First, the $50m pay packets. Now, the backlash. Ever since hedge fund Eisler Capital Management announced its closure last month following a 33% increase in compensation spending in a year, hedge funds’ generosity to their people has been under scrutiny. One fund, however, seems to have perfected the art of keeping its human costs under tight control.
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That fund is Qube Research & Technologies (QRT) the quantitative hedge fund that’s spent the past few years accumulating employees and assets under management. QRT didn’t respond to a request to comment for this article, but Bloomberg noted earlier this year that it had expanded to employ 1,400 people with $28bn of heavily leveraged assets under management.
That makes it a significant employer in the hedge fund space. Millennium, Citadel, Balyasny and Point 72 each employ more people, but most funds employ far fewer. Eisler Capital was only up to around 300 people when it announced its demise.
At Qube, though, insiders say they’re paid differently to rivals at other funds. This makes it easier to keep a handle on costs. And it’s understood to be a significant factor in the firm’s success.
Much like Jane Street, it’s understood that Qube gives many of its employees limited visibility on their personal P&L. Whereas most hedge funds pay bonuses that are a formulaic 20%+ of profits generated by portfolio managers, Qube doesn’t operate that way. Bonuses there are understood to be discretionary and linked to the performance of the fund as a whole.
We’ve reported on this before, but as Qube grows, its compensation structure is attracting more attention. Insiders say the fund’s focus is its large team of quants. Only around 10% of Qube’s employees are understood to be actual portfolio managers, but the firm is growing a team of fundamental analysts.
Members of these investment teams say their role is to generate trading strategies that are then coded into Qube’s systems. Once a small amount of initial capital has been invested and those strategies have been reviewed and back-tested, they say that members of Qube’s allocation teams assign more money to the strategy from a central fund. “Your strategy is coded into the system and you then lack visibility on how much PnL has been generated,” claims one insider.
When you work in an investment role at the fund, he says your main function is to generate a relentless flow of investment ideas. “You are measured more on how many strategies and signals you find in a month rather than on how much PnL you produce,” he claims. One strategy might be combined with another, making everything a group effort.
This means that Qube is more collaborative than rival funds. It also means that the firm has been able to keep a lid on compensation. Qube still pays well: the average UK employee there earned £722k ($963k) in 2024, but compensation costs were only 38% of revenues. That compares to average pay of $1.1m a head at Eisler, where compensation accounted for 80% of revenues last year.
Qube’s discretionary bonuses are also heavily deferred. Deferred bonuses are invested in the firm’s own fund, which generated returns in excess of 30% in 2024. Until recently, the firm didn’t charge its employees the hefty 25%-30% fees it charges investors for this privilege, but that changed in September.
One quant, who’s worked for the fund, says Qube’s compensation structure means it’s heavily aligned to the interests of investors instead of those of demanding individual portfolio managers. “Qube have created a business model that’s less about individuals and more like a machine,” he tells us. “It’s like the Taylorism of investing: divide the process into different steps; the person responsible for one step hasn’t got visibility on the full investment process.”
He says this works because it means Qube isn’t at the mercy of the big egos with the big pay demands. “At many hedge funds, there are too many risk-takers who are overpaid for low value-add. At Qube, they prefer to have three low paid individuals rather than one highly paid person. If someone leaves, they can then hire a new person cheaply and have them trained up by the other two…”
While this might sound great for Qube, it sounds less appealing for people who work there. However, very few people seem to leave. “It’s less cutthroat than a lot of places,” reflects one ex-employee. This may also be related to some long notice periods, though.
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