The competition for hedge fund portfolio managers has escalated, resulting in sign-on bonuses often exceeding $10 million, with some deals reported at $50 million and upwards. However, these figures can be misleading, as the contracts involve intricate elements like profit incentives, clawback provisions, and IP rights, which can greatly affect actual earnings. This competitive landscape has forced hedge funds to adopt creative contract structures, such as temporary performance incentives and provisions for relocation. In light of rising compensation expenses, firms are also implementing stringent vetting processes for prospective managers to mitigate hiring risks.
Amid the war for talent among multimanager investment firms, sign-on bonuses have grabbed headlines as they've stretched into the tens of millions of dollars.
The mechanics of an eight-figure PM deal are more complex than the headline figures may suggest, and a PM could pocket many millions less - or significantly more - depending on how the deal is structured.
Funds have come up with more creative and nuanced deal structures to lure employees - richer performance incentives for limited periods, relocation to tax-friendly countries, ownership of intellectual property.
As compensation expenses soar, funds are also taking measures to protect themselves and their investors from the risks of a bad hire.
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