In a move mirroring their cousins in the investment banking world, hedge funds are entertaining the idea of deferring bonus payments to take place over longer periods of time.
A greater portion of the typical hedge fund employee’s compensation – as much as 50 percent – may be paid out over longer periods of time, to better align that employee’s interests with those of the fund. So says Adam Zoia, chief executive of the executive-recruiting firm Glocap Search, in an article by Fins.com.
What’s more, hedge fund investors are rethinking their relationship with hedge funds, as well. Some are pushing for incentive fees to be based on a multi-year calculation rather than one stellar year. Others are pushing for clawback provisions that would yank back fees already paid if performance slips. Or they’re proposing 3-year rolling incentive arrangements that require certain targets to be met before incentive fees are paid out.
Either way, the pain of 2008 will likely have a lasting impact on how hedge funds set up their compensation agreements with both investors – and employees.