Hedge fund directors in London feel pinch

Lindsay Fortado London

BONUSES for hedge-fund employees in London have dropped by 94 percent since 2012 as returns in the industry have declined, according to a provider of salary data.

The average bonus for directors, or mid-level employees, has plummeted to £8 000 (R141 637) this year from £40 000 last year and £135 000 in 2012, said in a statement yesterday.

“The last two years have taken their toll on the myth of the hedge-fund executives in their Aston Martins,” the company said. “The slow decline in salaries pales in comparison with the collapse in bonuses.”

Profit for hedge funds is being squeezed, compressing mid-level pay, as net inflows slow and tighter regulation increases compliance and marketing costs.

Returns are lagging behind stock index benchmarks. The Bloomberg hedge funds aggregate index has climbed 2.5 percent this year after advancing 7.4 percent last year. The MSCI World share index has risen 4.3 percent this year after rising 24 percent last year.

Total compensation of hedge fund directors have shrunk by more than 50 percent as salaries fell to £90 000 this year from £101 000 last year and £120 000 in 2012, said.

On fixed pay, “hedge-fund managers have been more willing to show flexibility when it comes to management fees, which is why base salaries have been eroding”, chief executive Robert Benson said.

“Directors are at a particularly volatile level when it comes to bonuses as they are deemed expensive by their firm but not so senior that they are absolutely essential to the business.”

The company examined 2013 and 2014 salary and bonus data from 50 hedge-fund staff at director level. – Bloomberg