2014|2015 global buy side overview and compensation report buy side report... · compensation data...

2014|2015 Global Buy Side Overview and Compensation Report

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COMPENSATION DATA ANALYSIS METHODOLOGY

The Options Group 2014/2015 Buy Side Overview and Compensation Report is the culmination of twelve months of work to which more than 120 global consultants and research professionals contributed. It is intended to help our clients make informed compensation decisions in 2014 and to develop their human resource management plans and policies for 2015. Options Group Intelligence Unit (OGIU) has captured information on global business performance, key talent moves, recruitment trends and compensation practices through its extensive, global

various other data sources.

Our estimates are based on a combination of results from our global candidate survey, data from our proprietary database and conversations with our consultants and executives at investment management companies. Compensation estimates are based on employees’ expectations and Options Group’s interpretation of current compensation and hiring trends. Total compensation is defined as base salary plus cash and non‐cash bonuses awarded for 2013. Unless otherwise noted, estimates are in US Dollars. Forecasts incorporate general market conditions from January 1, 2014, to October 31, 2014.

As 2014 draws to a close and institutions begin allocating bonus pools and 2014 budgets, these estimates may be used by hiring managers and business unit heads as a guide to employee compensation expectations.

DISCLAIMER

This compensation report is intended for reference purposes only. All compensation tables include estimated total pay levels for 2014 and include both base salaries and bonuses. We believe that the information contained in this publication is dependable, having been procured from primary and secondary sources through October 31, 2014. Options Group does not guarantee its accuracy or completeness, and nothing in this report may be construed as a representation of such a guarantee. In the event that market conditions change dramatically subsequent to this date, Options Group claims no responsibility for the accuracy of this information. This report is a single source of data in the overall analysis of compensation structures and the opinions presented herein are subject to change without notice. Options Group does not accept any responsibility for liabilities arising from the use of this document or any of its content. Any reproduction, sale or distribution is strictly prohibited.

DATA CONTRIBUTORS

ABS Alert, Alternative Investment News, Alpha Magazine, Asiamoney, Bloomberg, Bond Week, The Boston Consulting Group, BusinessWeek, Dow Jones Credit Suisse, Dealogic, Derivatives Intelligence, Dow Jones, eFinancial, Euromoney, Financial News, Financial Times, Fortune, Investment Dealers’ Digest, The New York Times, Prequin, PE Week, Risk, SEC filings, Thomson Reuters, The Wall Street Journal

ABOUT OPTIONS GROUP

Founded in 1992, Options Group is a leading global executive search and strategic consulting company for the financial‐services industry. Since 2000, we have maintained a local presence on five continents and have placed thousands of mid‐ to senior‐level professionals in all areas of the financial‐services industry at a range of institutions. With more than 120 consultants and research analysts worldwide, Options Group has a thorough knowledge of key competencies in the financial industry and is at the cutting edge of global hiring services and compensation trends for securities, investment banking, hedge funds, asset management, and information

database of more than 500,000 industry professionals, interviews with senior executives across the industry, and

technology. Options Group possesses a track record of consistently providing expeditious and comprehensive executive‐search and market‐intelligence services to clients.

For additional information, please contact: Jessica Lee [email protected]

ABOUT OPTIONS GROUP INTELLIGENCE UNIT (OGIU)

OGIU is the business‐information and ‐research arm of Options Group. Through its extensive global network of analysts, consultants and client relationships, OGIU is uniquely equipped to assist senior executives in making more prudent business decisions by providing timely, accurate and reliable analyses of financial companies and market trends. Options Group is committed to delivering value‐added market intelligence and strategic consulting in addition to our executive search services.

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Table of Contents OVERVIEW ..................................................................................................................................................... 5 REGIONS US ............................................................................................................................................................................ 9

EMEA ..................................................................................................................................................................... 10

ASIA ....................................................................................................................................................................... 12

STRATEGIES .................................................................................................................................................. 14 SELECT ROLES Senior Portfolio Manager/Trader ......................................................................................................................... 19

Quantitative Analyst ............................................................................................................................................. 20

Distribution Professionals ..................................................................................................................................... 21

Risk Management & Compliance .......................................................................................................................... 22

Accountants .......................................................................................................................................................... 24

CANDIDATE SURVEY RESULTS Overview ............................................................................................................................................................... 26

