Opalesque Exclusive: While investment banks look to change pay structure, hedge funds are expected to maintain the bonus culture

The anticipated 50% salary raise for a number of Citi employees has generated almost 600 news articles dissecting, debating and many denouncing the bank’s decision. Under the proposed plan, first reported by the NY Times, Citi will raise base salaries for investment bankers and traders whose compensation is typically skewed towards bonuses rather than yearly salary. Employees in risk management, consumer banking and credit card areas will see much smaller increases.
This increase in base pay likely marks a shift within the banking industry as firms such as Bank of America and Morgan Stanley plan to follow suit, but it is not one that is likely to be echoed within the hedge fund industry.
“Citi needs to [increase pay] to retain their talent and due to the uncertainty regarding the firm’s future,” Deborah Markus, Founding Partner at New York-based executive recruitment firm Columbus Advisors told Opalesque.
Meanwhile, the hedge fund industry appears to be cycling out of a period of loss and the general consensus is that firms that survived 2008 are well positioned to move forward.
“What is driving compensation in hedge funds right now is the historical performance of the fund, the size of the fund, marketability, and funds future plans.”
Trends for the currently employedWhile there is less job hopping in general due to the decrease in opportunity across the hedge fund industry, people still have their ear to the ground for more appealing situations.
Individuals considering moving from a current position are doing much more in terms of due diligence on a firm’s background. “They want to make sure that they are going to a fund that has not only performed well in the past, but is also positioned to perform well in the future,” says Markus. “Candidates ideally want to move to a fund that has strong infrastructure and relationships, smaller less institutional focused funds are less appealing than they have once been.”
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