The annual Hedge Fund Jobs Digest Compensation Reports are based on surveys designed to capture valuable compensation information directly from those involved in the hedge fund industry. Over the years, we have surveyed many hedge fund portfolio managers, analysts, traders, CFO’s, COO’s, risk managers and others from hedge fund firms, both large and small.
Here we summarize the results of the hedge fund surveys to include some of the hedge fund earnings data and other findings. In the reports you will find large ranges of earnings by title because in the hedge fund industry there is no standard compensation plan or role definition. Traditionally, there are 3 drivers to hedge fund compensation: experience, performance of the fund and size of the fund (although bigger is not always better).
The 2014 Hedge Fund Compensation Report revealed that hedge fund players received increases in both base salary and year-end bonuses. The seventh annual report shows big hedge fund bonuses tied to strong fund performance. The average reported cash compensation was up again. Base salary played a small role in the increase this year, as bonuses drove the double digit gains.
According to our sixth annual Hedge Fund Compensation Report, hedge fund personnel reported a double-digit increase in total cash pay in 2012 compared to 2011. The strong year-over-year increase in total pay is not surprising given that three quarters of the respondents expected their fund to be in the black in 2012, including 30 percent who anticipated gains of 10 percent or more.
The sense pervading the broader financial sector that 2011 would be a difficult year for compensation appears to have spared the hedge fund industry. Half of the respondents believe that their cash compensation would either stay the same or go up between 1 and 15 percent; only one in five believe it will actually decrease — which is about the same as what we reported last year. Traders and senior associates saw the most substantial gains but other titles were not so lucky.
Hedge fund compensation increases were back in a big way in 2010 with experienced, mid-career professionals, reporting expected fund returns to beat 2009’s numbers. And along with performance comes bonuses. 53 percent expected a raise in total compensation for 2010, much higher than the year before. The highest earning managers expected an even larger amount of their 2010 pay to come from bonuses.
The 12-month period since the financial crisis hit stride has been a challenging time for hedge funds. Strategies with a short-bias were able to take advantage of the rapid sell-off in equity markets but had to tackle margin calls from their prime brokers and the exit of their clients who were desperate to cash out of their investments. Macro views have been difficult to call with the uncertainty of the global economy, and the upturn in equity markets since March this year caught many funds by surprise.
Note: This year, we have changed the report title date to better reflect the timing. The 2010 Hedge Fund Compensation Report is based on the data collected in Q4 2009 from hedge fund professionals.
We surveyed hundreds of hedge fund employees from firms such as Bank of New York Mellon, Barclays Global Investors, Citigroup, Fountain Advisors LLC, HSBC, Kellogg Capital Group, Lansdowne Partners and many others. Given the state of the market, the results tell an interesting story. Despite no significant increase in compensation, there was a big increase in satisfaction – an indication that, earlier this year, hedge fund employees knew the market had shifted. Hedge Fund Compensation Report
In 2007, we found that 76% of respondents were dissatisfied with their current compensation package and there was little loyalty to the firm. Most of the survey respondents are in senior roles, have over 10 years of work experience but less than 2 years with their current firms. Was it the fact that intelligent, well educated, hard charging “type A” personalities are never satisfied? Or could it have been that the hedge fund industry really does have a problem simply due to the high demand for talent? 2007 Hedge Fund Compensation Report details
The Hedge Fund Compensation Reports will be of interest to both industry insiders and those looking to break into the industry. If you have questions or comments regarding the surveys, please use the “Contact Us” link at the bottom of this page.