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Hedge Fund Salaries

How much can hedge fund managers make? A lot. A whole lot. Consider this list of the top-earning hedge fund managers of 2008, as reported by Alpha Magazine:

Rank  Name  Firm Name  2008 Earnings 
1 James Simons  Renaissance Technologies Corp.  $2.5 billion 
2 John Paulson  Paulson & Co.  $2 billion 
3 John Arnold  Centaurus Energy  $1.5 billion 
4 George Soros  Soros Fund Management  $1.1 billion 
5 Raymond Dalio  Bridgewater Associates  $780 million 
6 Bruce Kovner  Caxton Associates  $640 million 
7 David Shaw  D.E. Shaw & Co.  $275 million 
8 Stanley Druckenmiller  Duquesne Capital Management  $260 million 
9 (tie)  David Harding  Winton Capital Management  $250 million 
9 (tie)  Alan Howard  Brevan Howard Asset Management  $250 million 
9 (tie)  John Taylor Jr.  FX Concepts  $250 million

If you're motivated by the prospect of a very big payday, those numbers will be inspiring. But the information below will be a little more useful. The first thing to realize about the pay at hedge funds is it is largely about how the fund performs. Therefore it's the size of your bonus more than your base salary that determines how well you do overall. And bonuses paid for a given position are often explicitly tied to the fund's performance.
In general, if the fund's return is stellar, your bonus will be too. If it sucks wind, so will your compensation. That is, if you're lucky. Often, if the fund does badly enough, you will simply be out of work. No matter how skilled you are, or how difficult overall market conditions are, if you work for a hedge fund that loses a significant amount of money you will likely lose your job.

The second thing to realize about the pay at hedge funds is that the principals and senior portfolio managers take home most of it. The pay for more junior positions in successful hedge funds can be extremely attractive, as the tables below show. But if you're after the really, really big bucks, what you're gunning for is to become a senior portfolio manager or run your own fund. And that'll take some time, experience, skill, and luck. So in the meantime, since you'll be working awfully hard to position yourself for that opportunity, you might as well make sure the work excites you. Because after all, it's not just about the money. Is it?

    Mean Median Normal Range
Low High
Fund Head Salary $315,096 $200,000 $208,502 $421,691
Bonus $3,312,864 $1,000,000 $711,156 $5,914,571
Total $4,935,070 $1,300,000 $908,960 $8,961,180
           
Sr Portfolio Manager Salary $199,022 $175,000 $178,132 $219,911
Bonus $1,018,608 $325,000 $744,694 $1,292,521
Total $1,247,953 $500,000 $978,910 $1,516,996
           
Jr Portfolio Manager Salary $152,744 $150,000 $124,144 $181,344
Bonus $492,819 $300,000 $352,439 $633,199
Total $542,376 $450,000 $434,505 $650,248
           
Jr Trader Salary $97,323 $100,000 $79,678 $114,968
Bonus $204,250 $96,000 $65,735 $342,765
Total $309,438 $177,500 $154,562 $464,313
           
Jr Analyst Salary $103,852 $99,500 $88,536 $119,348
Bonus $168,740 $115,000 $125,999 $211,481
Total $266,171 $205,000 $212,662 $319,679
           
Risk Manager Salary $129,813 $125,000 $113,206 $146,419
Bonus $257,188 $132,500 $118,581 $395,794
Total $378,438 $245,000 $228,433 $528,442
           
Note: The preceding figures are from Alpha Magazine's 2007 Compensation Report. They can be expected to vary sharply from year to year as capital flows between hedge funds and other investment vehicles and as returns vary.

Salary Comparison

"It's a big problem for the industry. Mutual funds have a better time competing with hedge fund returns than with hedge fund salaries."

Russ Kinnel, Morningstar

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