Deal Journal reports a few sobering industry statistics generated by Eurekahedge.  15% more funds have closed during the first half of this year, than during the same time in 2007, and launches have slowed as well.  Industry growth, in terms of number of funds, is nearly flat.

More seriously, data that is already almost two months old also shows severly inadequate performance, and things haven’t gotten easier since then.  Funds are not meeting their high water marks, the valuation threshold that allows a fund to collect the performance fees (20% of gains or thereabouts) that constitute its profit.  Only one in ten hedge funds is now earning performance fees.  One fund executive doubts that some funds — assuming they survive so long — will begin again to earn them before 2010.

Though investors have been pulling money from hedge funds for many months, funds that retain credibility with investors may ride it through.  But since bonuses are often determined from performance fee earnings, hedge fund compensation is looking to be very tight this year, in any case.

To read the article from Deal Journal, click here.  For more on high water marks, read this lucid post.

Hedge Fund Search Digest’s 2007 Hedge Fund Compensation Report concluded, “For hedge fund firms to attract and keep the best players, some changes need to take place. The study shows notable turnover in the smaller funds. It is well known that small funds don’t have the large management fees to support high compensation increases in years of low fund performance. The firms represented here are performing well overall and yet, they should still be concerned about turnover. It is time to take closer look at compensation packages and other employee retention methods.”

That was before the credit crunch. Since then, the industry has seen many small funds close, others launch in hopes of profiting from distressed markets, and a general trend toward consolidation in which assets have been increasingly directed toward large, well-established funds. Also, while employment at hedge funds has always been competitive (and of course still is), hiring in the industry has been brisk, with stable funds amassing human capital from among many desirable candidates, including whole teams, looking for work. One recruiter specializing in financial technology in the Northeast corridor says, “Everybody wants to go to a good hedge fund now. It’s easy to attract candidates. And hiring is good, there are definitely opportunities.” Tectonic shifts in the industry and the financial world as a whole make the price of talent a murky question this year.

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It is time again to assess where the industry is headed with regard to compensation levels. You are invited to participate in Hedge Fund Search Digest’s annual hedge fund compensation survey, which we are conducting to provide information to evaluate compensation, negotiate better job offers, and benchmark firm compensation practices.

Follow this link to participate in the annual Hedge Fund compensation survey.

Click Here to take survey now.

We had tremendous response last year. A sample of firms who participated last year includes (cited with permission from respondents) Dresdner Kleinwort, Bluebay Capital, UBS, Credit Suisse, Goldman Sachs, ABN AMRO, Perry Capital, Eagle Asset Management, AlphaSwiss, Apex Capital Management and hundreds of others.

All eligible participants will get survey results. Take the survey now to secure access to this valuable data. And please send this to your friends in the industry because every additional response benefits all participants.

Participate in the survey

Last year’s Hedge Fund Compensation Report by Hedge Fund Search Digest was based on hundreds of responses to the 2007 Survey, representing small and large firms including startup shops and the biggest banks. With turmoil in the markets and the employment picture rapidly evolving, the 2008 Report will be a must-read.

The 2008 Survey will be out by early summer, and all hedge fund employees are encouraged to participate. It’s quick to complete, participation is free, and all qualified respondents will have access to the aggregated results — critical information to manage your hedge fund career and your fund, perhaps, as well. Keep an eye on this column for the announcement of the Survey launch sometime within the next two months.

Hiring a new analyst, looking for a new position, considering an offer, negotiate comp at one’s current firm — reliable hedge fund salary data is an absolute necessity for each situation.

It’s readily available in the Hedge Fund Compensation Report by Hedge Fund Search Digest. Here’s a recap of what went into producing the 2007 Report:

• Hundreds of survey responses narrowed down to 232 respondents representing 220 firms
• Household names include ABN AMRO, American Express, Credit Suisse, Deutsche Bank, Goldman Sachs, and Morgan Stanley
• 75% USA-based respondents
• 31% with 10+ years of hedge fund industry experience, 63% with 5+ years, and only 16% with less than 2 years
• Titles included Analyst, Trader, Portfolio Manager, and more specific titles such as Quantitative Strategist, Assistant Operations Manager, Head of Operational Due Diligence, and Quantitative Risk Manager

The 2008 Survey and Report isn’t far off. We’ll be posting more information here soon.

Respondents to our 2007 survey on hedge fund compensation were asked to characterize their level of seniority relative to others in their firm. Seniority in a firm may be less closely tied in the hedge fund industry, than elsewhere, to years of overall industry experience, partly because mobility is high and partly because raw talent counts for so much. (Those who responded “least senior” are a probable exception, since many are likely new to the industry, as well as new to their firm.)

Years at a firm and position within a managerial hierarchy are both quantifiables related to seniority, but they might tell different stories. Where competition for talent is fierce, the sense of seniority may be less closely tied to the number of years of employment at a firm. Responses to this question are self-characterizations, and the element of subjective ambiguity makes it an interesting datapoint.

Hedge funds often have flat-ish management structures, the more so the smaller the shop — and most hedge funds are small. That helps seniority become a matter of perception as well as fact, which may be why “somewhat senior” is by far the most common response. A hedge fund job confers a prestige of its own and funds do a good job, generally speaking, of making employees feel valued; both factors may encourage responses of “somewhat senior.”

It’s not clear to what extent this chart can be used to infer a typical distribution of seniority in funds. Standalone funds tend to be the brainchild of two or three people. (Hedge fund recruiter Charlie Panoff of Objective Solutions International: “You have the quantitative strategy guy and the trader/broker guy who comes and brings the money along with him, and the two of them build something that lasts.”) These are the “most senior,” and later additions to the team will not generally rival them.

The least frequent response surely reflects the steep barriers to entry to the industry, as well as the considerations mentioned above. Entry-level hedge fund jobs are a rarity, and new employees are expected to hit the ground running: Few consider themselves the “least senior.”

With a lot of movement in 2008, we’ll see what happens to these numbers.

Here’s 2007 hedge fund compensation in a nutshell. This chart is excerpted from the latest Hedge Fund Search Digest Compensation Survey, which had responses from individuals representing over 200 firms.

Note that not all ranges on the vertical axis are of the same size. Increments are of 50,000 up to 300,000.

Hedge Fund Search Digest’s annual Compensation Survey aggregates compensation data reported by hundreds of hedge fund professionals. But who? Here we profile respondents to the 2007 survey by years with their current firm.

Plainly, there is plenty of mobility in the industry.

Hedge Fund Search Digest’s annual Compensation Survey aggregates compensation data reported by hundreds of hedge fund professionals. But who? Here we profile respondents to the 2007 survey by years in the hedge fund industry.

While there are a few typical career progressions in this industry, lateral moves are routine as well. Therefore, people with — for instance — “less than 2 years” in the industry might vary widely in the other work experiences they have under their belt.

Nine or more weeks of vacation, and none at all, both seem surprising. Four weeks comes up as the most common allotment, three weeks in a not-distant second place, and five and two weeks with close-to-equal frequency.

Over two hundred hedge fund professionals reported on their vacation in Hedge Fund Search Digest’s 2007 Compensation Survey.