Portfolio Manager/Trader .................................................................................................................................... 29

Research Analyst ................................................................................................................................................... 30

Quantitative Analyst/Trader ................................................................................................................................. 32

Distribution Professionals ..................................................................................................................................... 34

Risk Manager ........................................................................................................................................................ 36

Information Technology ....................................................................................................................................... 37

Operations ............................................................................................................................................................ 38

PEOPLE MOVES Hedge Funds ......................................................................................................................................................... 39

Private Equity ........................................................................................................................................................ 40

Asset Management ............................................................................................................................................... 41

Michael Karp Chief Executive Officer [email protected]

Bob Reed President [email protected]

Carlos Mejia New York [email protected]

Simon Satanovsky New York [email protected]

David Korn London [email protected]

Raveen Shah London [email protected]

Vinicius Bolotnicki São Paulo [email protected]

SENIOR ADVISOR Robert Flohr New York [email protected]

Alan Blum Partner [email protected]

Meri Miller Partner [email protected]

Push Patel Partner [email protected]

Richard Stein Partner [email protected]

SÃO PAULO Vinicius Bolotnicki Managing Partner [email protected]

BOGOTÁ Carlos Mejia Managing Partner [email protected]

LONDON David Korn Managing Partner [email protected]

ZÜRICH Simi Schaerer Partner [email protected]

FRANKFURT Diana Herpel Director [email protected]

SINGAPORE Tyler Jackson Executive Director [email protected]

MUMBAI Anil Sharma Executive Director [email protected]

NEW DELHI Priyanka Kheterpal Executive Director [email protected]

HONG KONG Matt Pecheur Executive Director [email protected]

TOKYO Noriko Hasumi Executive Director [email protected]

SYDNEY Stuart Halfen Director [email protected]

MANAGING PARTNERS

NEW YORK

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OOVVEERRVVIIEEWW Despite steady increases in hedge funds’ assets under management, the industry has faced several challenges this year. According to HFR, hedge funds managed a record $2.82 trillion at the end of the third quarter, and over the same period, hedge funds were up 3.8% overall.1 Comparing this to the 9.2% rise in the S&P 500, more institutional investors have been questioning their allocations.

In 2013, the California Public Employees' Retirement System (CalPERS) reported a 7.1% gain in its hedge fund investments, versus 18.4% for its overall portfolio,2 highlighting a growing issue with investors. Earlier this year, CalPERS announced that it would no longer allocate money to hedge funds, citing cost, complexity and scale for the decision.3 This signaled a lower tolerance for underperforming hedge funds that charge traditional fees.

Adding pressure to the industry are increasing regulations in Europe. These regulations require larger funds to implement risk‐management and ‐reporting functions and set guidelines on remuneration, ultimately raising operating costs by requiring funds to add additional personnel.

GENERAL HIRING TRENDS

Despite mixed performance across the global hedge fund industry, we have seen fairly consistent hiring activity throughout the year. Hiring activity for investment professionals has been largely strategy‐specific, with a number of funds hiring front‐office staff. Emerging markets‐portfolio managers, across debt and equity, have been in

1http://www.efinancialnews.com/story/2014‐10‐20/pension‐funds‐eye‐reducing‐hedge‐fund‐investments?ea9c8a2de0ee111045601ab04d673622 2http://www.institutionalinvestor.com/article/3393349/asset‐management‐hedge‐funds‐and‐alternatives/hedge‐funds‐confront‐the‐future.html?ArticleId=3393349#.VGo95fnF8fs 3 http://www.bloombergview.com/articles/2014‐10‐30/fleeing‐hedge‐funds‐use‐your‐imagination

October 2014 September 2014 2014 YTDComposite (0.59) 0.07 1.51Arbitrage USD (1.18) 0.14 2.18Asian Pacific Fund of Funds (0.08) 0.70 2.64Commodities (0.96) (0.03) 0.93Distressed (1.94) (0.86) 0.68Emerging Managers 0.09 (0.75) 2.28Emerging Markets Hedge USD 0.30 (0.33) 5.19European Equity EUR (0.73) 0.57 (1.53)European Multi Strategy EUR (0.12) 0.76 0.39Fixed Income USD (1.53) 0.05 2.52Global Equity USD (0.44) (0.66) 0.39Global Macro Currency USD 0.12 1.51 2.05Global Multi Strategy EUR (0.85) (0.04) 0.54Global Multi Strategy USD (0.79) 0.00 1.20Leveraged Global Multi Strategy USD (1.83) 0.51 3.40Managed Futures 0.80 2.16 5.56Self‐Invested Fund of Funds USD (0.66) 0.40 1.40US Equity (0.01) (1.62) 0.69Source: InvestHedge

