Russell Reynolds cited one portfolio manager who compared shorting in a long/short fund structure to "putting one's hand on the burner after years of avoiding the very companies that they are shorting."
Another said hype surrounding hedge funds makes it difficult to meet investors' expectations.
"I beat my benchmark by 150 basis points, but the investors, including the hedge fund that backed me, did not think this was good enough," the portfolio manager said. "I felt that it was not prudent to manage for ‘shoot-the-lights-out' performance, so I chose to return to a traditional money manager. ‘Lights-out' performance, in the manner that they wanted me to run my portfolio, would create a process that would be unsustainable in the long term, and I did not feel comfortable with that."
Renewed long-only demand makes it easier for disheartened hedge fund professionals to return.
"There are a lot of (hedge) firms and funds where they never reached critical mass and are folding," Ms. Brown said. "The hedge funds don't make big guarantees when they hire people."
Hedge funds are not always viewed as a career gamble, and many people are more than willing to make the jump into the $1 trillion industry.
"There is still a lure and attraction to the hedge fund world," said Henry Higdon, general partner and founder of Higdon Barrett, an executive search firm in New York. "As long as the growth occurs, we see people leaving the sell side and Wall Street."
Hedge funds within larger institutions will pay $1.2 million to $1.5 million in total compensation for heads of business, with a $400,000 to $500,000 base salary, Russell Reynolds said. Hedge fund managers with smaller firms have base salaries of $200,000 to $250,000 with "tremendous" upside potential focused on the "2-and-20 fees."(Hedge funds typically charge an asset management fee of 1% to 2% of assets, plus a performance fee of 20% of a hedge fund's profits.) Experienced hedge fund-of-funds managers will make $500,000 to $600,000, with compensation bringing their total annual salary to $1 million or more, depending on fund performance.
Among long-only equity portfolio management and research, money management firms in Asia and Latin America are reporting newfound demand after several years of little to no interest. Additionally, money management subsidiaries of non-U.S. parent companies are recruiting aggressively and boosting salaries to build staff, the headhunter report said.
Most clients are planning numerous hires in research and portfolio management, particularly in derivatives, portable alpha strategies and structured products. Head count in research is growing 5% to 20%, while portfolio manager level hires will be "flat to slightly up."
In 2004, seasoned long-only equity portfolio managers typically earned base salaries from $250,000 to $350,000, with bonus opportunities taking the package to as much as $1.2 million, plus long-term incentive payouts, where available, Russell Reynolds said.
Compensation for long-only investment research professionals with seven to 10 years of experience held steady at $400,000 to $550,000. Senior analysts with portfolio management responsibilities or those on a partnership track in research-driven shops can earn $600,000 through seven figures, the report said.