Hedge Fund Compensation — How It’s Done
By BankersBall on Feb 8, 2007 in Cube Life, Salaries
Infovest (avail through Lexis Nexis) has a summary of their conference on hedge fund comp and how it is typically structured.
- Bonuses: Average 15 - 30% of base salary, as high as 60%. Three ways they are structured include: single strategy performance based; mutiple-strategy based (firm-wide performance based); or combo of the two. Co-investment (~30% of bonuses) is common, typically on a vesting schedule (five years to fully vest). Partners/Managers can get up to 40% of a strategy’s profits, thought they have to pay out junior trader’s bonuses out of that. Salespeople’s bonuses are based on assets brought into the firm, typically on a “vesting” schedule (how long money stays with the firm), plus % on return of fund. i.e. 20 basis points on new assets + 20% of fee on fund’s returns.
- Base Salary: Senior Analysts, CFO, Sales all earn in the range of ~$150,000 base. “Sign-on bonuses, guaranteed bonuses and ‘claw-back’ clauses are other features of first year hire agreements. Claw-backs occur if the employee leaves the fund within a year or two and involve the repayment of sign-on bonuses and items like moving expenses,” says John Breault of MJE Advisors, according to InfoVest.
On Feb 8, 2007, meanjoemoomoo said:
as a former PE guy turned hedge fund guy at a medium sized opportunistic fund, i can tell you that all of those numbers look VERY LOW. the base is about right but if someone ever aproached me with less than 200% of my base in bonus, i would be outraged. Big risk, big reward.
On Feb 9, 2007, arbman said:
Your sources are high on the salary side and very, very low on the bonus side (in terms of % of salary). hedge compensation is supposed to be almost entirely on performance and bonus should be more than 100% of salary in a decent year.
On Feb 9, 2007, Jason Raz said:
In the future, can you add a link to print out the pages in a printer friendly way?
On Feb 12, 2007, RJ said:
That seems to be back-office comp.
On Jun 23, 2007, Anonymous said:
even small firms with 100-200M AUM long/short equity i know pay more bonus than that.. those bonus numbers as a % of comp are completely wrong.
Most HFs pay at least 100% of base as bonus if they have a decent year and the employee does a decent job
hf base salaries for small firms are probably btw 125k - 200k (125k for analysts 200k for more senior) but bonus can be 150k - 500k or more (really depends on AUM)
then as they get bigger they can pay a bit more
On Aug 14, 2008, hedgehoggirl said:
I have to say the salary is accurate and agree that the bonus is way off. I’d say bonuses range in the 100-200% range depending on performance. If you’re a partner you receive a 10040% bonus pretty much regardless-incentive fee baby!