Small hedge funds outperform the market, bonus levels rebound, and hiring reflects industry changes.
The 2013 Hedge Fund Compensation Report revealed that hedge fund players expected increases in both base salary and year-end bonuses. The average reported cash compensation for 2012 was $314,000 and, again this year, bonuses played a big role in the paychecks of these professionals. The annual industry report is based on data collected directly from hundreds of hedge fund managers and employees.
In 2012, when it came to fund size, bigger was not necessarily better. The size of the most recent fund raised in the typical firm represented in this year’s Report is less than $1 billion. “Despite reports of significant amounts of capital moving to large funds, it seems these small funds are outperforming the market,” said David Kochanek, Publisher of HedgeFundCompensationReport.com.
Nearly three quarters of respondents reported positive returns for their funds in 2012. Last year, 16 percent of hedge fund professionals reported double-digit positive returns for their fund. This year that number jumped significantly to 30 percent. The number expecting their funds to be down 10 percent or less dropped from 22 percent to only 8 percent this year and only 2 percent reported negative fund performance in the double digits.
Great fund performance results in significant bonuses as well and double digit pay increases nearly across the board. Average cash compensation was up 15 percent over last year. Base compensation increased only 4 percent; however, bonuses jumped 31 percent as a result of the solid performance turned in by these funds.
The new rules for hedge funds continue to impacting hiring. Again this year, one out of four funds is looking to hire research analysts. Professionals reported that their firms are also looking for talent in the operations, legal and investor relations areas.
“Dodd-Frank has given rise to many new rules and regulations and firms are shifting their staffs to understand and meet those rules.” Hedge fund marketing, trading strategies and other aspects of fund management are now being examined closely with these new regulations. “Fund managers are more concerned than ever with compliance and operating with greater transparency and their hiring reflects this,” said Kochanek.
About The Report
The 2013 Hedge Fund Compensation Report is based on compensation data collected directly from hundreds of portfolio managers and employees from firms, both large and small, during October and November 2012. The full report can downloaded instantly at HedgeFundCompensationReport.com
The Report has grown to become the most comprehensive benchmark for hedge fund compensation practices in the industry. Respondents participating over the years represent a good cross section of the industry including small firms as well as some of the most recognized hedge fund firms, including: Apollo Global Management, Bank of America – Merrill Lynch, Barclays, Blackwater Capital, Citi, Deutsche Bank, Gottex Fund Management, HSBC, JP Morgan Chase & Co., Man Investments, RBC, Silver Point Capital, UBP Asset Management, UBS and Wells Fargo Alternative Strategies.
