Bonuses in investment banks and securities firms are fulfilling the best and worst of expectations, following the start of the annual bonus season last week.
Pay in fixed income has been skewed heavily towards the top performers who bring in the most revenues. The fixed income sector has provided the lion's share of revenue for the industry this year, so star performers - especially managing directors in sales and trading - have seen their bonuses rise as much as 20%, according to capital markets specialists.
Sources close to Morgan Stanley and Goldman Sachs, which kicked off the bonus round, said that bonus pools in fixed income were marginally smaller than last year, but that 'allocations were tilted towards lead rainmakers'.
However, staff below them who do not work on top-tier accounts lost out. Bankers at vice-president and executive director level were said to be unhappy with their compensation.
Unsurprisingly, bonuses in emerging markets and the high yield sector, which have suffered successive slumps, were well down on last year. Corporate finance professionals have been hardest hit financially. Industry insiders said that many bonuses are down by as much as 60%. Meanwhile, equity market bonuses are falling between 35% and 45%, according to market players.
The bad news follows announcements at some firms earlier this month - including Morgan Stanley and Merrill Lynch - that base salaries would be frozen Lehman Brothers will announce bonuses this week.