The average hedge funder is essentially a dentist
One of the biggest misconceptions surrounding the hedge fund industry is that if you’re a member, you’re incredibly rich. While that’s true for many, it’s not necessarily the norm. And the gap between the winners and the losers is getting wider.
The main reason for the misconception around hedge fund pay is the manner in which it’s calculated. Most surveys use averages, not medians. That works in an industry like accounting – where the ceiling and the floor can share a single story – but at hedge funds the gap can be cavernous.
A report from online investor network SumZero, first covered by Business Insider, found that some hedge fund analysts can make as little as $72,500 during their first year, less than what you’d make at an investment bank right out of college. Moreover, the study found that the gap between lowest- and highest-paid employees at senior levels is like no other industry, with clusters of analysts making $225,000 while others take home north of $700,000.
While that lower number is obviously nothing to scoff at, it compares reasonably well with other occupations that require the education and aptitude needed to score a job at a hedge fund. “These are salary ranges that are not uncommon for doctors, dentists, lawyers, engineers, etc. at comparable points in their careers,” SumZero COO Nicholas Kapur told Business Insider.
A New York Post report echoes the same sentiment. Top traders will see as much as a 50% jump in bonuses for 2014, one recruiter told the Post. Meanwhile, the second-tier will see their bonuses slashed by the same margin, he said.
When it comes to pay, hedge funds and banks are becoming even more of a meritocracy. Firms are feeding their top talent well while not doing much for middling staffers.
In the latest hiring roundup, Nomura is adding senior bankers in the U.S., again, a new bond unit has popped up at J.P. Morgan and a Gulf bank is in need for Western talent.
Morgan Stanley has now officially unveiled its class of 2015 managing director list. The bank has promoted 151 MDs, a slight decline on the previous year when 153 were bumped up. This year’s list is not without surprises.
Hedge funds managers are slowly becoming aware of a practice that may be alerting some in the industry of their future plans. Data providers like Bloomberg inform banks and brokerage firms when a hedge fund – and even a specific person within the firm – reads a research report on a particular stock. The act is disclosed, but most hedge fund managers had no idea until recently.
Standard Chartered is officially looking for a new leader. The emerging markets-focused bank has reportedly hired a recruiting firm to find a successor for CEO Peter Sands.
Morgan Stanley CEO James Gorman will be granted a $4.44 million stock bonus for 2014, down 13% from his 2013 award. However, his cash bonus and long-term incentives haven’t been disclosed. Morgan Stanley had a good year and is paying out more in cash to rank-and-file employees, so expect Gorman to be handed a fairly fat check.
Headline-making Wall Street analyst Mike Mayo said earlier this month that this year’s stress test will be a “do-or-die” moment for Citigroup, suggesting the bank would need to break up if they flunk for the third time in four years. Morgan Stanley analyst Betsy Graseck says don’t worry. The bank is “well-positioned,” and could even pay out a dividend.
Moore Capital Management founder is involved in one of the strangest legal battles you’ll ever hear. He is suing his Bahamas neighbor, Canadian fashion magnate Peter Nygard, for $50 million after Nygard falsely portrayed him as a murderer, drug trafficker and a member of the Ku Klux Klan. He made videos and everything. They are fighting over their property line.
Buzz Around the Office
Here’s your official roundup of the most bizarre prop bets you can make during the Super Bowl. Whether or not Patriots coach Bill Bilichick will smile during the game seems a bit subjective, so better steer clear of that one.
Quote of the Day: “In the past, maybe 30 out of a 50-person team, for example, would share 70 percent of the bonus pool. That’s changing — firms recognize the need to keep the top 10 percent to 20 percent really happy, and then kind of figure out what to do with the rest.” – Peter Tannenbaum, CEO of Ramax Search