NEW YORK — Everyone assumes hedge fund managers are paid well. A new compensation survey of larger hedge funds quantifies much better exactly what "well paid" really means.
More than 50 hedge fund companies, each with a minimum of $500 million under management, were surveyed about their compensation practices for 11 top executive slots by Infovest21 LLC, a New York-based information services company specializing in alternative investments. Korn/Ferry International Inc., a Los Angeles-based executive recruiter, sponsored the survey.
Infovest21 researchers found that total average compensation — a combination of base salary, bonus and other payments — shook out as follows for hedge fund executives:
• chief investment officer, $2.9 million;
• chief executive officer, $2.8 million;
• chief operating officer, $1.3 million;
• chief financial officer, $828,280;
• portfolio manager, $805,158;
• director of sales, $565,230;
• head trader, $488,829;
• director of research, $460,857;
• analyst, $389,557;
• chief risk officer, $307,083; and
• chief compliance officer, $215,071.
The total compensation packages of CIOs in 2004 provide a good example of the industrywide trend that Infovest21 found: Base salaries remained fairly stable, while bonus percentage payouts rose. The average base salary for CIOs was the second highest among all hedge fund executives at $303,250, but the average bonus — $2.9 million — topped those of all other categories. CIOs also earned high average "other" compensation of $405,000.
CEOs on the other hand, had the highest average base salary of all hedge fund executives — $344,028 — with average bonuses of $2.3 million, more than six times the base salary. "Other" compensation averaged $740,000.
Infovest21found that the larger the hedge fund, the bigger the executive compensation package.
CEOs of hedge fund managers with at least $1 billion under management received average total compensation of $6.5 million, compared with an average $2.8 million for firms with assets of less than $1 billion. Similarly, CIOs had average total compensation of $4.3 million at bigger firms, compared with $2.9 million for firms with less than $1 billion in their funds.
If hedge fund companies seem generous in their compensation, hedge funds of funds take it up one more notch, Infovest21 found. Again, the size of the asset pool made a huge difference in determining total average compensation.
CEOs of hedge fund-of-funds companies managing more than $5 billion brought home total average compensation of $13.3 million compared with $4.7 million for CEOs at firms managing more than $1 billion.
CFOs of the $5 billion-plus tier earned total average compensation of $3.7 million vs. $1.7 million for their counterparts at firms of more than$1 billion.
CIOs at hedge fund-of-funds managers handling $5 billion or more received total average compensation of $3.3 million, compared with $1.6 million for their brethren at $1 billion-plus firms.
The survey, the third annual done by Infovest21, was conducted in the fourth quarter.