As someone who works in the industry, I have a few issues with the article. Firstly, I feel the average salaries are inflated, even more so at the junior level. I find it a common tendency amongst finance workers to exaggerate, especially since real data is rarely made public, so it's an easy, unverifiable boast. Also, the finance industry seems to thrive on selling limitless upside to bright grads, in exchange for their best years and hard work. The truth is, not everyone makes it to star hedge fund manager status, and your personal earnings, while higher than a lot industries, will rarely be spectacular. My experience tells me that most people at hedge funds are doing just okay - enough to be comfortable, but not enough to quit their jobs for good. And yes, there is a lot of luck involved; for example, Paulson & Co - once considered a genius, now a garnering one-trick pony status.<p>A little message to the intelligent engineers, scientists, mathematicians out there: don't be taken in by the propaganda of the finance industry. The upside is potentially good, but on average, nowhere near as good as you are made to believe (and certainly not worth giving up your passion for). Ditch the hype and focus on contributing something more meaningful to the world - you'll probably be happier and perhaps financially better off!
I work at a hedge fund (as a dev for an average Dev salary). The pay for head manager seems roughly right, and we're 1bn between about five-ten analysts with one making most of the calls. ( I give a range because some are kind of apart from the fund proper, working on starting new funds by building a performance record.<p>I think the article might have some survivors bias, you can't say "I'm going to be a hedge fund trader" and equate that to the average income if you survive thirty years. It's cut throat and people burn out or get unlucky, we need the drop out rate. Also quant funds are getting bigger and must have a pretty different compensation scheme.
Obviously, the numbers vary a lot, but most top tier firms will start you at a minimum of 150-200k usd including bonus the first year. If I had to estimate the median salary growth from there on, I'd guess it to be around 50% a year, with the rate slowing down as you get to 750-1mm. After five years on the job, the median would be around 700k, with the top 10 percentile making more than 2-3mm. At that point, if you're good, you're probably leading a team (or are a senior quant in an all-star team), and your bonus depends almost entirely on performance.<p>An interesting downside to this, especially for young traders who get to the high numbers, is that they often begin to treat their bonuses as a given. Once you make seven figures, it becomes easy to assume that your smarts will ensure financial prosperity for the rest of your life. But bonuses in trading are very volatile - I think of mine like an NFL player's paycheck, rather than a software engineer's salary. Competition from different firms, financial regulation and shifts in market structure often come in the way of long term salary guarantees. Over the years, I've seen that those who survive through thick and thin (well, 'thin' in a strictly relative sense) are the ones genuinely passionate about the intellectual challenges of trading.<p>From Quora:
<a href="https://www.quora.com/How-much-do-traders-at-big-quantitative-hedge-funds-like-Renaissance-or-Two-Sigma-typically-make" rel="nofollow">https://www.quora.com/How-much-do-traders-at-big-quantitativ...</a>
I'm also here to echo the trader != portfolio manager which seems to be described in this article. There's a vast difference in duties and comp between the same job title at a bank, hedge fund, or prop shop and you really cannot look at only comp and job title for comparison. I suspect some data points from hedge funds and prop shops got mixed together. A typical trader at a hedge fund is not making anywhere near the comp claimed in this post and "senior trader" at most places is like giving you a gold star because they didn't want to promote you to portfolio manager.<p>Additionally, 2 and 20 literally does not exist anymore for the vast majority of funds. Downward pressure on fees has been all over the news for the past several years and having the inaccurate data point as well as no mention of recent trends leads me to doubt other data points in this article.<p>The revenue split also makes no sense and does not account for fund size or strategy which has a huge influence on costs.
IMO a lot of the information in this article is suspect. Perhaps the terminology is different in the states, but decision makers tend not to be known as "traders" in the UK: they're portfolio managers. Traders are middle-office guys who handle execution. Secondly, there are very few shops that can charge two and twenty these days. Even in the good days, two and twenty was the 'sticker price', a point at which to begin fee negotiations. Any client with a decent-size ticket would pay less.<p>As a junior / mid-level front office hedgie I made £120k last year. I wouldn't be surprised if my boss made double that. Not a stunning amount, but easily enough to be comfortable and save for the future. Unless you're an equity partner at a hedge fund, that's what you can expect to earn in the uk.<p>The appeal of asset management is mostly about the lifestyle rather than the comp: interesting, varied work, with fifty hour weeks and no weekend work. On a per hour basis, you might do better than someone on the sell side, but those guys work a <i>lot</i> of hours.
