At fast-growing quant hedge fund, some queries over pay

If there's one hedge fund that has expanded fast in recent years, it's Qube Research and Technologies (QRT). We reported on its most recent hire, from Citadel in Asia, only yesterday, but he's far from the only one. From diminutive beginnings, first at SocGen and then at Credit Suisse, QRT has expanded to employ 1,400 staff globally and to have $23bn of assets under management. Last year, the fund generated returns well in excess of 30%. Bloomberg says it aspires to have $30bn in AUM, so more recruits are presumably on the way.

As Qube expands, though, some of its existing hires are grumbling. Their gripe? Pay.

Given that the 526 UK-based employees at Qube Research and Technologies were paid a total of £314m in 2023 (the last year for which accounts are available), or an average of £597k each, these gripes may seem churlish. However, pay is never allocated equally in hedge funds and the way that Qube distributes its compensation appears to be the source of the complaints.

Unlike most funds, which offer a 20% or so formulaic cut of individual profits, Qube's bonuses are not based on individual performance and are discretionary. The fund says this fosters a collaborative environment instead of one in which people work in isolation for their own gains. However, insiders who claim to have generated the gains say they're hard done by. 

"It's supposed to be communism where everyone is collaborative and shares the profits, but my pay is very low," says one insider who claims allocations lack visibility. "- This is the worst I've been paid in my career." Unconfirmed reports from several sources suggest the profit share can be as low as 3%. Some insist their efforts merited more. Qube would argue that they did not and that most people there are well paid and happy.

Qube isn't the only quant-focused employer to pay discretionary bonuses. Jane Street has a similar ethos and is known to pay very well indeed. As at Jane Street, comparatively few Qube employees are stereotypically front office with most working in technology and quant research-type roles. Bloomberg says only 10% of employees at Qube are portfolio managers. 

Many at Qube also have their bonuses deferred. The proportion of deferrals varies according to role and seniority, but some claim that at the top end only 25% of bonuses are paid in cash and that 75% are deferred over three years. Many of these deferrals are reinvested in Qube's own funds, with the potential of earning high returns. However, individuals who want to leave say that they are effectively locked in and that this is one reason for Qube's low staff turnover. Like many other funds, Qube also imposes a combined non-compete and notice periods that can extend to over a year. Insiders say this has increased in recent years and adds to the difficulty of getting out. 

Qube disputes these claims. It has one of the lowest staff turnover rates in the industry and says people don't leave simply because it's a great place to work with high pay that's benchmarked to industry norms, and that the complainants are a minority. Some people do indeed seem happy there. Naysayers suggest the happiest of all are the small group of founders who are the main beneficiaries of the fund's high profitability. 

Photo by Jon Tyson on Unsplash

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