The 2014 report on hedge fund compensation compiled by HedgeFundCompensationReport.com is out.
Based on data collected directly from hundreds of hedge funds around the globe, including 240 of the biggest firms, as well as many smaller firms, the survey incorporates actual compensation data from 2012 and projections for 2013.
The market helped!
“Overall, 90% reported gains at their funds. This year, an incredible 18% of reporting firms enjoyed gains of 25% or more in their fund,” says the report.
That’s no surprise considering that equity markets put on a stellar performance during 2013. This was a helpful tailwind in favour of fund performance that naturally had a beneficial impact on bonuses linked to fund returns.
Bonuses formed a majority of the cash compensation and therefore total cash pay rose in double digits during 2013.
“In 2013, the bonus accounted for 19% of the total cash compensation package received by those who made between $100,000 and $200,000 and 38% of the pay received by those who earned between $200,000 and $300,000. Even those who made between $50,000 and $100,000 still received more than 30% of their cash compensation from bonus,” says the report.
Aggregate earnings: Expectations for 2013 versus 2012
The survey reports that overall, over a third of hedge fund personnel thought earnings in 2013 would increase from 15% to 100%.
An elite segment of 5% respondents were the lucky few who expected their pay packet to more than double from 2012. Here’s the pie chart:
Compensation by pecking order
An interesting observation from the range of compensation tabulated across various levels is that more senior personnel, such as the C-Suite, who directly carry fund performance on their shoulders, received compensation that could vary widely from the average compensation.
Observe in the table below, for instance, that the mean compensation for a CIO was $364,000 but total compensation in this category could vary from as low as $168,000 to as high as $663,000.
Size does matter, but not in the way you think…
Hedge funds tend to run lean and mean, keeping a tight lid on overheads, and that includes employee compensation. This works well for both the good and the bad times.
The survey found that employee compensation in mid-sized firms (number of employees basis) ruled higher in 2013 compared to the small or large-sized firms. In the graph below, note that firms with employees numbering from 11-49 paid the highest compensation of $384,000.
…And how size affects remuneration at various positions
The fund observed that usually the larger the AUM the bigger was the compensation for a given title, though this was not true for a CFO.
Earnings by the hour
It appears hedge fund employees lead a comparatively easier work schedule compared to their counterparts in investment banking.
“Hedge fund professionals told us again this year they are working fairly manageable schedules. Just 11 percent are working 70 or more hours and 78 percent said they work more than 50 but fewer than 70 hours per week. However, just 3 percent worked fewer than 40 hours,” says the survey.
How does that translate into compensation per hour for various seniorities?
Not surprisingly, the topmost echelons raked in the highest compensation when computed on an hourly basis.
Other facets of the survey
The report contains a wealth of additional information including equity sharing, vacation trends, job security, negotiating the recruitment process, the role of education and experience, training on the job and job satisfaction.