Overview of Hedge Fund Infrastructure

Written by Shane Ferguson on 25/01/2017

So far, year to date, there hasn’t been any particular hiring theme in terms of candidates with a select background being in demand – this is likely to be a result of largely indifferent hedge fund performance meaning there’s not been a consistent need in one area. A notable macro theme has been relatively steady hiring by systematic funds, typically the desire across that space has been mid-level operational candidates with a solid technical background and demonstrable examples of mitigating risk or improving operational efficiency using various coding languages (VBA/C++/Python etc).

 

We’ve seen volume across all levels of fund infrastructure; from COO & Head of Operations down to Junior Operations and a steady flow in the Senior Fund Accountant/Product control space. Interestingly the latter has proved to be one of the most challenging areas to source candidates for, mainly due to the continued out-sourcing by third party administrators. There’s been a noticeable increase in senior buy side middle-office candidates looking to move as a result of hitting a glass ceiling in their current firms, which is likely to be a domino effect of little movement at the Head of Operations/Operations Manager level with the more established managers.

Pay

Area

Title

Years of relevant experience

Salary

Bonus

Investment Operations

Middle Office Analyst

1

38,000-40,000

Circa 20%

Investment Operations

Middle Office Analyst

3

41,000-45,000

Circa 25-30%

Investment Operations

Middle Office Analyst

5

46,000-52,000

Circa 30%

 

The above gives some generic bandings for typical salary levels across operations up to 5 yrs’ experience. Generally it’s hard to give definitive salary bandings across middle-office because there are so many variables e.g. Operations Graduate Schemes at the top tier Investment Banks now start at circa £38k whereas an entry level Operations hire in a fund is likely to be on £30-35k.

 

The difference in bonus between the two would be significant also, and would go some way to bridging the gap in base salaries e.g. middle-office candidates in a bank would likely be between 4-7% of base in comparison to the typical hedge fund operations bonus of circa 25%. Again though, the buy-side bonus is driven by remit of role, performance of the fund and whether the position is seen as a processing or value-add role – for example it wouldn’t be unusual in funds managing between $2-5bn with an operations department of 4-8 people to see bonus’ climb to 40-60%. Generally funds tend to institutionalise when they surpass the $5bn threshold, this leads to increased headcount across infrastructure which in turn reduces bonus potential.

 

It’s not unusual to see candidates make the sell>buy side transition for a minimal uplift on the base with a view to getting a higher bonus percentage whilst improving future prospects (employability/progression) by going into a more diverse role. We’re seeing less fund>fund moves unless there is a significant difference in the size of the funds and complexity of the role. Candidates with >5 yrs. experience tend to move away from pure operations roles and may cover some elements of fund accounting or product control/investor relations alongside their BAU responsibilities – this makes it difficult to put definitive salary bandings in place that are a reflection of years of experience, it’s more skewed towards what the candidate is actually doing day-to-day.

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