Sample extract from the 2016 Glocap Hedge Fund Compensation Report HFR is proud to have joined Glocap Search as a partner in the publication of the 2016 Glocap Hedge Fund Compensation Report. HFR has contributed our industry-leading performance data and analysis to enhance the scope of the report. This sample extract from the 2016 Report is provided for your reference so that you might become familiar with the content and quality of the report materials. Please note that the actual 2016 Glocap Hedge Fund Compensation Report is a printed report that must be physically shipped. It is not available as an edocument. 2016 Glocap Hedge Fund Compensation Report may be purchased at: www.hedgefundresearch.com For more information please contact: Todd Hartman, Director Hedge Fund Research, Inc. 312-658-0955 todd@hfr.com All content 2015 Glocap Search, Inc. and Hedge Fund Research, Inc. http://www.hedgefundresearch.com/glocap/
Table of Contents Publisher s Note 5 Methodology 6 How to Read the Compensation Charts 9 Overview 10 Summary 11 Industry Context 12 Compensation Structure Observations 21 Deferred Compensation 24 Hiring Trends 25 SECTION I: HEDGE FUND INVESTMENT PROFESSIONALS 27 SECTION II: ASSET MANAGEMENT INVESTMENT PROFESSIONALS 45 SECTION III: FUND OF FUNDS 51 SECTION IV: TRADERS 54 SECTION V: RISK MANAGEMENT 58 SECTION VI: FUND MARKETING 62 SECTION VII: CFOs 65 SECTION VIII: COOs 69 SECTION IX: ACCOUNTING 73 SECTION X: OPERATIONS 78 SECTION XI: INFORMATION TECHNOLOGY 81 SECTION XII: LEGAL/COMPLIANCE 87 SECTION XIII: HUMAN RESOURCES 90 SECTION XIV: ADMINISTRATIVE/EXECUTIVE ASSISTANTS 94 Glocap Search LLC 156 West 56th Street - 4th Floor New York, New York 10019 Phone: 212-333-6400 Fax: 212-333-6401 www.glocap.com Adam D. Zoia CEO Anthony Keizner Managing Director, Head of Hedge Fund Practice Kathleen Cunningham Vice President, Hedge Fund Practice Kristin Sartorius Senior Associate, Hedge Fund Practice Rachel Kaplove Recruiting Associate, Hedge Fund Practice Reshma Ketkar Senior Vice President, Head of Asset Management Practice Brian L. Berger Senior Vice President, Generalist Practice Jennifer Whalen Managing Director, Head of Fund Marketing/ IR Practice Agustina Bartha Vice President, Accounting/Operations Practice Howard Gabler Managing Director, Accounting/ Operations Practice Tessa Deutsch Managing Director, Head of Legal/Compliance Practice Elizabeth Clark Zoia Managing Director, Head of Administrative/ Support Practice Hedge Fund Research, Inc. 10 South Riverside, Suite 700 Chicago, Illinois 60606 Phone: 312-658- 0955 Fax: 312-658- 1019 Inc@hfr.com www.hedgefundresearch.com Kenneth Heinz President Scott J. Esser Managing Director Todd Hartman Director 4 Aydan Savaser Layout Design
Publisher s Note This is the fourteenth annual edition of the Glocap Hedge Fund Compensation Report. Even in these days with so much data available online, we often hear from people in the industry that reliable data on topics of compensation and hiring is still hard to find. Even when data is available, doubts over whether the peer set is really apples to apples lead many to feel not comfortable acting upon it. This Report continually tries to address these concerns and provide a tool that can be useful, rather than just of interest, to the investment management industry. Glocap Search is in a unique position to provide insight and commentary on these trends given its position as a leading alternative asset management search firm. Glocap s specialized practices deal with their specific candidates (whether they be, for example, analysts, marketers or accountants) and work to fill roles in these practice areas day in, day out. Unlike surveys that rely solely on self-reported data, Glocap is able to make use of actual candidate and placement data and leverage its expertise to ensure the accuracy of the data provided in the various sections. Glocap is delighted to say that we have partnered again this year with Hedge Fund Research (HFR), a highly regarded data provider to the community. Thanks to HFR s data, we are able to provide commentary and analysis on aspects such as fund performance, capital inflows, fees, and high-water marks. We feel the partnership behind this Report further distinguishes it from other compensation data sources in terms of the accuracy of the data and setting the data within the wider hedge fund industry context. Every year, in response to purchaser feedback, we aim to make the Report even more useful in helping benchmark compensation decisions. Below are a few new aspects of the 2016 Report: Trends in diversity hiring Building proprietary research capabilities Use of pre-employment testing (personality, IQ, aptitude) We are again providing estimates for 2015 year-end bonuses. This effort is in response to readers ongoing requests for any guidance we might have on bonuses before the actual year-end. We have arrived at these estimates from select Glocap placements (with guaranteed bonuses), as well as from Glocap recruiters knowledge of compensation trends from prior years and from dialogue with hedge fund human resources and senior investment professionals regarding their likely intentions for year-end bonuses. While our research has lead us to believe that these estimates are close to actual levels based on validations of prior years estimates, we must point out that we do this with a certain degree of qualification as, at the time we publish this report, there are still ten weeks remaining in 2015 and (as particularly witnessed in 2008) a lot can transpire in a relatively short period of time. We trust you will find the Report useful, we appreciate your support, and we look forward to your continued feedback. Adam Zoia Anthony Keizner Ken Heinz, CFA CEO Head of Hedge Fund Practice President Glocap Search Glocap Search Hedge Fund Research the 2016 glocap hedge fund compensation report 5
Methodology The 2016 Glocap Hedge Fund Compensation Report is published by Glocap Search (Glocap) and Hedge Fund Research, Inc. (HFR). The Report analyzes compensation for investment and non-investment professionals at U.S.-based hedge funds and asset managers. The 2016 Report contains data and analysis on annual compensation and relates that data to each professional s functional role as well as to the firm s size and absolute and relative performance. The Report focuses on base salaries and cash bonuses and, for the most part, does not take into account compensation earned from profit share or firm ownership. While the data in the tables excludes compensation from P&L deals, we do cover the typical structure and rates of such compensation structures in a dedicated section at the start of this Report. Each section examines base salaries separately from bonus information, and also reports on total cash compensation. This Report is not a traditional survey. Unlike some industry compensation surveys, the statistics herein are not the result of a questionnaire sent to hedge fund professionals, as we believe that using only self-reported data may not accurately reflect the true market, and it may display selection bias. Instead, the compensation data in our Report is based on the following: Placement data from searches executed by Glocap Candidate data maintained by Glocap in the course of its search business, including self-reported candidate data Input from Glocap recruiters who are familiar with compensation in their specific fields of expertise Interviews with hedge fund managers and human resources personnel Given that the compensation data is collected confidentially by Glocap and not from responses to surveys sent to hedge fund firms, we do not publish a list of participating firms whose employees are represented. Nonetheless, we are confident that the data in the report is a representative sampling of the major hedge funds in each of the fund size and performance categories. In the few categories where we cannot gather sufficient data (e.g., for some specialized back office roles), we combine categories or exclude them altogether. The data on hedge funds, which includes a firm s assets under management and yearly investment performance, is derived from proprietary databases. In terms of fund data, fund assets were derived by adding the most recent asset estimate for all funds linked to a particular management firm. The performance data was supplied by HFR. BACKGROUND ON PUBLISHERS Glocap Search is a leading retained executive search firm focused on alternative asset management recruiting and has a global practice placing investment professionals and business (back office) professionals at all levels and across all functions into hedge funds, private equity firms, asset management firms, and funds of funds. Hedge Fund Research, Inc. (HFR) specializes in the areas of indexation and analysis of hedge funds. HFR Database, one of the most comprehensive resources available for hedge fund investors, includes fund-level detail on historical performance and assets, as well as firm characteristics on hedge fund managers. HFR produces over 100 indices of hedge fund performance ranging from industry-aggregate levels to specific niche areas of sub-strategy and regional investment focus. 