Wed, Jun 19, 2019
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedge fund industry compensation rises for third consecutive year

Thursday, October 31, 2013
Opalesque Industry Update - Hedge fund industry compensation rose for the 3rd consecutive year, as trends of increased investor visibility, organizational transparency, increased reporting requirements and role evolution accelerated on record industry assets. Average compensation rose between five and ten percent in 2013, with wide categorical and performance driven disparity, and with Portfolio Managers, Senior Analysts and Risk Managers at top performing funds seeing the highest relative increases, according the latest 2014 Glocap Hedge Fund Compensation Report, released today by Glocap and HFR.

Over the first three quarters of 2013, global hedge fund industry capital exceeded $2.51 trillion, the fifth consecutive quarterly asset level record, as the HFRI Fund Weighted Composite Index gained +5.5 percent YTD. The percentage of all hedge funds which reached their high watermarks YTD through September also rose to 62 percent, a sharp increase from the 48.4 percent of funds which reached respective high watermarks in 2012.

"Hedge funds bonus pools were fueled in 2013 by the combination of increased performance fees and additional management fees generated on an increase in investor capital allocations. These larger bonus pools will be passed through this year as higher compensation for key staff,” commented Anthony Keizner, Head of Glocap's Hedge Fund practice.

Hiring picks up, transparency takes center stage Several important trends defined the compensation picture for 2013. In general, 2013 saw increased hedge fund hiring, with an emphasis on qualified entry-level positions, in contrast to prior years’ focus on legal, operational and marketing hires. As a result of the increase in hiring, qualified candidates more frequently received multiple offers and the duration of searches (from posting to fill) was shorter.

Indicative of the trend toward greater total organizational transparency, there was again a premium for candidates who were in historically internal-facing roles but were capable of being market- or client-facing. These include Risk Management, Information Technology and front office roles, as well as Portfolio Managers, Traders and Analysts. One factor which inhibited greater hedge fund compensation increases was a decline in compensation in the banking industry and a flat compensation environment for private equity. Hedge funds were also under continued pressure to provide greater liquidity, more frequent reporting of results, less advanced notice for redemptions and short or no lockup periods.

Compensation trends up at largest funds while PMs must show value Entry-level Analysts at large hedge funds experienced flat base salary increases, though bonuses increased between 0 and 10 percent, with average compensation at a mid-performing fund totaling $353,000. Portfolio Managers and other Senior Investment Professionals at large hedge funds also experienced flat base salaries, although bonuses ranged from a decrease of five percent to an increase of 20 percent, with an average compensation for a PM of a large fund totaling $2.2 million.

Another important trend was an increased focus from hiring managers at large funds on PM candidate performance for 2008 and 2011, as managers needed to demonstrate not only proof of outperformance in good years, but also an ability to weather market downturns. Hiring managers were also more likely to require candidates to show an ability to generate performance without overexposure to risk, as risk limits continue to tighten. Budgets for analyst positions, travel expenses and other costly resources also appeared to be sharply reduced, as more funds indicated an interest in controlling costs.

“Given SEC registration and general regulatory and investor pressure, hedge funds bulked up their legal and operational teams in 2011 and 2012. This slowed in 2013, with the effect of reducing the rate of compensation increases for the average employee in these roles,” noted Keizner. “Compensation trends in 2013 reflect the powerful evolution of the hedge fund industry and individual funds toward fully transparent, client-centered financial services organizations, while maintaining a required focus on generating performance for investors,” stated Kenneth J. Heinz, President of HFR. “Compensation policy is designed to create a greater alignment of interest between a fund’s management and investors, support greater organizational stability, and improve investment strategy execution. As a result of this continued enhancement and refinement, the hedge fund industry has grown to a record level of investor capital in 2013 and is well positioned for additional growth and expansion in coming years.”

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. PE/VC: Pictet warns over PE boom being 'bubble waiting to burst', VC pot investments hit record highs in 2019, Private equity managers are increasingly turning to loans instead of investors, PE/VC investments halve in May as large deals dry up: EY report, Many investors in venture capital say a big return isn't enough[more]

    Pictet warns over PE boom being 'bubble waiting to burst' From City Wire: 'Dial down private equity' is the key message of Pictet's chief strategist Luca Paolini, who said investors should review their allocation to alternatives as private equity is the weakest link. Debt is its biggest

  2. New Launches: Hedge fund Cheyne raises $1.12bn for stressed loan fund, Private equity groups prepare to unleash mega funds, TCV, Warburg veterans launch new growth equity firm Farview, Carlyle closes European real estate fund at $604m, Consumer brand-focused H Ventures registering two new funds, Catalys Pacific targets $100m for first VC healthcare fund[more]

    Hedge fund Cheyne raises $1.12bn for stressed loan fund From FT: London-based hedge fund Cheyne Capital has raised €1bn ($1.12bn) for a new fund that will aim to profit from European banks selling down their loan portfolios to meet new accounting and regulatory standards. The

  3. PE/VC: The myth of private equity: Funds struggle to beat the market[more]

    From Guru Focus: Private equity is a glitzy industry, but does it actually beat the market? The data suggests it does not. In an October 2018 episode of "Talks at Google," former fund manager and academic Jeffrey Hooke explained why the sheen has come off of private equity in the last decade. A

  4. News Briefs: Fixing the Sharpe ratio: A machine learning approach, Sotheby's snapped up by French tycoon Drahi for $3.7bn, SALT announces its signature global thought leadership conference in Abu Dhabi, UAE[more]

    Fixing the Sharpe ratio: A machine learning approach From All About Alpha: The Sharpe ratio has long served as a simple but important item in the due diligence tool kit. Formulated by William F. Sharpe in 1966 and first called the "reward to variability" ratio, the number arises from a

  5. Crypto: Crypto exchanges are facing their biggest regulatory hurdle yet, Nasdaq's Quandl institutional data platform to add crypto reference prices, Coinbase launches its cryptocurrency debit card in six more countries in Europe, UK insurer Legal & General picks Amazon for first pensions blockchain deal[more]

    Crypto exchanges are facing their biggest regulatory hurdle yet From Bloomberg: The new rules will apply to businesses working with tokens and cryptocurrencies, such as exchanges and custodians and crypto hedge funds. Bitcoin and its fellow cryptocurrencies have surged in popularit