What Sized Hedge Fund Promises the Best in Compensation?

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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