Rainmakers and big-swinging traders aren't the only ones who boost their pay if they manage to jump from a bank to a hedge fund. Funds' compensation generally outpaces bulge-bracket banks for operations and accounting staff by 20 to 30 percent, says George Yulis, principal at Rothstein Kass Executive Search Group.
From CFO down to senior accountant, and from head of operations down to trade support, Yulis says, "the compensation is certainly significantly higher for hedge funds than for comparable professionals on Wall Street."
- A fund accountant with two to three years' experience could receive a base salary of $75,000 - $95,000, and total compensation up to $115,000 - $130,000.
- A controller at a multi-billion dollar hedge fund company could receive a base of $150,000 - $200,000, and total compensation of $300,000 and up - perhaps reaching $500,000 at the largest firms.
- A CFO at a multi-billion dollar fund's base salary could be in the $225,000 - $300,000 range, with total compensation of $700,000 to over $1 million, again depending on asset size. At the C-suite level, compensation often includes a share of the fund's "carry" (fee revenue).
Rothstein Kass Executive Search, part of an eight-office accounting and business services firm of the same name, has commissioned a survey of back-office compensation in hedge funds. It's slated for release in mid-November. Yulis says he derived the above estimates by adding 10 - 20 percent to last year's numbers.
Greater Scope for "Trickle-Down"
The economics boil down to this: Because funds operate with far less overhead than banks, more of their revenue is available for bonuses, even after paying for outsourced services such as legal counsel and auditors. On top of that, the bonus pie gets split among fewer individuals. "Your entire back office, accounting and operations might be 10 people," says Yulis.
So, compared with Wall Street, "there is more opportunity for the trickle-down to occur," he says. "The dynamics of a smaller firm allows for greater value to be added by an individual. If you work for a 10-person back office, there's a lot more opportunity to get noticed than in a 150-person back office."
Unlike front-office bonuses, back-office bonus amounts are at management's discretion. But while not explicitly tied to a fund's fee revenue or investment returns, they are nonetheless affected by fund performance - on both upside and downside. "If the fund does well, it's going to make its way down to the back office," says Yulis.
Like their co-workers in front-office roles, the bargaining power of fund operations and accounting staff has grown as a swelling number of fund companies vie for a limited pool of experienced talent. For instance, Yulis says he's seeing more pressure on funds to guarantee compensation - including paying a full year's bonus rather than a pro-rated amount for new employees. "There definitely has been an uptick in the number of guaranteed or non-discretionary bonuses we've been able to negotiate," he says.
A year ago, offers merely stated a base salary and an unspecified, discretionary bonus along with the factors that would go into it. This year, Yulis says, funds are offering guaranteed pay not only to prospective hires from Wall Street - who would lose a bonus on leaving their current employer - but to candidates from non-bonus environments like public accounting.
The past summer's market gyrations haven't dampened the outlook at the fund companies Yulis serves. He anticipates that total compensation for accounting and operations staff will average 15 - 20 percent higher than last year.