What Hedge Fund Managers Make in a Bad Year

Investors are on track to lose money in hedge funds this year—and pay managers an average $1 million each for their services, recruiting data show. 

Hedge fund managers’ compensation is likely to drop alongside performance this year, according to recruiting firm Glocap and Hedge Fund Research (HFR).

Annual compensation for managers of mid-sized portfolios—including base salary and estimated year-end bonuses—was projected to average $950,000, a decline of 8% to 11%. Chief operating officers for hedge funds managing between $1 billion and $5 billion would see a reduction in compensation of 4%.

Glocap and HFR attributed these decreases to volatile third-quarter returns for the sector, which will hit performance incentives. Hedge funds overall lost 1.6% in the year ending September 2015, according to the HFR weighted composite index. Total industry capital fell by $100 billion in the third quarter alone.

But America’s yacht sellers need not panic. The best performers among mid-size funds can expect double the average compensation—nearly $2 million—the report stated.

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“Following several years of steady gains, overall industry compensation has been mixed in 2015, varying widely by fund performance, size, seniority, functional role and specific qualities of individual contribution to firm growth and expansion,” said HFR President Kenneth Heinz.

Furthermore, Glocap and HFR predicted that improving nationwide employment trends will partially offset weaker performance-linked pay via rising base salary across functional roles.

For example, entry-level analysts would likely see bonuses drop 5%, but salaries climb nearly 9% for total earnings of $360,000 on average. The result: Fatter pay packets than in 2014, despite a weak year for limited partners. Analysts at top-shelf funds were expected to see compensation gains of nearly 6%.

Heinz said compensation structures will evolve to better align with the interests of investors and support operational, management, and infrastructure roles. Interest in and use of diversity policies for compensation has also increased in 2015, according to the report.

Anthonty Keizner, head of Glocap Search’s hedge fund practice, said that in light of lower performance—and therefore lower incentive fees—general partners will likely have to dip into management fees in order to compensate their teams.

“Even though it looks like many funds will end the year with flat performance, many employees will still receive sizeable bonuses in order to reward and retain them,” said Keizner.

Related: What Crisis? Fund Management Bonuses Approach 2007 Peak & Hedge Fund Compensation Takes a Dive

Russell Appoints UK Fiduciary Head as Market Builds

A major provider of OCIO has appointed a chief to spearhead its business in the UK and Ireland.

Sarah Leslie has been appointed to lead Russell Investments’ UK and Ireland fiduciary management offering as the market rapidly increases.

Last year, KPMG reported a 44% increase in the take up of fiduciary management—or outsourced-CIO—in the UK. This increase has been reflected in other European nations.

“Across Europe, demand for our fiduciary management services is growing, particularly in the UK, the Netherlands, and Germany,” said Pascal Duval, CEO EMEA at Russell.

Last year, KPMG reported that assets managed on a fiduciary or OCIO basis in the British Isles alone stood at £72 billion ($109 billion)—an increase of 22% over 2013. The consulting firm expects to see a similar uptick in the 2015 report.

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On a company basis, latest figures show Russell manages around $70 billion on an OCIO or fiduciary basis. Mercer, Towers Watson, and Aon Hewitt have comparable assets.

Leslie joined Russell in 2010 from Aon where she developed its fiduciary management product range. At the firm, she has been an associate director in the practice since joining and will continue to report to Rob Bishop, head of implementation services in EMEA and interim head of UK institutional.

Related: The OCIO Power Base & The 2015 OCIO Survey

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