BlackRock Boosted Staff Bonuses Last Year After 2016 CutBy
Bonus pool for 2017 increased in the high single digits
Payouts reflect more of a focus on rewarding top performers
BlackRock Inc., the world’s largest asset manager, boosted annual employee bonuses last year after a stinging 2016 when incentive pay was cut.
Overall, the firm’s bonus pool increase was in the high single digits, in the range of about 8 percent to 9 percent, and BlackRock put a greater focus on rewarding top performers, according to people familiar with the matter. Some star employees saw bonuses jump substantially, in the 20 percent range, while others who didn’t deliver got cuts, said the people, who asked not to be named because the information is private.
The increase comes after a stronger year for the asset-management business, which has benefited from the global rise in stock prices. BlackRock’s assets surpassed $6 trillion and the firm reported the biggest inflows in its history last year. The world’s largest provider of exchange-traded funds is continuing to benefit from the move to passive investing, while its active business, including hedge funds, has seen performance improve.
Brian Beades, a BlackRock spokesman, declined to comment for this story.
Bonuses across the industry were expected to increase by about 7 percent from 2016 to 2017, according to an asset management compensation study by Greenwich Associates and Johnson Associates.
By contrast, on Wall Street, most bond and equities personnel are getting smaller 2017 pay packages in part because of low volatility, while traders and salespeople who work for banks’ electronic trading platforms will get increases of 3 percent, according to recruiter Options Group Inc.
In recent years, money managers have sought to rein in expenses by cutting jobs and investing more in technology. In 2016, BlackRock reduced bonuses by an average of 2 percent to 4 percent after reporting the first decline in revenue since 2009. It was the first cut since 2011 when market volatility eroded fees.
Last year, BlackRock’s total expenses rose, driven in part by an 9.7 percent jump in employee compensation and benefits. The firm added more employees and handed out bigger bonuses on higher performance fees and operating income.
For all the gains in asset management, the Greenwich study points out that rising stock markets are masking challenges still facing the industry.
Investors continue to abandon higher-paying active funds for less expensive passive products, where fees keep falling. Asset managers will continue to look to aggressively manage costs because of fee pressures and the need for big tech investments, according to the study, which is based on data collected from more than 1,000 U.S.-based industry professionals.