The hedge fund high life is not what it used to be in London. That’s the takeaway from hedge fund research firm Emolument.com, which tells us that London-based hedge fund honchos are getting paid 55% less on average than they were two years ago. Average total pay at London hedge funds is £120,000 ($200,000) now, compared with £265,000 in 2012.
It’s mainly senior-level employees who are getting squeezed, though they still make far more than their lower-ranking counterparts. Interestingly, junior-level hedge fund workers are bringing home more total pay than before, driven mainly by a 50% increase in bonuses, which are averaging £106,000 versus £71,000 in 2012. The big cheeses took a 62% hit to their bonuses, which have plunged to £460,000 this year from £1.2 million two years ago.
Why the decline in pay at the top of the house? Disappointing performance by hedge funds compared with market indexes may be part of the reason. Here’s a look at hedge fund year-to-date returns, from data provider BarclayHedge:
Hedge funds typically charge a 2% management fee and a 20% cut of any profits. So bad performance means far less pay for senior and mid level officials, who generally pocket higher bonuses and base salaries than their underlings.What’s interesting about all this is that hedge funds have managed to continue to raise boatloads of money, despite unspectacular returns.