Here's how much you really earn at hedge funds vs. traditional asset managers

Working on the buy-side can obviously be highly lucrative, though not all roles are created equal. Despite struggling over the last few years as an industry, hedge funds still compensate their employees better than traditional asset managers. The key, of course, is to find one that keeps its doors open for more than just a few years. 

As you can see in the first chart below, senior professionals at hedge funds were paid a lot more than traditional asset managers and other buy-side funds like pensions and endowments in 2017, according to new figures from Greenwich Associates and Johnson Associates. However, hedge fund managers who specialize in fixed income averaged over $1 million in total compensation, nearly $200k more than senior equities professionals at hedge funds. The opposite was true with traditional asset managers. Here, equities specialists easily outpaced those working in fixed income.

When it comes to roles on the buy-side in general, it pays best to be a head trader or portfolio manager working in fixed income. Buy-side equities analysts made more in 2017 than buy-side equities traders, who took home only $270k in total comp last year, according to the figures. - Possibly because they were simply executing trades. 

The trends around pay for fixed income and equities professionals appear to be continuing this year (third chart below). Average total compensation for fixed income hedge fund managers should top $1 million again, according to the report. Meanwhile, traditional asset managers who work in equities are on pace to take home around $710k in compensation this year, up $30k from 2017. Fixed income asset managers will only earn around $490k in 2018, on average.

However, the variability in incentivized pay on the buy-side may be more pronounced in 2018 than in years past, according to the report. “The determining factor across this spectrum will be performance—but not necessarily investment performance,” the authors wrote. Rising costs and shrinking margins are providing a decided advantage to those firms with strong technology platforms, passive products like ETFs and quality sales teams. Therefore, portfolio managers and traders who expect their investment performance to directly correspond to increases in pay “might be disappointed.” Technology spending in particular is expected to take a sizable bit out of many bonus pools in 2018. Some investment professionals may see their bonuses fall despite an equal or better performance.