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Bonuses will be announced and paid in the coming weeks. And it’s not just bankers who get paid.
Our bonus expectations survey conducted late last year measured bonus expectations from buyers as well as sellers. As the graph below shows, buy-side respondents are more optimistic than other respondents, with hedge fund respondents being the most optimistic.
Hedge fund optimism is very reasonable and largely reflects the strong performance of large multi-strategy hedge funds this year. For example, his 2023 profit margin for Citadel was 15%, while his competitors Millennium, Verition, and ExodusPoint had profit margins of 10%, 8%, and 7%, respectively.
With intense competition for talent, many funds will feel pressured to pay their employees well, but a 30% increase may be optimistic. Not all hedge funds were as successful as Citadel over the year. For example, Baryasni, another large multi-strategy fund, returned just 2.7%. Given that U.S. inflation was around 3% last year (lower than most major economic indicators), it seems difficult to reconcile such a significant change in bonuses.
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Still, the reason people like hedge funds is because of the pay. Our ideal employer rankings late last year found that while long-term career prospects are important to prospective hedge fund employees, the overwhelming reason for this is “very good” pay. I understand. It performs much better in this category than would be considered “very good.” paid fairly.
It’s also worth pointing out that hedge funds’ optimism isn’t necessarily unique. Bankers at Goldman Sachs and HSBC also expected disproportionately large bonus increases of 30% and 29%, respectively, far higher than their closest rivals.
However, not everyone on the buy side expects bonuses to increase. Traditional asset managers expect bonuses to fall, being the only major sector to see a decline. The pessimism is spreading after layoffs at major companies such as Prudential and Charles Schwab. Money market funds are seeing renewed interest in money market funds as asset managers seek to cut costs in an era of rising interest rates, shrinking margins and the continued appeal of exchange-traded funds.
Private equity people are also surprisingly optimistic, all things considered. Despite the large amount of money in the industry, respondents who identified as part of the industry expected more money than last year. According to Bloomberg, investors who typically invest in private equity funds (such as pension funds and insurance companies) are pulling out, making it difficult for private equity funds to return money to investors. Despite the fact that
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