Institutional Investor's Alpha Magazine - April 2008 - (Page 61)

was up 10.0 percent, but individual strategies within the index varied from a 0.7 percent loss for ﬁxed-income funds that invest in corporate bonds to a positive return of 25.0 percent for emerging-markets funds. The range for individual hedge funds was much broader, thanks in part to the relentless credit tightening. “There was a wide distribution of performance last year,” notes Philip Simon, an executive recruiter for Long Ridge Partners in New York who works with a number of big hedge fund firms. Some brand-name funds were down, among them Goldman Sachs Asset Management’s Global Alpha fund, which fell 38 percent, and Tudor Investment Corp.’s Raptor Global Portfolio, which was off 8 percent. But other ﬁrms had stellar years, including Maverick Capital, whose ﬂagship fund was up 27.5 percent, and Viking Capital Management, whose main fund soared 40.4 percent. Because hedge fund compensation is tied to performance, most of it comes in the form of cash or equity bonuses. The typical senior portfolio manager last year re- ceived base pay of $372,000 and a $2 million bonus. Senior portfolio managers, however, expect their bonuses this year to be $1.6 million on average, a sure sign that market expectations for 2008 are not promising. But not everyone was glum about the year ahead. Investment professionals with expertise in distressed securities say they expect their compensation to increase over 2007’s. Experts in directional ﬁ xed-income trading and risk arbitrage are also upbeat. Maybe they should be. Several new hedge funds have been created lately — and some established ones are hiring people — in hopes of taking advantage of underpriced debt in the mortgage and structured-credit markets. New York–based Fortress Investment Group ($50 billion in assets under management), for example, is hiring a structured-credit team, headed by Joseph Walsh from RBS Greenwich Capital in New York, and plans also to create a new distressed fund. Link Global Solutions’ James says that many of these ﬁrms are luring sell-side talent, offering low base salaries Base Salary Base salaries at hedge funds are a small component of most compensation packages. For almost all hedge fund job functions, even the most senior ones, base pay falls within a narrow range. Mean ($ thousands) FUNCTIONAL TITLE Investment professionals Chief Executive Ofﬁcer Chief Investment Ofﬁcer Senior Portfolio Manager Junior Portfolio Manager Senior Trader Junior Trader Senior Analyst Junior Analyst Noninvestment professionals Chief Operating Ofﬁcer Operating Ofﬁcer Controller Chief Financial Ofﬁcer/ Finance Director Financial Ofﬁcer Chief Compliance Ofﬁcer Risk Management Ofﬁcer Risk Manager Chief Technology Ofﬁcer Investor Relations Ofﬁcer Marketing Manager Marketing Associate Business Development Ofﬁcer Legal/General Counsel IT Professional $207 117 134 171 149 179 194 139 165 154 174 80 192 240 162 $200 103 100 157 143 160 206 117 148 143 157 74 200 217 157 $166 114 80 153 150 160 151 150 153 147 156 80 185 231 165 $164 93 80 150 138 133 175 115 142 130 140 83 186 155 158 $475 574 372 155 306 79 163 94 $403 426 333 133 370 72 143 79 $238 303 182 120 146 75 130 90 $229 253 157 100 120 80 119 79 2007 2006 Median ($ thousands) 2007 2006 Bonus Compensation What makes hedge fund compensation exceptional is the bonus. The majority of survey respondents say that a cash, or cash and equity, bonus made up the biggest component of their 2007 pay. Mean ($ thousands) FUNCTIONAL TITLE Investment professionals Chief Executive Ofﬁcer Chief Investment Ofﬁcer Senior Portfolio Manager Junior Portfolio Manager Senior Trader Junior Trader Senior Analyst Junior Analyst Noninvestment professionals Chief Operating Ofﬁcer Operating Ofﬁcer Controller Chief Financial Ofﬁcer/ Finance Director Financial Ofﬁcer Chief Compliance Ofﬁcer Risk Management Ofﬁcer Risk Manager Chief Technology Ofﬁcer Investor Relations Ofﬁcer Marketing Manager Marketing Associate Business Development Ofﬁcer Legal/General Counsel IT Professional $1,112 373 254 721 509 545 1,624 679 326 792 715 41 1,169 916 437 $815 259 289 482 123 481 1,341 458 589 540 750 43 1,148 620 273 $ 400 116 80 295 145 250 1,829 235 171 450 222 62 499 508 476 $260 70 65 200 55 195 480 128 160 240 240 62 225 318 180 $4,119 3,618 2,036 423 1,508 158 718 162 $2,612 2,397 1,420 305 1,175 166 444 89 $1,300 728 582 205 216 100 375 105 $700 600 493 115 118 83 216 45 2007 2006 Median ($ thousands) 2007 2006 Base salaries are as reported in the current compensation survey for 2007 and 2006. Bonuses are as reported in the current compensation survey for 2007 and 2006 and include cash and noncash remuneration. APRIL 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 61

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - April 2008

Institutional Investor's Alpha Magazine - April 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Here to Eternity The Good Guys: Voice of Hope Cover Story: The Kings of Cash Where the Money Is Into the Light Interview: Proceeding with Caution Strategies: A Convenient Truth Alpha Bytes: Village Voice Unhedged: Commentary: No Time for Complacency

Institutional Investor's Alpha Magazine - April 2008

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