Hedge funds have hiked up bonuses again in 2014 after facing increased pressure from investment banks and private equity firms aiming to poach both front office and middle office employees. And, to prevent losing out to other financial services firms, they're filling roles quicker than ever.
Portfolio managers and senior investment professionals at larger hedge funds earned average salaries of $275k in 2014, according to a new survey from Hedge Fund Research and headhunters Glocap. This was flat on last year. However, bonuses have increased by 2-15%, resulting in average total compensation of a hefty $2.4m
At analyst level, assuming the hedge fund you work for has more than $4bn in assets under management, base salaries increased by an average of 6% and bonuses by 5%, taking average total compensation to $372k.
One of the main drivers of this rise is reportedly an increase in competition for client-facing employees. Hedge funds are also facing the prospect of staff fleeing for competitors, private equity and venture capital firms as well as investment banks.
This survey comes on the back of other compensation projections, which paint a mixed picture for hedge fund pay. In the UK, salary benchmarking firm Emolument claimed that average bonuses for directors in hedge funds came in at a mere £85k ($135k) in 2014, almost half that paid out only two years ago. Meanwhile, figures from Greenwich Associates and Johnson Associates suggest that fixed income hedge fund managers (the highest paid) received an average of $850k.
The hiring process for a hedge fund, comprising multiple interviews and various testing processes, typically takes six months, but in 2014 this has halved to three months.
“Examples are increasing of hiring in just a few weeks, especially when someone has left a fund that is folding, or when there are multiple funds chasing the same candidate,” said Anthony Keizner, head of Glocap’s hedge fund practice.
However, hedge funds are no longer basing their bonus payments purely on individual performance – teamwork, firm performance and risk-based capital returns are all being used to assess payments now, and guarantees are on the decline.