Who's up, who's down on the hedge fund pay scale
The new annual hedge fund pay report by Glocap, a New York based-recruiter, suggests hedge fund pay is rising, particularly for experienced senior staff. However, Claude Schwab, a former Glocap consultant-turned rival recruiter, says senior pay is stagnating and juniors are seeing the biggest increases.
According to Glocap, investment professionals with between five and nine years' experience saw their mean bonus rise 35%, to $287,000 between 2004 and 2005. During the same period, the company says pay for experienced traders at top peforming funds rose 38% to $433,000.
Glocap spokesman Landon Spitalnik attributed the rise to strong demand for hedge fund talent. "The pool of talented professionals hasn't grown nearly as rapidly as the industry," he says. He adds that higher investment banking bonuses have contributed to rising hedge fund pay by making it necessary to offer more money to extract banking staff.
However, Schwab, chief executive of New York-based Schwab Enterprise and author of 'Hedge Me', a guide to hedge fund careers, says the figures don't match the reality. "Senior pay is typically based on the performance of the fund," says Schwab, "Plenty of funds have done badly this year, so it seems unlikely average pay at this level will rise."
By comparison, Schwab says the financial future remains bright for juniors working at hedge funds, who are typically paid out of the fixed management fee and are increasingly sought after.
Smaller funds are often the most generous to junior staff. Schwab says his own research indicates second year analysts across all hedge funds receive a median base salary of $100,000, plus a median $100,000 bonus. However, some smaller hedge funds paid second year analysts bonuses as high as $800,000, he says: "Analysts at smaller funds are given a chance to participate in the upside, you don't get that in large funds."
Schwab says his research also highlights rising pay for juniors at investment banks as banks seek to prevent defections to hedge funds. He says third-year investment banking analysts saw bonuses rise 25% to 50% last year, to $115,000, on a base salary of $65,000.