2015 BONUS & TOTAL ESTIMATES This year s Report includes estimates for 2015 bonuses which, in turn, have allowed us to provide estimates for 2015 total compensation. We have included estimates for average bonus and total compensation as well as for top and lower tier estimates, based on consistent requests from readers of past reports for this information. We believe that these distinctions provide a useful range to help benchmark compensation. The estimates we provide are based on select placements that Glocap has made (cases in which the base salaries and general ranges for bonuses were verified) as well as Glocap recruiters knowledge of compensation trends. It is important to note that at the time we published this report, there were still ten weeks left in 2015, and much can change in this short period of time. Nevertheless, we are confident that these estimates will help hedge funds benchmark their 2015 compensation packages. Once again, the 2015 bonus and total compensation numbers we present are estimates as year-end 2015 bonuses have clearly not yet been awarded. However, we believe that these estimates will be close to actual levels and, in combination with the 2015 base salary data, make the Report comprehensive and indicative of expected compensation for 2015. FUND CLASSIFICATION Hedge funds were categorized by their size (AUM) and performance through the first nine months of the year. Within the Investment Professionals, Trading, CFO and COO categories, there are different fund groupings as we noticed more of a stratification of salaries by fund sizes, and additionally for Investment Professionals by performance (i.e., top performing funds, middle performing funds, and bottom performing funds). These performance numbers are not absolute return numbers but, instead, are relative performance data points for a given year, allowing for a more robust cross-year analysis. Funds were categorized into bottom, middle, and top Methodology the 2016 glocap hedge fund compensation report 7
Methodology performing based on how they compared to overall hedge fund industry performance and not according to their specific investment strategy. Funds were not classified by asset class or by investment style/philosophy. While a clear relationship does exist between a fund s performance and the firm s asset class and investment style/philosophy, we found that our performance classifications best captured the drivers of compensation. In other words, for the most part, absolute returns drive compensation rather than relative returns, as hedge fund variable compensation largely comes from incentive fee and not management fee earnings. JOB FUNCTION CLASSIFICATIONS This report evaluates hedge fund professionals by job function and relevant experience, as follows: Investment Professionals Hedge Fund Investment Professionals Asset Management Fund of Funds Traders Risk Management Professionals Marketers (including Investor Relations, Client Services and Fundraising Professionals) CFOs COOs Accounting Professionals Operations Professionals Information Technology & Software Development Professionals Legal/Compliance Professionals Human Resources Professionals Administrative and Executive Assistants Functional Roles Investment professionals are not categorized by position or title, as the meanings of each title varies too significantly from firm to firm. An Analyst, for example, in one firm is often a Senior or Junior Analyst at another and vice-versa. Additionally, we do not focus on MBA versus non-mba professionals. MBA degrees, along with position titles, are not a material distinction at the vast majority of funds and have little bearing on compensation relative to their impact in other areas of finance (e.g., private equity and investment banking). Instead, we categorize investment professionals and traders by their functional roles. Accordingly, for each job function, there are three categories of professionals. For investment professionals, there are Modelers/Research (Level I), Idea Generators (Level II) and Portfolio Managers (Level III). For traders, there are Junior Execution Traders (Level I), Execution Plus Traders (i.e., traders with some discretion) (Level II) and Senior Traders (Level III). The Investment Professionals and Traders sections have more complete descriptions of these roles. 