Summary of Performance by Strategy (%)

SELECT ROLES ‐ Distribution Professionals


DISTRIBUTION PROFESSIONALS

As the fundraising environment has become more competitive, the hiring demand for proven asset raisers has increased. Firms are not only seeking professionals with large rolodexes; they must also quantify their relationships and demonstrate current track records of raising capital in relevant strategies or geographies. In the past year, there has been increased demand for product specialists as firms continue to offer different products and/or strategies. This has been particularly common at large funds (defined as greater than $5 billion in assets under management) that have a substantial, diversified in‐house client bases. These firms seek to hire product specialists who are dedicated to selling new products or strategies to the fund’s existing investors. One of the benefits of dedicated product specialists is that chief investment officers and portfolio managers do not have to be involved until the final decision‐making stage.

Strategies most active in hiring marketers have been credit, distressed, emerging markets, long/short equity and event driven. Newly launched and midsized funds still rely on their prime brokers’ capital introduction teams before hiring dedicated, in‐house distribution professionals. In previous years, it was unusual for a new fund to hire a dedicated marketing or investor relations professional; they usually made these hires after six months, or after the fund gained traction. However, investor relations professionals are becoming more essential in funds’ earlier stages. More firms have come to believe that the gathering and retaining of assets need to be managed properly and that this should be addressed early on. This has caused the demand for investor relations professionals at both hedge funds and capital introduction divisions at banks.

Large funds usually divide distribution professionals between investor relations, who only manage current investors, and marketers, who are responsible for raising new assets. While some firms with multiple funds choose to maintain a sales team and only add additional investor relations professionals for new strategies, others use a formula. For example, a large American hedge fund (managing over $15 billion in assets) adds one senior marketer and one investor relations professional per $1 billion dollars under management.

Non‐compete clauses remain fairly prohibitive. Typical gardening leave is still three months. However, non‐competes of 6‐12 months remain the industry standard. Some senior marketers have grown wary of signing partnership agreements due to the severity of the restrictions placed upon them. Furthermore, new UK partnership agreements have made the legal ramifications of these partnerships onerous.

COMPENSATION EXAMPLES

Although a majority of marketers are paid on a discretionary basis, some firms offer formulaic bonus schemes, and these can vary dramatically from firm to firm. Below is a table with examples of various payouts.

Firm Type Compensation

Asset Management Firm$100K draw on 5bps up to $107.5K, then 20bps thereafter + qualifies for partnership if assets raised exceeds $40 million in first year

Hedge Fund £200K base salary + 1% equity

Hedge Fund 15% of management fees for first year, 10% of management fees in second year

Hedge Fund $350K base salary + $200K bonus +10% of management fees

Real Estate Fund $375K base salary + 25bps of management fees + 10bps incentive fees based on assets raised

Hedge Fund $250K base salary + 10bps on assets raised

CANDIDATE SURVEY RESULTS ‐ Overview


AVERAGE PERFORMANCE LEVELS AND EXPECTED CHANGE IN TOTAL COMPENSATION

The chart above is based on survey participants who reported percentage change in P/L. Note that professionals at banks and hedge funds reported, on average, better individual performance than their groups; however, on average, most expect their compensations to rise not to the level of their individual contributions but to be higher than their groups’. Also note that the averages of groups’ and individual hedge funds’ performances are not significantly greater than banks’. As the difference in potential compensation upsides between banks and hedge funds decreases, the reverse migration of those moving back to banks from hedge funds might continue.

In this chart, responses from those employed at insurance companies are included under the classification for asset management firms. As expected, reported change in P/L and expected changes in compensation are less than those for banks and hedge funds. In bad years, compensation of other professionals typically declines less than that of their peers at banks and hedge funds, and in good years, compensation typically rises less than that of their peers at banks and hedge funds. What is noteworthy is that the average change in individual P/L at asset management firms and insurance companies is in the mid‐teens, whereas in previous years, it has ranged from the mid‐ to high‐single digits. This change can be attributed to more asset management firms and insurance companies focusing on developing alpha‐driven investments to complement their core investments.

