Hedge fund global pay and hiring forecast

In the first half of 2005, money flowing into European funds grew at an annualised rate of just 18%, down from 50% in 2004 and 100% in 2003, according to EuroHedge, a trade magazine. Chicago-based Hedge Fund Research Inc, paints a similarly spluttering scene in the US: in the first half of this year it says inflows into US funds of hedge funds dropped 40% as investors eschewed lackluster returns.

If hedge fund inflows are losing some of their sparkle, the same cannot be said for the goings on at particular hedge funds and hedge fund managers. In June, the secretive London-based Bailey Coates Cromwell fund went into very public liquidation after making some bad bets on the US market. More recently, the founders of Bayou Management, a collapsed US hedge fund that once had $450m (€374m) under management, pleaded guilty to fraud.

Despite these shenanigans, would- be hedge fund employees need not put their CV's away just yet. This year's difficulties have largely affected hedge funds following convertible arbitrage strategies, which suffered from poor volatility and investor redemptions. On the whole, recruiters in the sector say hiring is healthy, particularly in key hedge fund centres such as the UK and the US.

UK and US: Biggest money

There's little doubt that the big money and the big jobs in the hedge fund industry, are to be found in the UK and the US. According to Eurohedge, UK hedge fund assets are 121bn, or more than 75% of the European total. US hedge fund assets exceed $1 trillion. David Durham, managing director of Durham Consulting, says there are still lots of hedge fund jobs to be had in London: "It's a growing business, hedge funds are still drawing people from banks."

The most popular profile is a successful proprietary trader with a proven track record who can make money from the outset, says Durham: "Hedge funds like a sure bet." Analysts in hedge funds can expect to earn comparably to analysts in investment banks: for five years' experience a base salary of 75,000 (€110,000) to 95,000 is normal, plus a 100% bonus. The really big money is earned by traders, says Durham: base salaries after five years rarely rise above 80,000, but traders are often paid between 10% and 15% of what they bring in. This can add up to many millions.

Similar riches are on offer across the Atlantic, where a survey earlier this year by Alpha Magazine found the best paid hedge fund managers in the US each earned an average of $253,000 (€210,000). Pay for the bulk of the market is lower, but impressive nonetheless: a recent survey by New York-based recruiter Glocap found traders with between five and nine year's experience earned an average bonus of $433,000 last year.

Germany: On par with investment banking

Like their counterparts in Italy, German hedge funds are also not the place to get rich. Patrick von Pfetten of Frankfurt search firm Von Pfetten & Kollegen, says most jobs in German hedge funds pay similarly to their equivalent in mutual funds and investment banks. Only a few individuals at the top of the tree are earning more than €500,000, says Kollegen. He says an analyst or trader with five years' experience could expect a base salary of €130,000 in a German hedge fund, plus a bonus of 100%, if they're lucky.

Despite efforts to liberalise the German hedge fund market at the start of 2004, Kollegen says the industry remains uninteresting and that jobs are few and far between. This is borne out by figures from Eurohedge: like Italy, Germany accounted for less than 1% of the European hedge fund universe in the first half of this year.

France: Recruiting analysts and traders

If size is an indicator of hiring, French hedge fund jobs should be easier to come by: according to Eurohedge, France was the second largest European market in the first half of 2005, with 5% of European hedge fund assets under management.

Antoine Morgaut, head of the financial services division at Robert Walters in Paris, confirms the correlation. After cutting staff earlier in the year, he says French hedge funds are recruiting both analysts and traders. Preferred candidates have strong academic backgrounds (preferably in engineering), an understanding of complex trading strategies, and fluent English.

Pay in France is also robust. A junior analyst can expect a base salary of €50,000 euros, says Morgaut, plus a 15%-20% bonus. Within two years, he says this could easily rise to a base salary of €80,000 euros, plus a bonus of 50%; and after five years, a very good trader in a Paris hedge fund could earn a total of €500,000.

Switzerland: Drop-off

In the mid 1990s, Switzerland accounted for around 75% of the European hedge fund market, today it represents a miniscule 2% of the total.

Despite this dramatic fall from grace, Urs Killier, a consultant at Swiss recruiter PKP Beratungs, is bullish about job prospects in the country. "The Swiss hedge fund business is picking up. There are jobs for people with at least five years' experience."

Swiss hedge funds are eager to hire people with experience in New York, London and Frankfurt, says Killier. Base salaries tend to be lower than London or New York, but he says the cost of living is lower: with five years' experience, expect to earn between €50,000 and €100,000 in base salary, plus a bonus of up to 100%.

Italy: Senior staff apply

If you want to work in a hedge fund in Europe, Italy is probably not the best place to do it. According to Eurohedge, Italian hedge funds accounted for less than 1% of the European hedge fund universe in the first half of 2005.

Sergio Zanetta, associate partner at Milan-based executive search firm Transearch, says hedge fund jobs are hard to find in Italy, and are primarily open senior staff: "To find a job in a hedge fund, you'll need between five and ten years' experience in a financial institution. The ideal background is a trader in an investment bank."

Italian hedge fund positions are also poorly paid. Junior roles are sufficiently rare (and sufficiently sought after) to enable funds to offer scanty remuneration: Zanetta says the standard salary for a junior trader or analyst is €40,000 euros, plus a bonus of up to 100%. He says senior traders can expect a base of €200,000, plus an equivalent bonus - which is not much when you consider what's on offer elsewhere.