A Unique Survey of Compensation Practices in the Hedge Fund Industry |
Date: Thursday, July 2, 2009
Author: Emediawire.com
Grahall Partners, LLC recently released to participants the results of the 2009 Survey of Hedge Fund Compensation Practices. The survey was developed in collaboration with Kleinberg, Kaplan, Wolff & Cohen, P.C. and UBS Prime Brokerage Services.
This survey provides a unique perspective about the architecture of key compensation practices in the hedge fund industry. It differs from other hedge fund compensation surveys in three key ways:
- The survey addresses how firms' compensation policies work, not how much compensation partners and employees receive.
- Data was provided by principals or senior members of the firms surveyed, not by recruiters or other service providers, or self-reported by staff.
- The focus of the survey report is on policies and structures, including topics such as the form of firm ownership, fee structures and retention policies, and how they relate to hedge fund compensation.
Key survey findings revealed that:
- 60% of participant firms do not have a formal compensation policy (i.e., written and communicated).
- 75% of participant firms do not use a standard sharing ratio for investment teams.
- 40% of participant firms have had changes in their ownership structure since inception.
- 40% of participant firms do not use restrictive covenants for key staff.
- 60% of participant firms do not have a succession plan.
In discussing survey results, Jon Jodka, the U.S. Head of Prime Brokerage Sales at UBS, noted "While the hedge fund industry grew to more than $2 trillion in assets at its peak, the compensation policies in the industry remained informal in many regards."
On Tuesday, June 23, 2009, UBS hosted the 2009 Hedge Fund Compensation Practices Conference, open exclusively to survey participants. Panelists included Michael Graham and Tom Roth from Grahall Partners and Myron Kaplan and Jason Grunfeld from Kleinberg, Kaplan, Wolff & Cohen. Panelists addressed the survey results as well as current compensation trends in the hedge fund industry. The panel was moderated by Laura Marmorale from UBS Prime Brokerage Sales.
Survey participation was through invitation only, and responses were reported from December 2008 through March 2009. The full survey report is available only to participants.
Myron Kaplan, a founding partner of Kleinberg Kaplan, commented that "A key question to consider when an employee with vested equity departs from a management company is how the circumstances giving rise to his departure, as well as his compliance with any restrictive covenants after the departure, will affect the calculation of his buy-out."
Jason Grunfeld of Kleinberg Kaplan added that "It is extremely important that these types of issues are resolved prior to an employee's departure, which is why we advise our clients to address this in their operating and employment agreements."
A summary of the report for non-participants will be available the week of July 13, 2009. For more information, please contact: Tom Roth, Grahall Partners LLC, (914) 714-2386, tom.roth@grahall.com; Jason Grunfeld, Kleinberg, Kaplan, Wolff & Cohen, P.C., (212) 880-9887; jgrunfeld@kkwc.com; or Laura Marmorale, UBS Prime Brokerage Sales, (212) 713-3555, laura.marmorale@ubs.com.
ABOUT GRAHALL, LLC
Grahall Partners, LLC (www.grahall.com)
is an intellectual capital firm with deep roots in compensation and
total rewards consulting. Grahall's consulting practice has
long-standing experience working with alternative asset management
firms. The depth and breadth of their Senior Consultants' work with
hedge funds is unique in the compensation industry. It includes all
aspects of compensation and total rewards design for Partners and
employees, including related staffing and firm governance issues.
Online www.grahall.com
ABOUT KLEINBERG, KAPLAN, WOLFF & COHEN, P.C.
For over 30 years, Kleinberg Kaplan (www.kkwc.com)
has been a leader among service providers in the hedge fund industry
and has developed a national and international reputation for its
representation of hedge funds, including several pioneers in the hedge
fund industry. For three consecutive years, Kleinberg Kaplan was
included in Alpha Magazine's Top Hedge Fund Service Providers listing.
In 2006, Kleinberg Kaplan was named as one of the overall top four U.S.
law firms serving hedge fund managers throughout the world, and in 2007
and 2008 it was named as one of the top U.S. law firms that excel at
representing hedge fund managers with less than $1 billion under
management.
Online www.kkwc.com
ABOUT UBS
Headquartered in Zurich and Basel, Switzerland, UBS is one of the
world's leading financial firms. It serves a discerning, international
client base with its wealth management, investment banking and asset
management businesses. In Switzerland, UBS is the market leader in
retail and commercial banking.
UBS is present in all major financial centers worldwide. It has offices
in over 50 countries, with about 38% of its employees working in the
Americas, 34% in Switzerland, 15% in the rest of Europe and 13% in Asia
Pacific. UBS employs more than 75,000 people around the world. Its
shares are listed on the SIX Swiss Exchange, the New York Stock
Exchange (NYSE) and the Tokyo Stock Exchange (TSE).
UBS Prime Brokerage Services offers global clearing, custody, flexible
financing solutions, full accounting support, plus access to our
foreign exchange and fixed-income platforms. UBS Prime Brokerage
Services provides timely settlement and clearing of securities and cash
balances for all transactions in more than 60 markets - in any
time-zone and all major currencies.
CONTACT INFORMATION
Tom Roth | Grahall Partners LLC | (914) 714-2386 | tom.roth(at)grahall.com