Hedge funds in talent war, offering $100 million pay packages to top managers: Report

These massive compensation deals are largely financed through pass-through fees charged to clients, covering not just salaries but also operational costs.

Billionaire investor Steve Cohen and his firm Point72 recently engaged in a high-stakes bidding war with rival hedge fund giants to secure Kevin Liu, a young and highly sought-after stock picker, according to a report by Wall Street Journal.

Liu worked at Marshall Wace for about eight years, most recently as a portfolio manager focused on global TMT and before that, worked at Morgan Stanley, his LinkedIn profile shows. Point72’s pricey hire is the latest sign of a raging talent war among the biggest multistrategy hedge funds, with many traders opting for a signing bonus at a giant firm rather than starting their own fund.

Point72 had about $36.9 billion in assets under management as of Jan. 1, according to its website.

Liu, known for his strong performance trading tech stocks at Marshall Wace, drew offers from top firms including Citadel, Millennium Management, and Balyasny Asset Management. The competition for his talent became so intense that one insider compared it to a high-profile art auction. Ultimately, Cohen secured Liu with a lucrative five-year deal worth tens of millions of dollars, sweetened with a personal dinner and mentorship offer.

This battle reflects a broader trend in the hedge fund industry, where elite portfolio managers can now command compensation packages exceeding $100 million over several years. These massive offers are driven by intense competition among “multimanager” hedge funds—large firms composed of semi-independent teams managing vast sums of capital. With more capital than ever flowing into these funds, the pressure to find skilled traders capable of managing multibillion-dollar books has reached unprecedented levels.

High-profile fund founders are increasingly getting involved in recruitment efforts, offering personal gestures to court top talent. Dmitry Balyasny, for instance, has taken candidates for mountain bike rides or games of pickleball in Central Park. At Point72, Cohen, who has traditionally focused on nurturing talent internally, made an exception for Liu, recognizing the value of securing an already proven star.

These massive compensation deals are largely financed through pass-through fees charged to clients, covering not just salaries but also operational costs. According to Barclays, some of the top funds charged pass-through fees as high as 8% of assets last year—far above the traditional 2% management fee and separate from the standard 20% performance cut.

Yet, questions remain about the sustainability of these sky-high payouts. Ilana Weinstein, CEO of hedge fund recruiting firm IDW Group, noted that unless these highly paid managers deliver consistently strong returns, such aggressive compensation structures could undermine long-term performance and profitability.

*With Agency Inputs