Hedge fund players enjoyed increases in both base salary and year-end bonuses last year, according to Benchmark Compensation’s 2014 Hedge Fund Compensation Report.
The average reported cash compensation was up again in 2013 and came in at USD330,000.
Base salary played a small role in the increase this year, as bonuses drove the double-digit gains. The annual industry report is based on data collected directly from hedge fund managers and employees representing hundreds of firms.
Average cash compensation was up 16 per cent over last year. Base compensation increased only four per cent; however, bonuses were 30 per cent higher due to performance-based bonus structures.
“As we reported last year, fund performance results in significant bonuses, especially for those closely involved in the investment decisions,” says David Kochanek, publisher of HedgeFundCompensationReport.com. “This wasn’t always the case but in a post-recession market, pay for performance is now the rule.”
Two years ago, the report revealed that hedge fund professionals were worried due to a decrease in fund performance and corresponding bonus payouts. Those surveyed cited market conditions and the pace of redemptions as concerns driving a tough hedge fund job market.
This year, however, those concerns are nowhere to be found. Twenty five per cent of firms are looking to hire research analysts and team members in investor relations, legal and back office operations. The number of professionals reporting that their firms are reducing headcount was down across all functions.
Nine out of 10 respondents reported positive returns for their funds in 2013. Two years ago, only 16 per cent reported double-digit positive returns for their fund, that number is now 54 per cent. Additionally, this year, 18 per cent reported returns of 25 per cent or more with only three per cent reporting losses.
“For those in decision making roles, this level of performance results in tremendous increases in compensation,” says Kochanek. “Thirty-one per cent of hedge fund employees expected 15 per cent to 100 per cent more money while five per cent expected to see their compensation more than double.”