Money managers’ pay will come under pressure in 2018 as the asset management industry scrambles to manage rising costs and increased competition from cheaper passive funds, according to Greenwich Associates.

While average pay rose a projected 7% this year, the impact of cost constraints is already starting to show, the advisory firm said in a report. Fund managers should brace themselves for “tough compensation negotiations,” it warned.

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“Margin pressure is forcing asset managers to manage costs aggressively,” said Greenwich Associates Associate Director William Llamas. Bloomberg News

“Margin pressure is forcing asset managers to manage costs aggressively,” and “one of the primary costs is compensation,” Associate Director William Llamas said in the report. Investment performance and pay are “delinking,” he said.

While asset-management salaries rose on average this year, equity fund managers earned more than their fixed-income peers thanks to a rally in global stocks. Bond managers actually received about 14% less this year than in 2016, the study showed.

Rising technology costs and increased pressure on fees from index and ETFs are working against the industry, according to the report, which Greenwich Associates produced with pay-consulting firm Johnson Associates.

Elsewhere, hedge fund pay rose an estimated 5% from last year, the report showed. And Greenwich Associates said it’s a good time to be young and in tech at financial firms as staff working in data and analytics benefit from increasing competition for their talents.

Bloomberg News