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Now that markets have picked up, clients are coming back to hedge funds, and returns can be made by riding the market back up, but there is still much to be unsure about. The result has been a state of confusion for many in the hedge fund industry.
On the one side, there are investment opportunities to be made from the crisis, and on the other, growing assets under management and having a middle to long-term strategy has been difficult.
This state of uncertainty has been reflected in the compensation packages of hedge fund employees. Base salaries, on average, have increased slightly, but a closer look reveals a distinction between the haves and the have-nots. Those employees of the top performing funds are earning more than the rest of the industry, naturally.
But positive performance seems to have only a positive impact on the salaries of those employees that make investment decisions like portfolio managers, traders and quant programmers. The gap in salaries between top management and back office employees is increasing, even CFOs and some director-level team members took a pay cut this year.
Even in the most challenging market this generation of investors has ever seen, the drive for more continues. As we have seen before, as the market improves, overall satisfaction with hedge fund compensation decreases. Interestingly, those at the bottom of the salary scale are happiest with their package – likely due to limited job market opportunities. But mid-tier employees are expressing disdain with not having more equity and more money.
While the number of hours that hedge fund employees are now working has not increased since 2007, there is a sense that the stress of the financial crisis and general uncertainty surrounding the future of the global economy is causing some hedge fund employees to question whether their compensation suitably reflects the environment.
Hedge Fund Jobs Digest surveyed hundreds of fund managers and employees over October and November 2009 to benchmark compensation practices. Respondents were from the across the globe, with a concentration in North America, and include some of the largest and most recognized hedge funds.
Among the respondents are Citi, Black River Asset Management, Deutsche Bank, Gartmore Investment, Gottex, Green Arrow Capital Management and UBS. As is indicative of the industry as a whole, most respondents are from either smaller firms or small groups within a large firm (in terms of number of employees).
Links to Further Analysis:
Hedge Fund Compensation Summary
Hedge Fund Compensation by Role
Fund Performance and Compensation Levels
Fund Size and Compensation Levels
Education, Tenure and Compensation Satisfaction