BONUS DEFERRALS

The number of firms implementing bonus deferral programs is increasing. The overall averages of deferrals at hedge funds are rising as many newly launched firms start deferring bonuses from conception. For hedge funds, the industry‐average deferral rate program is as follows: for bonuses exceeding $500,000, 25% of the bonus is deferred into the fund and vested equally over three years; some companies, meanwhile, require all employees, regardless of role or bonus amount, to defer at least 15% of their bonus into the fund for 12 to 18 months.

10.6%

22.6%

14.6% 15.0%

28.1%

20.6%

3.8%

13.3% 13.4%

Expected Change in 2014 Total Compensation ‐ Survey Results Ending October 1, 2014

Reported Change in Group P/L

Reported Change in Individual

P/LExpected Change in Total Comp

Banks Hedge Funds Asset Management Firms

Reported Change in Group P/L

ReportedChange in Group P/L

ReportedChange in Individual

P/LReported Change in Individual

P/L

Expected Change in Total Comp

Expected Change in Total Comp

CANDIDATE SURVEY RESULTS ‐ Distribution Professionals


Junior distribution professionals are defined as marketers, investor relations and sales professionals with two to five years of experience. Those with compensation in the top 30% are all marketers.

• Those with compensation in the top 30% are all marketers • Investor relations professionals typically earn no more than $350K in total compensation.

Compensation varies according to the complexity of the investment products and sophistication of the investor base.

Bonus $5B+ HF $1B‐$5B HF <$1B HF Private Equity Asset MgmtDiscretionary 91% 92% 82% 86% 91%Mixed 9% 8% 18% 14% 6%Formulaic ‐ ‐ ‐ ‐ 3%

Base Salary 2014 $5B+ HF $1B‐$5B HF <$1B HF Private Equity Asset MgmtLess than $100K 12% 33% 38% 16% 9%$100K to $150K 35% 42% 44% 43% 47%$150K to $200K 47% 25% 19% 36% 38%$200K to $300K 6% ‐ ‐ 5% 6%$300K to $400K ‐ ‐ ‐ ‐ ‐$400K to $500K ‐ ‐ ‐ ‐ ‐

Total Comp 2013 $5B+ HF $1B‐$5B HF <$1B HF Private Equity Asset MgmtLess than $100K ‐ ‐ ‐ 6% 8%$100K to $150K 5% 16% 9% 6% 13%$150K to $200K 12% 5% 25% 11% 4%$200K to $300K 17% 21% 36% 22% 38%$300K to $400K 22% 42% 18% 33% 29%$400K to $500K 34% 11% 7% 19% 8%$500K to $750K 10% 5% 4% 4% ‐$750K to $1M ‐ ‐ ‐ ‐ ‐$1.1M to $2M ‐ ‐ ‐ ‐ ‐$2.1M to $3M ‐ ‐ ‐ ‐ ‐More than $3M ‐ ‐ ‐ ‐ ‐

$5B+ HF $1B‐$5B HF <$1B HF Private Equity Asset MgmtAvg. Sit out (in Months) 3.20 2.12 2.36 0.89 0.70

JUNIOR DISTRIBUTION PROFESSIONALS

PEOPLE MOVES ‐ Private Equity


PRIVATE EQUITY

SELECT PRIVATE EQUITY PEOPLE MOVES: JANUARY 1 – OCTOBER 31, 2014

NAME TITLE NEW COMPANY PREVIOUS COMPANY

Abbate, Christopher MD, Energy Leveraged Finance Riverstone Holdings New York Citigroup New York

Aiyesimoju, Fola Principal ‐ Africa KKR Nigeria Stanbic Nigeria

Albrecht, Michael MD, Energy Private Equity Ridgewood Private Equity Partners New York Allstate Investments Chicago

Batchelor, Nicholas Partner Quadrant Private Equity Sydney RMB Sydney

Bennett, Dan Head of Capital Markets Jefferies LoanCore New York Goldman Sachs New York

Bourn, Jonathan Partner, Senior Dealmaker Lyceum Capital Partners London Baird Capital Partners London

