Hedge Fund Managers' Earnings Have Risen As Sector Inflows, AuM Gained - Data

Tom Burroughes

7 November 2014

While hedge funds are now reputed to be under more pressure to trim fees in the face of sometimes lacklustre performance, figures show that people working in this business made more money this year than in 2013.

Compensation increased 5 to 10 per cent over 2013’s levels, according to the 2015 Glocap Hedge Fund Compensation Report (issued along with Hedge Fund Research), with front-office roles including portfolio managers, traders and senior analysts seeing increases, as well as professionals in marketing and IT at top-performing funds.

The sector now holds a record amount of $2.82 trillion in assets and net inflows at their highest level since 2007. As this expansion has taken place, the industry finds itself in tight competition for talent against other industries, as well as other hedge funds, for top finance professionals, the report said.

The sector has been expanding, but performance hasn’t been stellar. So far this year, the HFRI Weighted Composite Index is up 2.90 per cent. The share of all hedge funds which reached their high watermarks since the start of the year through September also rose to 68 per cent, a sharp increase from the 48.4 per cent of funds, which had reached respective high watermarks only two years prior (2012).

Compensation growth, including base salary and bonus (both fixed payout and discretionary), were largely a function of fund relative performance and firm size, with portfolio managers at top performing funds approaching eight-figure compensation levels.

Analysts at large hedge funds, managing greater than $4 billion and performing near the industry average, experienced a base salary increase of 6 per cent and a bonus increase of approximately 5 per cent, for an average compensation increase of 5.4 per cent to a total compensation of $372,000.

Portfolio managers and other senior investment professionals at large hedge funds saw less change in their base salaries, with these typically earning an average base salary of $275,000, although bonus increases ranged from 2 per cent to 15 per cent, topping the average increase from 2013.

Overall, the average compensation for a portfolio manager of a large fund with performance near industry average increased by nearly 8 per cent to $2.4 million, the report said.