Global hedge fund and investor survey 2012
Managers and investors have made little progress in reconciling differences regarding compensation structure – and in many ways they are drifting further apart.
Differences between managers and investors regarding compensation are not new. In this year's survey, we specifically wanted to learn whether there had been any reconciliation between the two groups.
The short answer is that they have made little progress – and in many ways seem to be drifting further apart. Remarkably, these differences have not caused material redemptions, nor do investors cite them as key considerations for choosing a fund.
In 2010, nearly all managers (94%) felt risk and performance were effectively aligned with investor objectives; only half of investors felt the same way (source: Restoring the Balance, EY's 2010 survey of the global hedge fund market). In 2012, 87% of managers feel this is true, while 42% of investors agree. Clearly, attitudes in this area remain divided.
Regarding compensation types, nearly 75% of senior executives' compensation is paid in cash – a similar proportion to that in 2010. By contrast, investors say less than 40% should be cash, with a large portion paid in equity and deferred cash (three years or more), subject to clawbacks.