BlackRock Said to Cut Employee Bonuses for First Time Since 2011

(Bloomberg) -- BlackRock Inc., the world's largest money manager, reduced annual employee bonuses by an average of 2 percent to 4 percent for last year, the first such cut since 2011, a person with knowledge of the matter said.

Bonuses were flat overall a year earlier, according to people briefed on the matter, who asked not to be identified because the information is private. Payouts vary with each individual and group depending on performance.

Farrell Denby, a spokesman for New York-based BlackRock, declined to comment on the payments.

The asset-management business is under increasing pressure as money flows from active strategies into cheaper passive offerings. In 2016, BlackRock saw its first decline in annual revenue since 2009 as performance fees fell by more than half, according to Bloomberg Intelligence. Bonuses across the industry were expected to be down 5 percent to 10 percent at traditional firms and as much as 15 percent at hedge funds because of the profit squeeze, according to a December report from Greenwich Associates and Johnson Associates.

Fidelity Buyouts

Money managers are responding to the headwinds with layoffs and other cost cuts. Fidelity Investments, known for its active products, is offering buyouts to 3,000 veteran employees, a person with knowledge of the matter said this week. BlackRock, State Street Corp. and Pacific Investment Management Co. are among major firms that have reduced staff.

Some businesses at BlackRock fared better than others in 2016. The firm attracted a record $140 billion net inflow into its iShares lineup, helped by fee cuts on 15 ETFs in October.

Performance in the firm's stock-picking business continued to lag behind peers, however. U.S.-based active mutual funds at BlackRock saw a record $19.3 billion in outflows last year, according to estimates from Morningstar Inc. Four of BlackRock's quantitative hedge funds posted the worst annual returns in their history.

The last time the company trimmed bonuses came as market volatility eroded fees. BlackRock eliminated about 3.4 percent of its workforce in the fourth quarter of 2011.

To contact the reporter on this story: Sabrina Willmer in Boston at swillmer2@bloomberg.net.

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Josh Friedman