labels: rex mathew, finance - general, banks & institutions
Wall Street bonuses to hit record this yearnews
Rex Mathew
07 November 2006

2006 has been a record year for the big investment banking firms on Wall Street, hedge funds and the investment banking divisions of big banks. Helped by strong equity and commodity prices, strong profits from private equity investments and increased M&A activity, they are all set to report record revenues and earnings for the full year.

Large investment banks like Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Sterns and Lehman Brothers have all seen their trading profits from equity and commodities rise substantially. The investment banking divisions of top global banks like Citibank, HSBC, Bank of America and Deutsche Bank have also done very well. Global M&A activity is expected to touch a new record of over $3 trillion by year-end. Assets managed by hedge funds are at an all-time high, despite the Amaranth failure.

When these firms do well, their employees can expect large payouts in the form of year-end bonuses. Bonus payments by just the top-5 Wall Street investment banks are expected to touch $35 billion this year — according to some estimates. Add to that the payouts by hedge funds, private equity funds and banks; the total payouts would approach a staggering $50 billion.

Top employees and division heads of large investment banks and hedge funds would be the biggest beneficiaries and individual payouts can be in millions of dollars. Goldman Sachs employees are expected to take home the biggest bonuses — an average of nearly $400,000 per employee.

As the bonus season nears, dealers of luxury goods and real estate in New York are also readying for some excitement. Most of the bonus payments usually get invested in real estate. Those who receive substantially high payouts splurge in expensive cars and art. Stories about hedge fund managers snapping up paintings and other artwork at phenomenal prices have become very common in recent years.

All those receiving fat bonuses this year would be praying for sustained global growth next year as well. Despite the signs of a US slowdown, steady growth in Europe, Japan, China and India may keep the global economy on its growth trajectory in 2007 as well.

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Wall Street bonuses to hit record this year