Hedge fund compensation increases as payment models change

Hedge fund compensation increased by 5-10% this year and a larger portion of reward was paid in deferred compensation

while base salaries remained level.

Performance was the main driver for the compensation increase as industry assets set a new record, but researchers also say compensation models “consider an increasingly broad and complex continuum of qualities”.

These models are designed to reflect increased teamwork, risk-based capital returns, firm promotion, extending duration of incentives and scrutiny from both regulators and investors of compensation practices, according to the 2015 Glocap Hedge Fund Compensation Report by Glocap Search, a recruiter, and HFR, a hedge fund data firm.

Base salaries in 2014 have stayed largely unchanged for portfolio managers and other senior investment professionals at large hedge funds. They have typically earned $275,000 (€220,000) and bonuses this year have ranged from 2% to 15%, topping the average increase from 2013.

Front office roles including portfolio managers, traders and senior analysts have seen increases, as well as professionals in marketing and IT at top performing funds.

Over the first three quarters of 2014, global hedge fund industry capital exceeded $2.82 trillion, the ninth consecutive quarterly asset level record.

“The continued emphasis on performance generation, as well as increased emphasis of teamwork, firm profitability and the decreased use of large guaranteed compensation packages, has contributed to a greater alignment of interest which properly incentivises employees to expand their firms in a responsible manner,” says Kenneth J. Heinz, president of HFR.

©2014 funds europe

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