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The typical path for MBA graduates into a hedge fund is to take on the role of analyst, and work their way up to portfolio manager. On average, respondents with an MBA earned almost $50,000 more than those without and over $20,000 of that came in the form of base compensation. Beyond the pure earning potential, we find many of the current hedge fund jobs in the Hedge Fund Jobs Digest’s database require an MBA.
The hedge fund industry is still relatively nascent. The vast majority of those surveyed had been employed in their current firms less than five years, and most had less than five years of hedge fund experience. Only 4% of respondents have been working in hedge funds for more than 15 years.
Amount of hedge fund experience also impacts opportunities for equity in the firm. 17% of employees with less than two years at a hedge fund are offered equity participation and 65% of those employees that have been with the firm longer than 20 years hold equity in the fund. This is presumably because many individuals with that much experience are founders of the firm. There is little difference in equity participation opportunities for employees, however, until they have been with a firm more than 10 years. 70% of respondents had no equity stake at all.
As would be expected, it is the senior roles that are most likely to have equity in the firm. More than half of managing directors, portfolio managers and CFOs have equity. The survey revealed that traders are now increasingly being offered equity. For the first time in three years of data, the percentage of traders with equity in the firm exceeded the 20% mark.
The majority of respondents said they were granted three weeks or more of vacation time in 2008 but only took 75% of that time off. Interestingly, fewer respondents said they were granted no time off in 2008. Hedge fund employees are still not taking their full allowance of vacation time, however, opting to take just 75% of their vacation earned. Players in hedge fund jobs on average take about 2.5 weeks of vacation time each year.
Once again it is the senior employees that appear to have the longest vacation allowances, and they are not afraid to take it. Those that took more than six weeks in vacation were employees earning more than $450,000. Following cultural differences, hedge fund employees in the UK earned more vacation than those in the US. On average, UK employees earned 4.6 weeks of vacation time over 2008. Salaries, however, were on average $10,000 lower than those in the US.
The stress of the markets seems to have affected the sense of work and personal life balance. Fewer respondents now claim their work and personal life balance to be excellent. Indeed, this year only 36% of respondents rated their work and personal life balance to be above average. In 2008, almost 44% made this claim. This dissatisfaction is not a result of increased hours. The hours worked in 2009 do not differ from hours worked before the financial crisis began. The majority of hedge fund employees work a 40 to 60 hour work week, with the most common response being 50 hours a week.
However, respondents now seem to feel that they are not being compensated appropriately for the amount of work they are doing. Perhaps the more stressful environment during the financial crisis, while not increasing hours, has made employees feel they should be better compensated, or has affected their personal lives.
It does pay to work longer hours, however, as those who reported working 70 hours a week also reported higher salaries than those on shorter workweeks. The jump in income from 50-60 hours to 70 hours a week resulted in a 27% increase in total compensation.
As intimated, the results of the survey indicate a growth in the level of dissatisfaction with compensation among hedge fund employees. Last year, 58% of survey respondents said they were unhappy in their roles. That percentage has since increased to 61%.
Given the disparities between salaries of top management and back office employees, one would imagine that the latter would have the biggest gripe, but the survey reveals a different story. Accountants and legal and compliance officers within hedge funds are among the happiest when it comes to compensation levels. COOs and directors which are among the top earners at a fund are predominantly dissatisfied. Analysts, however, are the unhappiest of the lot. Only 20% of analysts surveyed said they were happy their compensation.
Back to the 2010 Hedge Fund Compensation Report
