Are credit bonuses cyclical?

Based on the most helpful WSO content, bonuses in private credit can indeed be influenced by the performance and deal flow, similar to other areas in finance. However, the structure of bonuses in private credit might lean more towards the private equity (PE) model due to the nature of the investments and the income generated from interest payments and fees. Private credit firms typically have a stable pool of capital and generate consistent management fees, which can support more stable bonuses even in periods of weaker deal flow or fund performance.

However, it's important to note that while there might be a base level of stability in bonus structures due to the management fees, the overall bonus can still be significantly influenced by the performance of the fund and the deals closed during the year. This means that in years with excellent performance and strong deal flow, bonuses can be higher, while in slower years, the bonuses might not reach the same levels.

In summary, while private credit might offer a bit more stability in bonuses compared to banking due to its fee structure and income from interest payments, it's not entirely immune to fluctuations based on fund performance and deal flow.

Sources: Private Equity vs. Private Credit, Private Equity vs. Private Credit, Banking -> PE -> Banking (Updated views?)