Hedge Fund Salaries – Everything You Need to Know [Infographic]

How much do hedge fund analysts make? That’s one of the first questions people often think about when they are interested in buy side careers.  Unlike investment banking or management consulting compensations, which are structured clearly by year and group,  hedge fund salaries vary drastically by asset type, AUM, location, and culture.

Which makes knowing your expected salary range even more important for folks coming out of the 2 year investment banking and management consulting programs. Will you be making more at a hedge fund than in investment banking or consulting? By how much?

I’ve come across many compensation reports over the years and have collected a lot of peer data from my network.  While the data range is wide, there are definitive trends when we cut the base and bonus numbers by experience, asset class, location, and sector coverage.

The primary report with a decent sample size and quality data is by SumZero, the online community of buy side professionals for sharing investment ideas.  SumZero produces an annual compilation of salaries reported by hedge fund, private equity and asset management professionals.  The report is comprehensive, and I’ve extracted the data points that matter for only hedge fund and asset management.  The product is the straightforward infographic below to satisfy your curiosity.

7 conclusions came out of this analysis. Let’s get right down to some conclusions about buy side compensation:

  • $165k is the average total compensation for buy side analysts with 2 years of experience. The biggest jump is 5 years post college graduation, where average compensation jumps to $250k, and then to about $300k for analysts with a decade of experience.  This fact might actually pour some cold water on investment banking analysts who are thinking about the move to the buy side, as they should already be close to the $160k mark for total compensation by the end of 2nd year.  However, the nature of the job is different.  Investing is more intellectually challenging and offers more responsibility.  More importantly, hedge funds present higher compensation upside in the later years as your career progresses.
  • The compensation increase accelerates at certain title promotions. The biggest increase happens when you are promoted from junior to senior analyst, and the second jump happens when you are promoted to a senior executive role.  Senior role meaning portfolio manager and above.  Once you have your own book, the bonus will dominate your total compensation package.
  • In terms of fund AUM, it’s not simply that the larger the better. A large AUM certainly equates to job stability, but they are not the most generous in terms of compensation package. The sweet spot for pay is at funds with AUM between 5-15bn. Larger firms are typically corporate environments with little pay growth, while smaller funds are still growing and more sensitive to managing their costs.
  • Where the fund is based matters more than you think. Analysts in New York and San Francisco have the highest compensation.  They make about 25-30% more than analysts in Boston and Washington DC, and 40% more than analysts in Chicago.
  • One misconception is that equity analysts make more than people the credit side.  While this might ring true prior to the 2007-08 financial recession, it’s no longer the case.  The new lending boom post-recession has benefited credit analysts.  Credit analysts now make about 30% more than equity analysts.
  • Do hedge fund analysts really make more than folks at traditional asset managers? Data shows that hedge funds and mutual fund analysts make approximately the same base salary. However, hedge fund analyst bonuses are 50-75% higher.
  • Should you become a generalist or specialize in a sector? Specialized analysts across most sectors out-earn generalists. Among all sectors, consumer media, automotive, and healthcare/bio-pharma have been the sexiest industries.
 

Summary:

There are many questions and misconceptions about hedge fund compensation, and this article is a straightforward look at what you can realistically expect as a research analyst on the buy side.  When you first make the transition, you can expect the total compensation to remain the same or tick up slightly from investment banking, sell side research, or management consulting.  The upside is at the later stage of your career, particularly when you make the transition from research analyst to portfolio manager.

Share the infographic with fellow analysts aspiring to move to the buy side.  For those who are inclined to see the full data, head over to the SumZero Report and analyze to your heart’s content.

Do you have any questions about buy side compensation? Did you get an offer that’s way out of the range discussed above? Post your comments below.

Author Kelvin Jiang, CFA

Kelvin Jiang has a decade of investment experience in public equities, private equity, distressed debt, and leveraged finance. His journey spans across Calamos Investments, Thornburg Investment Management, CHS Capital, and J.P. Morgan. Throughout his career, Kelvin has screened and interviewed candidates extensively for the buy side. Kelvin earned an M.B.A. from the Kellogg School of Management and graduated magna cum laude from Columbia University. He is a CFA Charterholder. In his spare time, Kelvin is an avid commentator on NBA trade rumors and Oscar-worthy performances.

More posts by Kelvin Jiang, CFA

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