Financial fashions - much like clothing or musical ones - come and go, some seeming as enduring and meaningful as a Kylie Minogue song or a single by the latest boyband. Yet the cult of the hedge fund is very much with us, despite a wave of negative publicity, warnings about the lack of regulation and recent concerns about under-performance. Few have benefited from this as much as the hedge fund salesperson.
'Senior hedge fund sales people are the most sought after marketers in fixed income,' says Shaun Springer of search firm Napier Scott. He says that hedge fund salespeople typically have more technical knowledge than other salespeople in financial markets, with many coming from a trading background in credit funds. Many also cover proprietary trading desks.
Richard Fraser of RJF Global Search agrees, noting that hedge funds are continuing to grow in popularity, with investment banks responding to the high demand by strengthening their hedge fund teams. On the sales side this means having sales desks with individuals focusing in underlying credit, structured products, foreign exchange, equity, commodities and derivatives.
So what sort of individual typically thrives as a hedge fund salesperson? A good understanding of the industry is a must, which means strong technical knowledge and a strong head for figures. Contacts are a must: despite recent growth the industry is relatively small and knowing the right people in the right institutions, in the US as well as within Europe, is critical to getting ahead.
"A salesman's personal client contact book will be their greatest asset as they typically earn management/performance fees of between 1 and 3%," says Jeremy Canning of recruiter Morgan McKinley.
For hedge fund salespeople in fixed income, Fraser says an 'excellent knowledge of both high grade and high yield from cash bonds to derivatives and structured products including correlation trading, ABS and CDOs is required.'
Springer suggests the other main attribute for getting ahead is having a reputation for being trustworthy. 'Most hedge fund managers are former traders, so they prefer to be covered by people they know and trust who can provide them with a premium service,' he says.
The individual who can offer all this and an excellent track record to boot can expect to be royally compensated. Fraser and Springer suggest the typical salesperson at this high a level would be sitting on a basic of around 100,000 with a bonus running up to 500% - which means in a good year, walking away with a cool half million. Pounds sterling.
'Successful salespeople command exceptional packages since there are few individuals who can generate significant revenue,' says Springer, adding that like all sales roles, individuals are paid on performance. He adds that the top 5% can be expected to produce in excess of 20 million and will be rewarded accordingly, sometimes above the standard 10% of P&L.
Canning says remuneration strongly reflects performance. "A top-tier hedge fund salesman can earn between 90,000-120,000 basic, with a total compensation package of 250,000-350,000. Mid-tier performers are more likely to take home around 100,000-200,000, with a basic salary of 50,000-80,000. High performers are more likely to opt for high bonus content," he says.
The good news is that hiring continues despite the continuing evidence that hedge funds are not performing as well as in 2002/03. UBS, Dresdner and Lehman Brothers in particular are on the lookout for high quality individuals. And that suggests the fashion for hedge funds looks set to be rather more enduring than the latest here-today-gone-tomorrow boyband.
Figures and commentary by Napier Scott, Morgan McKinley and RJF Global Search