15-20 per cent this year, with some receiving packages of $4m (?2.3m). However, others should expect flat or marginal improvements on what they received last year, when bonuses rose by an average 15-20 per cent.
High hopes might be brought to earth in bonus shake-out
Discussion & poll: Are you expecting a bumper Christmas?
Many within the fund of funds business funds that comprise a number of different investment funds expect this to be a year best forgotten when it comes to annual bonuses. The modest bonus season comes in spite of record third quarter earnings from several Wall Street investment banks and a recent sharp revival in European M&A volumes, which are forecast to reach $930bn by the end of the year.
?This year will not be seen as a bumper year for bonuses, despite the hype, although key performers will be very satisfied,? said Aidan Kennedy, partner at Armstrong International, the executive search firm that provides the definitive survey of the annual bonus season. ?M&A has to increase at a much higher rate for investment bankers to take home the record bonuses of the boom years,? he said.
Opaque system of deciding City packages
Star dealmakers at managing director level who have successfully used a mix of their firm's products could achieve bonuses of more than $3m this year. However, second and third quartile performers will see only marginal growth or flat bonuses. The demand for highly liquid products means top performers in interest rate sales to hedge funds will do well this year, with some receiving total compensation of $3m-$4m.
