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Poor returns last year took a bite out of paychecks, with average total compensation for all investment professionals at hedge fund firms falling 6.1 percent year over year, fueled by an 8.3 percent fall in average bonuses.
Illustration by Neil Webb
Not since 2011, when Occupy Wall Street was in full bloom, has hedge fund compensation been such a hot issue. U.S. presidential candidates have recently found hedge fund managers useful as poster boys for income inequality and have called for tax hikes to lower their often-munificent annual compensation. But turbulent global markets may have done more to reduce hedge fund pay than all the speeches in the world.
It's been a difficult period for many hedge fund firms. Returns have been mediocre over the past few years, and although hedge funds got a chance to redeem themselves in 2015, when volatility swept global markets, causing energy prices to plunge and currencies, stocks and bonds to whipsaw, most firms failed to profit from the kind of markets hedge funds were invented to exploit. Instead, in 2015 the HFRI Fund Weighted Composite Index fell 1.12 percent, its worst year since 2011.
Poor returns took a bite out of paychecks. According to Alpha's 2016 Hedge Fund Compensation Report, average total compensation for all investment professionals at hedge fund firms dropped 6.1 percent year over year, fueled by an 8.3 percent fall in average bonuses. "Bonuses have decreased in general with the market drop," says Helena Peszek, a manager at Chicago-based executive search firm First Temporary, adding that firms with high exposure to the energy sector got hit the hardest.
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