“What do I have to pay these days to keep my best people?” We’ve been hearing that question a lot lately. And we hear a lot of different answers. Some funds with performance and asset issues seem to have distributed weak bonuses, yet on the other hand, there are still rumors about Joey Analyst at XYZ Capital getting a bonus of several million dollars. So now that the dust has settled on the 2017 bonus payouts, we at Odyssey again approached the hedge fund community to straighten out the facts. We surveyed over 500 investment professionals, and their responses help clarify exactly who got paid what, and which factors helped determine those outcomes. Recalling our Fall 2017 survey, expectations were high given the strong returns across the board for capital markets, particularly the hedge fund space. In that survey, we noted that HF investment professionals were expecting an average increase of 39% YoY for their year-end bonuses. While the numbers didn’t quite meet those lofty expectations, the hedge fund industry’s 2017 bonus payouts did indeed rise dramatically when compared with 2016’s figures. The average year-end 2017 bonus was $574,000, compared with $448,000 for 2016; a 28% increase. The key driver behind a firm’s bonus pool was fund performance, which once again turned out to be a far more significant metric than fund size. Hedge funds that were up 5%+ in 2017 distributed bonus payouts 33% greater than those of their peers who sat below that benchmark. In terms of fund size, those with AUM over $5B offered bonuses 14% greater than their peers with less than $1B in AUM (and there was no significant correlation between fund size and performance.) In terms of payout by position, the Junior Analyst and Analyst levels saw the largest percentage increase in bonus payments, followed by Junior Analysts. These increases were higher than those seen at the Mid and Senior levels (though of course, the actual dollar amounts awarded to these more experienced investors were much greater.)

Additionally, in our Comp Report we show how senior investors in equities were rewarded more than their colleagues in credit or event-driven, and how professionals at long-onlys received a fraction of the average bonus awarded to their colleagues at long/short funds. 3 So how were these Bonuses received?

For a second straight year, we asked Analysts how satisfied they felt with their compensation packages. We used a scale of 0 to 100. As the chart below indicates, all groups experienced a minimum 8% increase in their satisfaction levels when compared to perceptions about 2016 bonuses. For the second straight year, Juniors felt the most satisfied, given their healthy bonus packages coupled with the overall strength of the market (youthful enthusiasm likely also plays a factor). Senior Analysts/PMs felt relatively less exhilaration after their bonus payouts, given they experienced the largest gap between expectation and result. In our Fall 2017 survey, the Senior Analysts/PM predicted a massive 70% increase in their
year-end bonus, and so their average 28% increase looks quite paltry in comparison. % of Respondents at Each Level “Satisfied/Very Satisfied” with their Total Compensation in 2017