It’s only August, but many Asian hedge fund professionals are already facing up to the prospect of dire 2016 bonuses on the back of faltering performance in the sector.
Figures from eVestment show that Asia-based funds are suffering the worst redemption pressures in five years, with $6.3bn of capital outflows in the first half of 2016, more than any other region.
The performance of hedge funds in Hong Kong and Singapore has fallen by 11.49% and 3.73% respectively over the past 12 months, according to a report released earlier this month by Preqin.
In an “average year” hedge fund investment professionals in Asia can look forward to bonuses of 100% to 200% of their base pay, while in an “excellent year” this can soar to 300%, says Amanda Lote, MD of search firm Lote & Partners in Hong Kong.
This year looks likely to be below par, however. Most people at hedge funds in Singapore and Hong Kong will ‘only’ receive payments of 25% to 50% of their salaries, while zero bonuses will be more common than last year, says Will Tan, managing director at search firm Principle Partners in Singapore.
“Bonuses will be down on 2015 as they’re tied to fund performance, which generally hasn’t been good. So don’t expect a large bonus – just be happy to keep your job,” says Tan.
Lote adds: “It’s been largely a bad year and expectations are already being managed for year-end bonus. Hedge fund bonuses are often paid out of the two and 20 model. When bonuses are being allocated portfolio managers get the most then divide up the rest between investment analysts – but obviously if there’s no upside there’s no bonus."
Hedge fund base salaries in Hong Kong and Singapore
Meanwhile, base salaries at hedge funds in Asia are up on last year, but only by the "standard 3% to 5%", says Rob Green, CEO of search firm GRM Group in Hong Kong.
Portfolio managers typically earn about US$250k as base pay, but this can vary widely according to seniority, performance and fund size, says Lote.
Investment analysts with one to three years’ experience receive about $100k to $150k, she says. This can rise to $200k once they have worked in a hedge fund for about eight years, says Tan.
‘Career analysts’ – those who stay in the function for more than 10 years without becoming partners – earn up to $300k, adds Tan.
While Hong Kong is a larger hedge fund centre than Singapore – it has 653 active funds compared with Singapore’s 323 – there is little difference in compensation between the two cities.
“Singapore has bridged the pay gap that used to exist,” says Tan. “It’s nearly as expensive to live in as Hong Kong, so the comp reflects this. Some senior fund managers prefer Singapore because they think the lifestyle is better there, especially those with kids.”
“But the hedge fund sector in both markets doesn’t pay quite as well as a lot of people think,” adds Tan. “So don’t be misled by the big bucks that the minority make in bonuses – you’re probably better off long term in a more stable role in a traditional asset manager.”