Clashing Forecasts on Hedge-Fund Pay

Date: Friday, November 13, 2009
Author: Laura Lorber, FINS.com

Is hedge-fund pay on the way down or on the rebound? Two closely-watched reports are projecting divergent estimates for hedge-fund pay in 2009.

Yesterday a forecast from executive recruiter Glocap Search and trade publication HedgeWorld said total annual compensation at hedge funds is on the rebound, expected to be up 2% to 7% above 2008 levels.

Last week, an analysis that looked solely at incentive pay from executive compensation firm Johnson Associates Inc. said hedge-fund year-end payouts would plummet 15% to 20% from last year.

Why the disparity?

One difference is that Glocap's forecast looks at salary and cash bonuses, while Johnson Associates' survey looks at incentives including cash bonuses and equity awards.

"Ours is more pessimistic for sure," said Alan Johnson, managing director of Johnson Associates, which monitors a cross-section of about 40 hedge funds for its analysis which is conducted quarterly.

Glocap chief executive Adam Zoia said his forecast is based on data that his firm collects from placements and information gathered on recruiting assignments.

Zoia is skeptical of the Johnson numbers, pointing out that few hedge funds are publicly traded and firm ownership isn't typically referred to as equity in the industry.

"He's not a search firm that talks to candidates," he said.

What's more, he said, it doesn't make sense that bonus pay would be down, given that many hedge funds are expected to turn in stellar performance this year coming off a miserable 2008.

"It just doesn't pass the smell test. Just think of things logically," Zoia said.

One thing's for sure: It's a very messy year end.

"It's a lot of volatility," Johnson said. "A lot of it is going to have to do with the different performance of the fund. If you had a good 2009, you're up."