Hedge Fund Compensation Trend Mixed

December 31, 2013

A survey of 15 hedge funds with assets of at least $1 billion under management revealed mixed compensation trends for 2013. The survey conducted by market research firm Infovest21 covered compensation figures for twenty hedge fund positions across different functions such as management, investment, sales and marketing, compliance, finance and operations. The survey found that chief investment officers earn $2.43 million on average and are the highest paid employees at hedge funds this year. Chief executive officers with average compensation of $2.28 million and portfolio managers with average earnings of $2.27 million were the second and third most paid positions at hedge funds. It is worth noting that the average compensation for all these top three earners at hedge funds is lower this year compared to 2012.

Bonus Comprises Majority Of Compensation

For executive positions such as chief investment officer, chief executive officer, portfolio manager, chief risk officer and chief operations officer, bonus accounted for majority of total compensation. For example, chief investment officers at the hedge funds surveyed had average base salary of just $433,000 but earned $2 million bonus on average.

In two thirds of the hedge funds, bonus was determined subjectively and only one third of firms calculated bonus using a preset formula. The survey found that while chief investment officers, portfolio managers and chief executive officers made less than last year, incomes of chief risk officers and chief operations officers rose from last year. On average, a hedge fund chief risk officer made $1.7 million and a chief operations officer $977,000 in 2013.

Positions Earning $1 Million

The Infovest21 survey found that average total compensation is $1 million or higher for the positions chief operating officer, chief risk officer, and director of sales and marketing. Two other prominent hedge fund positions director of research and senior analyst also had compensation exceeding $1 million on average. The compensation figures are from large, well established hedge funds that currently manage at least $1 billion, with average assets of $5.7 billion and with a 15 year track record.

In comparison, positions such as chief financial officer, controller, head trader, and mid-level analyst had compensation of less than a million on average and ranged anywhere between $500,000 and $999,999.

Six supporting positions including compliance director, junior analyst, IT, director of operations, client services and fund accountant had average total compensation below $400,000.

Hedge Fund Performance Key Pay determinant

In a separate survey of a number of hedge fund recruiters, Infovest21 found that more so than in the past, the main factor in determining pay grades at hedge funds is the performance of the fund itself. Compensation is directly correlated to fund performance with funds that have performed well compensating their employees well, while those struggling with losses are not compensating well.

Previous post:

Next post: