Tags: clawbacks, hedge fund compensation, nice work if you can get it, yesterday's CEOs
No problem! Even though you’ve got nothing at all to do with how your hedge fund is doing, you’ll be rewarded even if your hedge fund doesn’t do all that great.
The executive in charge of running the firm without making investments—usually called the CEO, chief operating officer or president—can expect to haul down between $7 million and $10 million if the fund returns just 10 percent for investors and manages about $5 billion….
If performance and assets increase, the pay is even greater, Boyden said, and CEOs can earn $15 million or more.
Traditional hedge CEO compensation has three parts. For the No. 2 at a firm managing $5 billion with a 10 percent return, typical base compensation would be $500,000 to $1 million; a fixed bonus based on the management fee charged to investors of $1 million to $2 million; and an incentive bonus based on the performance of the fund, perhaps $5 million to $10 million but with no cap.
On the other hand: You will be punished for poor performance which you are not responsible for, and in two ways.
The survey notes that more asset management firms have so-called claw backs on compensation if the firm does well one year but crashes the next. More innovation compensation structures award a larger percentage of pay based on assets raised—or lost—and investment performance as opposed to fixed bonuses….
“Yesterday’s CEOs are not in demand,” she said. “The market is looking for skin in the game and CEOs with the ability to wear many hats. We’re seeing a noticeable trend that will change the market for certain.”
Inside hedge fund pay: $10M for a 10 percent return [NetNet]