Do you really want to work for a top hedge fund? After all, they’re notoriously unwilling to commit. They’re only really interested in hiring people with prior hedge fund experience. And…you may eclipsed by the superstar trader who founded the fund and takes most of the cash.
At least, this is what seems to have happened at Capula Investment Management. As we reported last week, Capula increased pay for its partners by an average of £400k each in the year to March 2014. Over the same period, the value of profits set aside to share between Capula’s partners increased by £6.8m, to £66.6m. This all sounds very generous, except that one single individual at Capula (likely founder Yan Huo) saw his own pay increase by £5.1m over the same period, to £17.6m.
In other words, Capula’s top trader walked away with 26% of the bonus pool – leaving the other 24 partners to share the rest.
It’s not just Capula. The ‘top trader’ phenomenon is common in the hedge fund world. In 2012, for example, London-based hedge fund Comac Capital allocated 70% of its available profits to just one partner – likely founder Colm O’Shea. Nor is it just hedge funds – Goldman Sachs’ 467 partners have access to a special ‘partner bonus pool’ – said to equal 20% of the firm’s total. The remaining 33,500 staff have to make do with the rest.
Hedge funds are, however, an extreme case. As partnerships without shareholders, without remuneration committees, and without executive boards, their senior staff have the power to pay – and to pay themselves – as much as they like. Before you join a hedge fund, it might therefore be worth looking at its most accounts and determining who’s in control and how much of the cake they cut for their own plate. Tellingly, Capula’s most recent results end with the statement that, “The members consider the ultimate controlling party to be Yan Huo.”