8 TIERS The compensation data has been labeled into categories: Average, Top Tier and Low Tier. The Average data point is the compensation paid to the typical person in the role and represents performance that is expected and normal. The Top Tier data points are for top performers top of the class performance and represents above-average compensation. It also relates to what an average employee might be paid at a fund that wants to pay its people at the higher end of the range typically seen at peer firms. The Low Tier data points represent compensation that is still in the typical range for the job but on the lower end of it, whether because of the fund s compensation philosophy or because the individual s performance was fine but not above expected. Neither high tier or low tier numbers represent the maximum or minimum compensation numbers we have seen for that role, as the idea is not to include potential outliers but rather a generally accepted high and low range for the role. SAMPLE BIAS AND DATA LIMITATIONS As with any statistical study, sample bias must be evaluated. In this case, the data is not a sample but instead a census of the activities done by Glocap. We believe that the placements made by Glocap, in conjunction with the candidate data and the information gleaned from hiring funds and recruiters, make the data presented in this report indicative of compensation levels in the market. Given the variance of results across the factors measured, there seems not to be any consistent observable bias based on Glocap s sphere of activities. This study does not include compensation of the most senior-level investment professionals -- that is, those professionals who essentially are not looking to leave their current fund/firm which they either have founded and/or which they head. The focus is on professionals who are paid largely by discretion rather than on formula, or through a percentage of firm profits. These points are discussed in the report, however. In addition, data points of these professionals create large outliers that tend to disrupt the significance of many common statistical calculations. CONFIDENTIALITY Glocap and HFR worked in full observation of Glocap s standard client and candidate confidentiality policies. To that end, Glocap provided the information necessary for analysis without disclosing any names of firms or professionals. Only members of Glocap s Hedge Fund Recruiting Practice have had access to the underlying identities of hedge fund professionals; HFR was not given access to their individual identities. the 2016 glocap hedge fund compensation report
How to Read the Compensation Charts in this Report Investment Professionals Level 1 Level I - Modelers/Researchers Medium Hedge Funds ($500M - $4B) 300k 250k 200k 150k Middle Performing Funds Avg. ROR = +0.85% 236k 131k 245k 140k 255k 140k Fund size is an important element in compensation, particularly for investment professionals and traders. In general, larger funds pay higher compensation for a given level of candidate and for a given level of fund performance. In the investment professional and trader sections of the Report, data is therefore provided by 3 fund sizes (small, medium and large), which is indicated in the label at the top of each chart. Knowing your own fund's AUM, you can go to the appropriate table based on your role and fund performance to find the data relevant for your analysis. 100k 50k 0k 2013 2014 2015 Base Salary 105k 105k 115k Base Bonus 2013 2014 2015 Change Average 105k 105k 115k 9.5% Top Tier 175k 175k 175k Low Tier 80k 80k 90k Bonus 2013 2014 2015 Change Average 131k 140k 140k 0.0% Top Tier 163k 171k 163k Low Tier 89k 94k 89k Total Cash Comp 2013 2014 2015 Change Average 236k 245k 255k 4.1% Top Tier 338k 346k 338k Low Tier 169k 174k 179k Fund performance is a key variable in investment professional compensation. Therefore, in the investment professional section of this Report, we divide compensation into bottom, middle and top performing funds and indicate what those actual average peformance numbers are for each category of performance as of 9/30/15. Knowing your own fund's performance as of the end of September, you can then look at data in the applicable graph and associated table below it for your size fund to determine the applicable range for your fund for an investment professional role. Within a given role, fund size and fund peformance, there is further variability in compensation based on the individual's actual job performance. This variability is reflected in the Average, Low Tier and Top Tier data that is provided. Average compensation is for individuals who performed the job well and as expected and is the typical (not necessarily the mathematical "mean" of the Top and Low Tier numbers) compensation for the role. Low Tier is for individuals who performed satisfactorily - well enough to remain employed but not exceptional in any way. Top Tier is for individuals who are stars and exceeded expectations and were "top of their class." Depending upon the class size this may apply to multiple individuals. THE 2016 GLoCAp HEDGE FunD CompEnSATIon REpoRT 9