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Hedge fund Capula slashes partner to a mere £2.2m average, but keeps on hiring

New reality for banking pay

Hedge fund Capula Investment Management has slashed partner pay by more than half following a big drop in profits for the year to March 2013. However, it’s also been indulging in relatively prolific recruitment.

The fixed income-focused hedge fund set up by former JPMorgan prop trader Yan Huo in 2005 has endured a difficult 12 months, according to accounts filed today on Companies House. Assets under management shrunk to $9.6bn as at the end of June 2013, compared to $13bn in January, and profits slipped from £137.9m in 2012 to £57.9m for the 12 months to March last year.

Not surprisingly, remuneration for its partners has also been hit. Last year, it shelled out £138.6m in compensation for its 21 members, a figure that shrunk to £57.9m  for 22 people in 2013. The highest paid person, presumably Huo, received £12.5m in 2013, down from £56.6m for the previous 12 months.

The highest paid member aside, Capula paid its partners nearly half of what they received last year. Average remuneration was £2.2m for the year to March 2013, compared to £4.1m for the previous 12 months.

However, performance for the remainder of 2013 has been an improvement on the previous year. To November, Capula’s flagship relative was up 7.31% after gaining just 0.43% in 2012, according to figures provided by an investor to Financial News.

What’s more, while curbing compensation, it’s also been hiring portfolio managers and researchers below partner level. Accounts for Capula Investment Services, which provides staffing services to the hedge fund, show that it now employs 95 people, up from 66 in 2012.

There are now 28 people working in portfolio support, up from 21 in 2012, 18 in research (up from 11 in the prior year) and 49 people working in an administration role, compared to 34 in the previous 12 months.

Even here, though, pay has been scaled back. It paid its staff £24.9m in 2013, or an average of £262.1k per person. In 2012, £27.9m was shared between 66 employees, or an average of £422.7k.

Capula was founded in 2005, initially focused on bonds and currency trading, but it launched a European distressed debt investment operation in 2012, led by Mark Berry. In April 2012, it also opened a new office in Hong Kong. Goldman Sach’s Peterhill fund, which invests in hedge funds, bought a 20% stake in Capula in 2008.

AUTHORPaul Clarke

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