Ailing hedge funds forced to slash pay

SALARIES and bonuses in the hedge fund industry are set to slump by an average of 10 per cent this year as global market turmoil bites.

Some top hedge fund managers will suffer a cut of up to 30 per cent in their total compensation packages, according to research.

The study also showed the typical compensation of an experienced analyst at a large hedge fund will decline by about five per cent to $950,000 (£593,496) this year. The average for a junior analyst at a smaller fund will drop by the same margin to around $169,000.

Many of the changes, outlined in the Glocap hedge fund compensation report, produced with Hedge Fund Research (HFR), are due to a dire third-quarter for the industry. Iconic managers such as Crispin Odey and John Paulson have seen sharp declines in the value of their funds while weak performance has also dragged down shares in Man Group.

Adam Zoia, chief executive of Glocap, said the greatest volatility had been seen in the pay of the top hedge fund managers.

“Performance suffered, which was the primary reason compensation overall fell.”

Separate figures for the third quarter showed hedge funds posted their fourth worst performance since HFR started tracking their performance in 1990. Total capital under management fell 3.43 per cent to $1.97 trillion.

Macro funds performed well, however, including commodity and discretionary macro funds, Kenneth J Heinz, president of HFR, told City A.M.

● Hedge funds lost an average of 6.16 per cent of their value in the third quarter according to the HFRI fund weighted composite.

● Funds have sunk in value by an average of 5.44 per cent so far this year, the HFRI also said.