4 Nov 2010
Glocap Search LLC and Hedge Fund Research, Inc. have released the 2011 Glocap Hedge Fund Compensation Report, an in-depth analysis of 2010 compensation paid by US.hedge funds, including estimates for year-end cash bonuses, it was announced today. The report shows that for the second consecutive year average compensation has increased modestly.
While on average 2010 base salaries for investment professionals and traders were essentially flat from 2009 levels (regardless of fund size or performance) year-end bonuses (most of which will be paid in early 2011) are expected to climb 5% on average. This marks the second consecutive year that bonuses increased since 2009, when they rose about 15% on average above the depressed levels of 2008. Despite the increases over the past two years, overall compensation is still below the peaks reached by the industry in 2007.
Adam Zoia, CEO at Glocap, noted that although most funds are not being as aggressive as they were in 2007 and the first half of 2008 in terms of their expansion, they are also clearly out of crisis mode. In addition to rising compensation, hiring has increased and performance has been stable. He noted that fund marketers and compliance professionals remain in particularly high demand and their compensation experienced the largest percentage increase in 2010. “2010 represented a return to normalcy for the hedge fund industry,” said Zoia.
For the first time in the history of this report, the compensation data for investment professionals and traders has been separated into categories based on an individual’s job function, rather than by their years of experience. Zoia explained that this change was made to better reflect how compensation packages for those professionals are actually structured at hedge funds and will make it easier for funds to benchmark compensation. The compensation is still segmented by fund size and fund performance both of which heavily influence compensation.
A few selected examples of average 2010 total compensation are as follows:
Along with the increases in compensation, Zoia noted that overall assets under management in the industry have recovered and more funds are above their high water marks, meaning the total income earned by the industry has increased over last year. The increase in total income explains why overall compensation has risen despite the fact that, on average, funds will likely earn a lower return this year than last. The report also found that deferral plans are now the norm at funds rather than the exception.
The 2011 Glocap Hedge Fund Compensation Report bases its estimates for 2010 bonuses in part on fund performance through the first three quarters of the year.
Ken Heinz, president of Hedge Fund Research, Inc., noted that with a gain of greater than 3.5% in September 2010, the hedge fund industry, as represented by the broad-based HFRI Fund Weighted Composite Index, finally emerged from the performance drawdown which began in October 2007.
The drawdown was not only significant in magnitude, but in duration; the decline lasted for 16 months which means the drawdown spanned across and impacted three calendar years of performance and compensation structures.
While on average 2010 base salaries for investment professionals and traders were essentially flat from 2009 levels (regardless of fund size or performance) year-end bonuses (most of which will be paid in early 2011) are expected to climb 5% on average. This marks the second consecutive year that bonuses increased since 2009, when they rose about 15% on average above the depressed levels of 2008. Despite the increases over the past two years, overall compensation is still below the peaks reached by the industry in 2007.
Adam Zoia, CEO at Glocap, noted that although most funds are not being as aggressive as they were in 2007 and the first half of 2008 in terms of their expansion, they are also clearly out of crisis mode. In addition to rising compensation, hiring has increased and performance has been stable. He noted that fund marketers and compliance professionals remain in particularly high demand and their compensation experienced the largest percentage increase in 2010. “2010 represented a return to normalcy for the hedge fund industry,” said Zoia.
For the first time in the history of this report, the compensation data for investment professionals and traders has been separated into categories based on an individual’s job function, rather than by their years of experience. Zoia explained that this change was made to better reflect how compensation packages for those professionals are actually structured at hedge funds and will make it easier for funds to benchmark compensation. The compensation is still segmented by fund size and fund performance both of which heavily influence compensation.
A few selected examples of average 2010 total compensation are as follows:
- Senior Trader: Small and Mid-Size Fund, Middle Performance: $365,000
- Chief Operating Officer: Large Fund: $800,000
- Portfolio Manager: Small Fund, Top Performance: $1.23 M
- Portfolio Manager: Larger Fund, Top Performance: $4.85 M
- Investment Professional (Idea Generator), Large Fund, Middle Performance: $1M
- IR/Marketing Professional with 4-9 Years Experience: $253,000
Along with the increases in compensation, Zoia noted that overall assets under management in the industry have recovered and more funds are above their high water marks, meaning the total income earned by the industry has increased over last year. The increase in total income explains why overall compensation has risen despite the fact that, on average, funds will likely earn a lower return this year than last. The report also found that deferral plans are now the norm at funds rather than the exception.
The 2011 Glocap Hedge Fund Compensation Report bases its estimates for 2010 bonuses in part on fund performance through the first three quarters of the year.
Ken Heinz, president of Hedge Fund Research, Inc., noted that with a gain of greater than 3.5% in September 2010, the hedge fund industry, as represented by the broad-based HFRI Fund Weighted Composite Index, finally emerged from the performance drawdown which began in October 2007.
The drawdown was not only significant in magnitude, but in duration; the decline lasted for 16 months which means the drawdown spanned across and impacted three calendar years of performance and compensation structures.
“Hedge fund compensation in 2010 is not exclusively about management and incentive fees, but also about duration, liquidity, transparency, and retention, as well as operational and organizational efficiencies," said Heinz. "As the hedge industry continues to grow and evolve, the compensation model which defines the fundamental economic relationship between investors and fund managers will continue to evolve with it.”
