Last August SumZero, a social research site for investment professionals, launched a new feature dedicated to compensation trends within our buyside-only investment community. We (SumZero) have since collected thousands of salary reports sourced directly from analysts, associates, and portfolio managers working at hedge funds, mutual funds, and private equity funds around the world. A handful of high-level findings from our database are available below.
“Pay” is just one of several information types that we aggregate on an industry-wide level through SumZero, but it also happens to be a controversial, publicly-relevant topic since (1) participants are generally being paid a lot, (2) performance can be quantified relatively easily, and (3) members of the public are, in some cases, the actual customer footing the fees that pay the salaries.
Compensation data is hard to get. Annual surveys are conducted by a variety of outlets, and the results are sold for thousands of dollars per report. But we have elected to make this information much more accessible...and free.
Contributors span the junior-level to executive-level. They are old and young, generalists and specialists. They work at different types of funds in cities all across the world--although, notably, we do not offer access to quant funds and thus receive no data from them. Some take home millions a year in pay. Many others take home $0 over the course of a full year, which is a reality that the media never fails to ignore.
Using the database, permissioned users can construct elaborate searches like “show me how much a Senior Analyst covering Industrials with 5-7 years of experience at a $500mm Private Equity fund in Singapore made on average in 2013.” From there, one could examine each of the individual reports matching that criteria to examine some of the key differences between them. For the purposes of this article, however, we are looking at much broader trends.
A few, important disclaimers before diving into the data:
1. This is not a rigid statistical analysis. I have not controlled for outliers. I am not drawing from a well-balanced population from within the buyside, i.e. we are heavily NYC-biased, slant a bit younger, and are dominated by hedge funds. Take it all with a significant grain of salt.
2. This is user-generated information. There’s no reason why someone would or should provide misleading information (since the information is collected anonymously), but people do mysterious things.
3. Some results are not statistically significant.
4. Some data points we collect include estimates which are inherently subject to significant margins of error.
5. Our database has not been around long enough to be sensitive to the natural realities of full market cycles.
Over time, we expect the dataset to become much richer, increase in significance, thus become far more actionable. This is merely the beginning.
Now for the data!
The Typical Hedge Fund Comp Package
This is the typical compensation package for an investment professional at a hedge fund (no mutual funds, PE funds, or others). The chart is insensitive to experience, title, location, strategy, etc. Total average yearly comp comes to $409,826. The data is dispersed widely with big outliers on the top end (people getting paid well into the millions).
How An Investment Career Evolves Over Time
We looked at how experience affects compensation. All fund types, all locations, etc. The drop-off in median income for an employee with 15-20 years of experience is anomalous. We track experience levels up to 30+ years. The longer you remain in the industry; the higher your pay is likely to be.
Job Title Matters
This is the combined data of all fund types, locations, years of experience, etc. and then split by job title. This data is robust on all the different titles, so we’re pretty confident in its directional and proximate accuracy. Note: the data is displayed on a log scale.
Best Cities for Big Bucks
These are incomes of all fund types, seniority levels, age, etc. set against location. Use caution here. While it’s certainly possible that the average analyst does really well in certain cities, it’s far more possible that the fewer number of reports we have from these specific cities came in abnormally high and thus are skewing the data unnaturally.
Battle of the Sexes
This is our data split by gender. It’s exciting to consider the possibilities here, but we are not sure it’s real. SumZero is 5-7% female by user base (which is representative of the industry), and a relatively small number of our female users have entered their comp information. It is possible that this gap is real. Ultimately we are not sure. Fund Women, please join sumzero.com and help make the data better.
Coverage Area Matters...Or Does It?
A multi-year analysis sensitive to the cyclical nature of businesses is needed to draw more actionable conclusions. In the interim, don’t read too deeply. I also would not read into the disparity associated with Generalists. I have spoken with several current and former analysts who have confirmed that Generalists aren’t comped worse than their peers.
Hedge Funds Offer Highest Pay
Funds are the core foundation of the site and are responsible for just about all of the content/data creation within it, but we also offer select access to large, institutional investors (i.e. endowments, fund of funds, family offices etc.). They are permitted to post compensation details. Data on the allocators as a group is decent, but not great. The fund data is strong.
Combinations Equal Personalization
The real power of our database is revealed when users activate the multi-variable search functionality, which keys on a total of about a dozen information types. This chart is demonstrative of that. Other variable types include firm strategy, asset class expertise, AUM, etc. It’s all available on sumzero.com .
About the Author
Nicholas Kapur serves as COO for SumZero. You can learn more about the company at sumzero.com.
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