The average hedge fund got absolutely trounced by the S&P in 2013, booking a year-end return of roughly 10%, compared to the near 30% rise of the index fund. How have hedge fund managers been taking the news? Many are crying all the way to the bank.
Average cash compensation for hedge fund managers rose 16% in 2013 to $330,000, according to Benchmark Compensation’s annual report, despite the fact that the majority of funds failed to pace the general market. The survey, first reported by FIN Alternatives, found that less than one in five funds returned 25% or more.
The reason for what many outsiders may perceive as an inequitable raise in pay is based on a philosophical change made after the financial collapse. Hedge funds began better tying compensation to performance, as was the want of many investors. So, even though many funds didn’t gain at the level of generic indexes – like the S&P and Dow Jones – they did still make money. Hence, year-end bonuses for hedge fund managers were up nearly 30%. (Some funds do use indexes as a benchmark to assess performance, but clearly not as many as we thought).
Another contributing factor is the fact that investors don’t seem to notice – or care – that many hedge funds are losing to the overall market. Hedge fund assets under management increased by $228.8 billion in 2013, the fastest annual growth since before the crisis. Hedge funds didn’t have all that great of a year in what many have called a “rigged market,” but the industry seems to be doing just fine.
JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America, Citi and (surprisingly) Deutsche Bank, have all announced their fourth quarter results. Here are all the key takeaways on hiring and pay.
Deutsche Bank had a lousy fourth quarter, booking a pre-tax loss of $1.56 billion. The investment bank – particularly the fixed income unit – was largely to blame. Deutsche Bank will now step away from areas that aren’t profitable.
Klaus Diederichs, chairman of European investment banking at J.P. Morgan, is to retire. He has spent the last 34 years at the bank.
Citi and Deutsche Bank each plan on announcing new initiatives aimed at easing the working conditions of junior banks. Most every other major bank has already done something similar.
Gaby Abdelnour, a former regional head for Asia at J.P. Morgan, was reportedly interviewed by FBI agents in New York last year as part of a federal foreign bribery investigation. Feds are looking into whether the firm or its employees gave gifts to foreign officials in an effort to win business.
Morgan Stanley CEO James Gorman has a plan for the bank’s struggling fixed income unit: make it smaller. Apparently his traders don’t love the idea. Glenn Hadden, global head of interest-rates trading, reportedly expressed his concerns to the point that he was asked to resign.
Here are the seven hottest jobs in financial services. None of them are in banking. And none pay particularly well.
Buzz Around the Office
Staring at short people is allowed when they are celebrities. Who knew Prince was 5’2”?
Quote of the Day: “2014 will be a continuation of some of the trends we have seen . . . Items like litigation, impairments, the operating environment, all of those will remain challenging,” – Anshu Jain, co-chief executive of Deutsche Bank.