Former hedge fund trader here at a big fund: these numbers are correct, but not representative. There are thousands of funds out there. Some huge and killing it, but most are small that aren't. The costs to launch and run a fund are huge, which really eats into the take home of the smaller operations. In large shops, a PM will often take half of what he earns for the manager (i.e. not for the LPs). So if he runs a book of $100m and makes 25% (so $25 pnl), the manager keeps (historically) 20% so $5, of which $2.5 might go to the PM. There are definitely guys who are making tens of millions, and obviously the guys that everyone reads about who are making much more. But the vast majority of front office personnel who are working at funds are making sub $500k/year.
Hedge fund traders get some small percentage of what they earn for their clients. This is not a problem. The problem is that when they fail, their clients lose money, and they don't (yes, there are some career risks, but they are minor).<p>Elementary knowledge of game theory tells us that becoming a hedge fund trader is a great opportunity. Thankfully, now it is easier than ever — just show that you can consistently earn money by trading, and you'll get calls.
Some observations having put some time in on Wall Street between tech stints...<p>1 - There are a lot of jobs a few years out of undergrad or MBA that pay low 6 figures.<p>2 - The hedge fund jobs that are mid to high six figures are much harder to get. It's not "Graduate, sit and wait"<p>3 - Most of the comp is in bonus, and there is tremendous job risk. (Base salaries top out around 100K) If you make $750K for a good year, and then have 2 bad quarters, you're fired without any bonus, and good luck getting the next job due to the weak track record.<p>4 - The industry goes through purges every 6-8 years where masses of people get laid off. (2008 was the last - they're overdue)<p>5 - The industry is cutting employment over time.
Trading/Dealing and portfolio management are two very different functions and this article doesn't begin to touch the distinction. This article is not a good source of information, especially about the current state of the industry
Maybe someone can explain this to me... how is this different than saying that professional athletes are one of the highest paying jobs in the world ? There are a lot of hedge fund traders that blow up and are no longer part of the statistics of these senior guys who are taking in $10 million.
Can anyone shed light on how an machine learning focussed software engineer or data scientist might get a piece of the action? Specifically, how might such a person land a role that has potential to pay say, 300k+ ?
What the article talks about is not a typical hedge fund trader, but a kind of portfolio manager, that's what a prop trader is more like. A trader in a hedge fund is someone who usually earns $200k plus or minus something...but is more in executing trades and such, not coming up with investment ideas (so not that gigantic upside they mentioned there usually).
Here is a visualisation of different assests including Hedge funds which explains the high salaries. Hedge funds are the top of the financial world.
<a href="http://money.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization/" rel="nofollow">http://money.visualcapitalist.com/all-of-the-worlds-money-an...</a>
"can only be used by accredited investors"<p>"3.6% of assets under management"<p>Hold on. Let me take another swig of coffee so I can decorate my screen with it.<p>How can this possibly be true? This would mean that there is some form of accreditation for investing that allows someone to qualify who thinks that a 3.6% fee is a good investment. Who are their investors? Do they know this?<p>I have no special access to the markets (no investor status, no massive sums under management) and I pay no more than 0.07% in fees, in total. Were I resident in the US it would be about 20% less.<p>No wonder they're raking it in.
The comments below point out that the numbers or the math may be right or wrong but one lesson for people choosing a career:<p>1. Industry matters big time!<p>2. Reputation of the teams your on matters big time!<p>3. College (High School..) you go to/went to matters big time!<p>4. Moving industries can be done ... but in the more mature industries (like finance), it's hard to break in 2 years after college.<p>5. College really freaking matters (even if you drop out of Harvard).<p>6. Your humanity must always be top of mind and any of the prior points are swamped by the importance of 'to thine oneself be true'.
I would advise lots of you who have answered here to watch the TV show "Billions", lots of your answers made me immediately think of this show !
I am not sure if the salaries are accurate, but today data is very cheap (just search for stock market data in eBay and you can find 20 years for less than 100 bucks) and with a little python knowledge you can test any trading idea imaginable, passive ETF investing, etc...