Here’s another reminder of how spectacularly well compensated the hedge fund industry is — and the pay doesn’t seem closely connected to performance.
How much do you think the average hedge fund professional earns? You probably guessed something pretty high, but remember: We’re talking about the industry average, taking into account everyone from the jet-setting managers of multibillion-dollar funds, down to the analysts and traders who keep the engines running.
Even accounting for the wide spectrum of roles, the average salary at hedge funds comes in at a whopping $368,000, according to a new report by Benchmark Compensation.
The report also details how the bonus component of this number has increased by double digits in the last year, despite the fact that hedge funds returned an average of 2% last year, the industry’s worst showing in three years.
David Kochanek, the report’s publisher, summarized the industry’s pay raise in a statement released alongside the report Thursday.
“Again this year, solid fund performance results in significant bonuses,” Kochanek said. “The difference this year is we saw a reduction in the correlation between fund performance and bonus levels.”
In other words, hedge fund industry professionals continued to pay themselves handsomely, despite making less money for their clients.
It isn’t just that hedge fund managers and their support professionals make a lot of money because they’re in finance. They even make a ton of money relative to their Wall Street peers.
At Goldman Sachs, the top of the investment banking totem pole, the most common professional positions range in salary from $69,748 for an analyst to $189,165 for an intermediate research associate, according to Glassdoor. A 2013 survey of financial professionals by Wall Street Oasis found that across the investment banking industry average total compensation ranged from $114,000 for a first-year analyst to $409,000 at the higher end of the food chain for managing directors.
Those ranges generate nowhere near an average approaching $400,000 like the hedge fund industry does. One could argue that there are fewer industry professionals working for hedge funds, but that would only mean either an insane amount of inequality between the highest and lowest paid — partially true — and/or fewer people to share such an exorbitant pot. And that’s regardless of the amount of money they make — and often lose — for their investors.