Briggs, Hugh Partner, CFO Hawthorn Leisure London Talamanca Capital London

Brodsky, Jamie MD, Energy Leveraged Finance Riverstone Holdings New York Nomura New York

Cavanagh, Michael co‐Chief Operations Officer Carlyle Group New York JP Morgan Chase New York

Chambers, Simon MD, Debt Advisory Altium Capital London DC Advisory London

Clark, Richard MD, Debt Advisory Altium Capital London DC Advisory London

Dell, Graeme Chief Financial Officer BC Partners London Ashmore Investment Management London

Dempsey, Andrew MD, Capital Formation & Business Development Easterly Capital New York Fortress Investment Group New York

Geithner, Timothy President/MD Warburg Pincus New York US Treasury Dept Washington DC

Genachowski, Julius Head of Leveraged Buyouts Carlyle Group Washington DC FCC Washington DC

Hart, Michael MD, President of GMS Unit Carlyle Group New York BlackRock New York

Hatcher, Dan Investment Manager Palatine Private Equity London Gresham Private Equity London

Holland, Jeffrey Head of Private Client Group Carlyle Group New York Cole Partners New York

Humphrey, Tim Infrastructure Debt Investment Solutions Macquarie London Trade Risks London

Karpati, Bruce Global Chief Compliance Officer KKR New York Prudential Securities New York

Kawkabani, Remy MD, Head of EMEA Siguler Guff & Company London Credit Suisse Asset Management London

Koecher, Drew Partner Highlander Fund Management New York KPMG New York

Lapham, Andrew Executive Advisor ‐ Toronto Office Blackstone Group Toronto Onex Real Estate Partners Toronto

Lee, Carol Jungeun MD, Asia Structured Credit Carlyle Group Hong Kong Northstone Peak Hong Kong

Lee, Seung‐June Principal, Private Equity Sourcer TPG Capital Hong Kong Goldman Sachs Hong Kong

Leung, Antony Chief Executive Officer Nan Fung Group Hong Kong Blackstone Group Hong Kong

Lu, Henry MD, Healthcare Fund China Merchants Capital Shenzhen William Blair & Co Shanghai

Lyons, Erin Principal, Credit Product Specialist KKR New York Citigroup New York

Maguire, Robert MD, Global Energy & Power Carlyle Group London Perella Weinberg Partners London

Mendoza, Orlando Partner Method Advisors Boston Harvard Management Company Boston

Momdijan, Albert Founder Sokotra Capital Dubai UBS Dubai

Ohlmeyer, Stephan MD, Investment Opportunities ‐ EMEA Lone Star London Intrum Justitia London

Okuliar, Boris Head of Capital Markets Carlyle Group New York UBS London

Ordway, Matt Chief Financial Officer/Chief Operations Officer Energy & Infrastructure Capital Stamford Ridgeline Energy Seattle

Pillemer, Marc MD, Private Equity Investor Blackstone Group New York Goldman Sachs New York

Ponti, Andrea Founder GHO Capital Partners London JP Morgan Chase London

Powell, Mike Founder TECHSQR London HSBC London

Prasetya, Jaka MD, Asia‐Pac KKR Singapore Raiffeisen Zentralbank Singapore

Richings, Paul Chief Financial Officer Bridges Ventures London Langholm Capital London

Schaar, Allen Operating Partner Highlander Fund Management New York Eagle Healthcare Physicians New York

Schamis, David Partner Atlas Merchant Capital New York JC Flowers & Co New York

Schumacher, Patrick Head of Strategy and Deal making Celanese Dallas Blackstone Group New York

Suzuki, Jun Executive Director Longreach Group Tokyo UBS Tokyo

Trivers, Tor MD, Asia Structured Credit Carlyle Group Hong Kong Northstone Peak

Turner, Mike Partner GHO Capital Partners London Macquarie London

Watson, Gordon Principal Victory Park Capital New York Ore Hill New York

Wu, Francis Principal CPP Investment Board Hong Kong TPG Capital Shanghai

Wyncoll, Oliver Partner Bridges Ventures London Langholm Capital London

Xu, Joshua Director, Generalist BOCOM International Holdings Hong Kong Goldman Sachs Hong Kong

Zarzavatdjian, Guy Chief Executive Officer Quilvest Private Equity London 3i London

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