If you want to move into a trading role that continues to pay well, hedge funds remain a tempting place to base yourself. While regulators crack down on investment banks’ pay, hedge funds are – generally – free to pay their employees what they like in the UK.
From a recruitment point of view, this means larger hedge funds have had relatively easy pickings from investment banks. But hedge funds can be risky – smaller firms often fold, larger funds can be intolerant of underperformance and tenures can be short.
Is it all worth it? Yes, actually. Our analysis of the latest available accounts for the UK divisions of large hedge funds – either the full year to April 2014, 31 December 2014, or the 12 months to 31 March 2015 – reveals that for the rank and file employees, average pay per head generally exceeds that of even the better-paying investment banks.
For example, Och-Ziff Asset Management’s UK division, which has 75 employees, pays the most – an average of $788k.
Interestingly, Man Group now ranks among the highest paying hedge funds. Europe’s largest hedge fund has been stripping back staff – from over 1,800 three years ago to 1,078 in 2014. But those disappearing staff were mostly in support roles – Man now has a one to one ratio between front and back office staff. As a result, the overall compensation pot has gone down, but pay per head has spiralled from $362.6k in 2013 to $544.5k last year.
Winton Capital Management ($483k), Caxton Associates ($446.8k) and Arrowgrass Capital Management ($444.8k) all make the top five.
Globally, average pay at investment banks is generally driven down by higher numbers of support staff increasingly working out of lower cost locations. At Goldman Sachs, for, example average pay in 2014 was $383k. However, at Goldman Sachs International (the UK based operation), average pay was $530k for 2014.
The real money in hedge funds is when you reach partner level. Average pay for members of limited liability partnerships (LLPs) in UK hedge funds invariably reaches seven figures.
In 2014, Odey Asset Management was the place to be as a partner. Profits for division among its members hit £174.2m ($266.9m), averaging out as $13.3m on average for its 20 partners.
Most hedge funds in the UK are not publicly-listed and file their accounts on Companies House often 12 months after the reporting period.
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