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Hedge Fund Paychecks, Revealed

Hedge fund managers shared what they earn in II’s second annual All-America Buy-Side Compensation survey.

The average portfolio manager at a U.S. hedge fund expects to take home about $1.4 million this year, according to Institutional Investor’s All-America Buy-Side Compensation survey.

Employees of hedge funds with assets under management ranging from less than $500 million to more than $5 billion shared their current salary and expected 2018 bonuses with II for the second annual report, which breaks down pay by job title and firm AUM. Roughly 900 portfolio managers, research analysts, and managers-cum-analysts at North American hedge funds, investment advisory firms, and mutual funds responded to this year’s survey. 

Hedge fund portfolio managers said they expected to earn $346,164 in base pay on average, up from $277,268 last year. Variable pay — including bonuses, commissions, and options — averaged just over $1 million.

This marks an overall increase from last year, when the average hedge fund portfolio manager earned just shy of seven figures, including variable compensation of $686,757. 

[II Deep Dive: Here’s What Hedge Fund Managers Will Earn This Year]

The best paid hedge fund managers, according to II’s survey, worked at the largest funds. Portfolio managers at firms with upwards of $5 billion expected to earn $2.3 million in bonuses this year on average, on top of an average salary of $526,000.

But although portfolio managers reported fatter paychecks, hedge fund analysts did not share their good fortune. The average analyst surveyed by II reported $678,189 in total compensation, slightly down from $710,810 last year. Although bonuses were little changed year-over-year, average base pay slipped to $175,755 from $201,179.

These uneven paychecks come during a particularly rocky year for investors, who experienced major stock market sell-offs in February and October. As of the end of the third quarter, hedge funds were up just 1.37 percent for the year, according to HFR’s fund-weighted composite index.

Investors pulled a net $11.1 billion out of hedge funds during this volatile period, reversing the inflows seen in 2017.

Despite redemptions, hedge fund employees surveyed by II were broadly optimistic about their future compensation. 

At firms managing less than $500 million, for instance, more than two-thirds of portfolio managers expected their total income to improve by at least 10 percent over the next two years, while the remaining third predicted their pay would remain more or less the same. Portfolio managers at funds managing between $500 million and $1 billion had still higher expectations, with 80 percent anticipating earnings growth of 10 percent or more.

The most pessimistic portfolio managers surveyed were those managing more than $5 billion firm-wide, 20 percent of whom believed their compensation would decline by more than 5 percent. Even then, the remaining 80 percent expected their pay would go up by at least 10 percent.

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