If you have been watching the news lately, you will have no doubt heard about some of the so-called “fat-cat” bankers of Wall Street who take home hedge fund salaries that make a small African countries GDP look like pocket change. But, is the hedge fund business really that lucrative? Are hedge fund salaries really that high? Should you drop out of art school and start studying quant analysis as soon as possible? While there are many great opportunities in the financial industry, it is not all it’s cracked up to be.
You have to remember that the top people in any field will make a lot of money, no matter what they are involved in – that’s just the way the capitalist system works. But, on the flipside of that, there are still people just scraping by, trying to make it big as well.
When you just graduate from school, you can expect a pretty small salary if you can actually secure a position at a hedge fund. (Which is no small feat in itself) Now, it is important to preface this by saying that “small” hedge fund salaries are actually quite high for the general population – with bonuses, a first year hedge fund researcher or gopher can still make up to $100,000. There are almost no other fields that currently pay that well right out of school.
But, as you start to progress into higher positions, hedge fund salaries grow and bonuses get bigger. That is one thing you have to remember – since hedge funds procure most of their income from management fees and take a cut on the overall profit, the more money you have under management and the higher your yearly return is, the more money you will make. It is not uncommon for someone with 5 to 10 years of experience (if they last that long) to secure hedge fund salaries that are close to $1 million per year.
If you start your own hedge fund, though, hedge fund salaries get a little more complicated. Usually, the founder of a hedge fund has his or her own money invested in the fund, so they will have grow their money in this way as well. They keep whatever is left of the management fees and profits when all the expenses and hedge fund salaries of their workers are paid, so the above information doesn’t really apply to them – they can make exorbitant amounts of money in a very short period of time.
To try and peg down any accurate information on hedge fund salaries is a futile task – there are just too many variables to consider. Sure, we know people just starting at a small hedge fund can secure hedge fund salaries of around $70,000 plus bonuses based on their performance, and that a top hedge fund manager can make over $1 billion in compensation, (much like David Tepper of Appaloosa Management – 2009 earnings: estimated $4 billion) but this information is not very helpful. It is like asking how much a CEO makes, there is just too much variation.