In a race to attract and retain talent, hedge funds have begun to ramp up sign-on bonuses and adjust compensation structures as their assets under management surge.
For some of the most successful senior portfolio managers, sign-on bonuses can now range anywhere from $10 million to $50 million, and many portfolio managers are frequently being paid bonuses of $5 million to $10 million, according to recruiters. Some multi-manager shops, such as Millennium, have reportedly offered guaranteed payouts of $50 million over several years to lure top traders.
“To me, it seems like hiring in the multistrategy hedge fund space has been hyperaggressive, like a fever pitch,” said Sloan Klein, who runs career management consulting and talent development firm SloanKlein Advisors. “Were senior hedge fund managers making $10 million a year before? For sure. But you weren’t [commonly] seeing $5 million to $10 million sign-on bonuses to move between the multistrategy platforms.”
Besides soaring bonuses, hedge funds have also been pulling other levers to attract talent. Firms are accelerating payouts to portfolio managers — giving managers a higher percentage of the profits they generate during their initial period with the firm. Some funds have also implemented a P&L credit, which pays managers as though they’ve already generated profits for the fund.
The bidding wars come at a time when the hedge fund industry is booming as investors seek to protect their portfolios. The total assets under management of global hedge funds rose from $3.8 trillion in 2020 to $4.8 trillion in 2022, according to data from BarclayHedge. In 2022, the S&P 500 index dropped nearly 20 percent, while hedge funds lost an average of 4.2 percent, according to the HFRI Fund Weighted Composite Index. The larger funds generated positive returns, with the HFRI Asset Weighted Composite Index advancing 1 percent in 2022. At the same time, the collapse of Silicon Valley Bank and the bailout of Republic National Bank by JPMorgan Chase and other heavyweights may change the hiring picture, even for the best hedge funds.
“This is the dream time to be making money as a portfolio manager,” said Canice Hogan, CEO of recruitment firm Shadowhound.
But firms need talent to support their growth. “If you think about the magnitude of gains made by those hedge funds last year…that’s just a vast amount of capital that needs portfolio managers to deal with,” Hogan said. Multi-strategy funds need “a number of diversified, uncorrelated risk-takers. The problem is finding those risk-takers,” he added.
The largest funds are having an easier time hiring top people.
“[At] the top multi-manager [funds], their success is hardly due to just the stock-picking ability of the portfolio manager,” said Anthony Keizner, partner at the recruitment firm Odyssey Search Partners. “It’s also due to the fact that they have the resources that only a very large platform can provide, [such as] risk management systems and data intelligence.”
Keizner added that market-neutral funds have been among the most aggressive recruiters in hedge funds, after outperforming in 2022. They’re expanding, including opening new offices across Asia and the Middle East, as well as adding senior-level staff at these locations.
Smaller, single-manager hedge funds have been pushed to search for people outside the usual sources, according to Max Heppleston, executive director at recrutier Lawson Chase.
“They are now exploring people from traditional asset management or investment banking, which does crossover [business with hedge funds],” Heppleston said.