Most people gravitate to a career in the hedge fund industry for the earning potential. After all, flexible working hours, a low stress work environment and job security are not perks generally associated with the hedge fund industry.

Investors have debated the pros and cons of small, medium and large hedge funds for years. Some argue the merits of small funds, often citing nimbleness as a competitive advantage, while others favor medium sized funds because they offer a degree of flexibility and are perceived to have better access to resources than their smaller counterparts. Other investors favor large funds because they as established and able to draw the best talent. Of course, no truly reliable study has ever been compiled establishing optimum firm size for an investor.

Job Seekers Want to Know

In the same way investors want data on returns across various sized hedge funds; prospective employees seek guidance on potential levels of compensation. Job seekers are interested in the differences in base salary and bonus pay between small, medium and large hedge fund firms.

The good news is that this compensation data is available on a range of hedge fund firm sizes in the 2016 Hedge Fund Compensation Report published by Job Search Digest. This report does not define firm size in terms of assets under management but, rather in terms of the number of employees in the firm. Using this methodology provides a clear line of demarcation between firm sizes that will almost certainly parallel assets under management.

The results are surprising! The difference in total compensation between the smallest and largest firms favors the largest firms by only 7.6 percent, a much smaller differential than many might have imagined.

Even More Surprising

One of the most astounding revelations in the report with respect to firm size is that the largest firms do not necessarily offer the best base salaries. That distinction goes to firms having between 50 and 99 employees. Professionals in these firms earn 20.35 percent more than those in small firms of 10 or less. Overall, the numbers point to a higher earning potential in firms with 11 to 99 employees. And when it comes to bonus pay the results also favor mid-sized firms.

Final Thoughts

Although compensation is the main driver in any employment decision, it should not be the only consideration. Other factors, although individually of lesser consequence, could cumulatively influence one’s decision. Some of these considerations would likely include the firm’s training programs, bonus guarantees and equity sharing policies. In short, a holistic view is encouraged.

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Many aspiring to a career in the hedge fund industry ask this question in the broader context of career path. It is an excellent question but, like so many others, has no single answer. The truth is there are many paths to a career in hedge funds.

Hedge fund employees come from a multiplicity of backgrounds, some of which seem logical and others which do not. Some examples of professional backgrounds that one might not immediately associate with hedge funds include public accountants, information technology professionals and attorneys, yet 13 percent of those working in hedge funds come from one of these three professional backgrounds, based on a recent survey performed by Job Search Digest.

Almost the same percentage of hedge fund employees enter the profession directly from institutions of higher learning but, only a small percentage of those students graduated with an MBA. This is good news for those who had dreamed of landing a position with a hedge fund right out of school but were unsuccessful.

The greatest percentage of hedge fund professionals come to the job with a background in asset management, followed by individuals with sell-side experience and then by those with an investment banking background. Yet these backgrounds are only shared by one-third of hedge fund professionals.

The rest have backgrounds in proprietary trading, were brokers-dealers, worked in private equity, fund administration, mutual funds, research and other varied professions.

What’s the Takeaway?

First and foremost, the takeaway should be that there are numerous roads to a career in hedge funds. An MBA isn’t required nor must one work in an investment bank to effect the transition to a hedge fund career. Re-think all the clichéd advice and wake up to the possibility that you may already have the “right” background for a hedge fund job.

For example, a background in information technology is a highly marketable skill in the hedge fund industry. Cyber security concerns, automated trading, web development and other technological aspects of modern hedge fund operations require these talents.

Landing the Interview

One’s professional and educational backgrounds are important but you still need to land the interview. There are three principal paths leading to a position with a hedge fund and almost 80 percent of those working in hedge funds today followed one of these three roads. They are: professional networks, personal networks and recruiters and job boards.

Negotiating Your Compensation

A successful interview is going to lead to a job offer which, in turn, leads to compensation negotiations. Compensation packages in hedge fund firms can be very complex and any candidate for employment needs to engage in thoughtful and thorough research to ensure fair compensation for the corresponding contribution to the firm.

There are a great many variables to consider, including the size of the firm, the strategy the firm is pursuing, the bonus structure, upside sharing conventions, expected working hours and vacation, to name a few.

Over the coming months, we will continue to share pertinent job related information as well as point you to tools that you can leverage – whether you already have a job in the hedge fund industry or are interested in moving into that space.

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Lawyers See New Opportunities Working in a Hedge Fund

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Will Yellen’s FOMC Consider Sub-zero Interest Rates?

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The curious concept of a central bank employing negative interest rates to affect desired economic outcomes is not the theoretical musing of an eccentric economics professor.  At least one non-voting FOMC committee member suggested that a below zero fed funds rate might be appropriate for the balance of 2015 and beyond. In remarks subsequent to […]

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