New golden rules for getting as rich as possible in a hedge fund
It's increasingly unlikely that you'll end up getting rich quick working for a hedge fund, but if you want to maximise your earning potential, there are some golden rules to follow.
Work for a big hedge fund, but not too big
The new Fund Compensation Report by SumZero, which slices and dices median salary and bonus data from its community of buy-side professionals, suggests that hedge funds with between $5-10bn in assets under management are likely to pay you the most. After that, particularly as hedge funds become more unwieldy, you'll earn less - but the smallest hedge funds pay their employees the least.
[caption id="attachment_272069" align="alignleft" width="600"] Source: SumZero[/caption]
Work in New York
SumZero also suggests that the U.S. is the place to base yourself as a hedge fund professional. New York offers the highest median hedge fund compensation, but greater New York, Greenwich, San Francisco and Los Angeles all rank above London when it comes to pay.
[caption id="attachment_272070" align="alignleft" width="600"] Source: SumZero[/caption]
Stick with it
Last week, Luke Ellis, CEO of Man Group, suggested that the whole idea of getting rich at a hedge for is an outdated notion. But he was talking billionaires terms - other studies have suggested that portfolio managers in hedge funds are still pulling in seven figure bonuses. However, SumZero's figures, which strip out more outrageous outliers, point to more sober compensation packages. Even after 25 years in the industry, median pay is less than $400k, it suggests.
[caption id="attachment_272068" align="alignleft" width="600"] Source: SumZero[/caption]
Pay obviously increases over time at hedge funds, although not necessarily linearly or in a totally predictable manner.
The table above contains hedge fund compensation percentiles that SumZero tabulated by experience level. The difference between the 25th and 75th compensation percentiles for first year analysts is about $100,000, while at 20-25 years of experience the difference is almost $450,000, per the report – salaries take on wider and wider ranges as hedge fund careers progress over time.
Many top hedge fund professionals are making eye-popping figures, but SumZero data suggests that there is actually high variability among hedge fund compensation, especially among the most experienced earners. Some earn very large sums, but many more are compensated in ways that mirror highly educated professionals in other well-paid industries, per the report.
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