London Hedge-Fund Director Bonuses Slump 94% as Returns Fall

Aug 20, 2014 6:56 am ET

(Updates with CEO comment in the sixth paragraph.)

Aug. 20 (Bloomberg) -- Bonuses for hedge-fund employees in London have dropped by 94 percent since 2012 as returns in the industry declined, according to a salary-data provider.

The average bonus for directors, or mid-level employees, plummeted to 8,000 pounds ($13,300) this year from 40,000 pounds last year and 135,000 pounds in 2012, Emolument.com said in a statement today.

“The last two years have taken their toll on the myth of the hedge-fund executive in their Aston Martins,” the company said. “The slow decline in salaries pales in comparison with the collapse in bonuses.”

Profit for hedge funds is being squeezed, compressing mid- level pay, as net inflows slow and tighter regulation increases compliance and marketing costs. Returns are lagging behind stock index benchmarks. The Bloomberg Hedge Funds Aggregate Index, which tracks more than 2,400 funds with more than $470 billion in assets under management, has climbed 2.5 percent this year after advancing 7.4 percent in 2013. The MSCI World Index of shares rose 4.3 percent in 2014 and 24 percent the previous year.

Total compensation shrank by more than 50 percent as salaries fell to 90,000 pounds this year from 101,000 pounds in 2013 and 120,000 pounds the previous year, Emolument.com said.

On fixed pay, “hedge-fund managers have been more willing to show flexibility when it comes to management fees, which is why base salaries have been eroding,” Chief Executive Officer Robert Benson said in the statement. “Directors are at a particularly volatile level when it comes to bonuses as they are deemed expensive by their firm but not so senior that they are absolutely essential to the business.”

The company examined 2013 and 2014 salary and bonus data from 50 hedge-fund professionals at director level.