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Bonuses increase for junior equity hedge fund professionals

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Professionals at equity hedge funds earned significantly more in 2014 than peers in credit hedge funds and asset management, according to the latest compensation report from Kea Consultants.

Base salaries for junior professionals grew by a marginal 5% at most funds and varied little across asset management and equity/credit hedge funds, with mean base ranging from GBP67.5k to GBP75k for analysts with two to four years of experience, and peaking at a GBP200k even for more senior VP/Principals with eight to ten years of experience.  However, top performers at credit funds earned substantially larger bonuses than their peers, which increased by an average of 18% on the previous year compared with less pronounced bonus growth of 8% at credit funds and 4% for asset managers.  

Hephzi Nicol, Co-founder at Kea Consultants, says: “While we have seen marginal increases in compensation for asset management and credit funds, we are encouraged to see a strong gain on bonuses for juniors at a number of equity funds. This was mainly driven by strong performances in event-driven strategy at these funds.  Hedge funds this year reached their highest levels of capital since 2007, and now they are ramping up compensation to secure and maintain strong investment teams.” 

In the year ending December 2014, top mean bonuses for junior equity analysts with four to six years of experience, at GBP352,000, were two times higher than those earned by peers in credit and asset management, while more senior credit professionals earned up to GBP1,000,000 in bonus or an average of GBP775,000, more than three times the closest peer.

As in previous years, compensation is largely determined by the hedge fund’s performance and size.  Most hedge funds compensate junior staff in cash on a discretionary basis, but some offer fixed payouts between 1.5% and 5% of profit and loss (P&L) depending on assets under management, with smaller funds paying a slightly higher percentage of P&L to incentivise mid-senior analysts.

Nicol adds: “Large, high-performing hedge funds are in a better position than smaller funds to raise salaries to attract and retain talented investors.  However, strong performance, fundraising and a push to deploy capital across the buyside in the past year is driving increased competition, and subsequent costs, for rising stars both from other hedge funds as well as from private equity and venture capital funds.  

“Equity funds could pay over one million sterling to secure a top senior analyst and significantly higher for a more experienced fund manager.  Faced with the mounting cost of scaling an investment team, hedge funds are placing a heightened focus on recruitment at the more affordable junior level.” 

Data for this report was compiled based on contributions from individual investment professionals and 21 leading funds in the UK.

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