In this Newsletter, we do a deep dive on what’s been happening at the investment banks, particularly at the Analyst level. The banks continue to be the major source of talent entering the investment industries, and trends at the banks often play out on the buyside. We examine what’s similar and what’s different about these new entrants to the finance industry, and what’s happening with Analyst compensation.

On the topic of compensation, given the time of year, it’s no big surprise that the most common question we’re hearing is, “How are buyside firms thinking about compensation come year-end?” For this year, in particular, it’s complex. On the one hand, there are clearly macro-economic headwinds; on the other, employment markets remain robust. How will everything play out come December 31^st? Here are 5 thoughts and we’d be happy to discuss specific circumstances with you further:

1) 2021 represented a recalibration of compensation – very few in the industry are expecting the increases seen 2020 to 2021 to be repeated 2021 to 2022; but with costs rising as they have been, it’ll take an 8% compensation increase just to keep compensation flat in inflation-adjusted terms

2) Wall Street bonuses will be way down year-on-year (20 to 40% are ranges being mentioned) but these figures only have a marginal bearing on the talent market within investment management

3) We’ll see a greater dispersion of firms paying up (including many within market-neutral equity strategies, and macro trading) and those paying flat/ down (including directional equities, long-only, and credit)

4) Strong demand for junior talent persists; therefore, any firms unable or unwilling to pay at least flat for pre-MBAs, regardless of performance, are likely to have attrition concerns in 2023

5) Heading into the end of 2022, we don’t see a reduction in the value of offers; we see successful firms looking to strengthen their talent and viewing it as opportunity to add employees given the market for top talent has been very tight for a couple of years, rather than trying to pick up people “at a discount”

Here’s to a happy year-end and New Year!

The Odyssey Team