Fresh data suggests that hedge fund managers’ earnings have been hit by unruly markets this year, with compensation falling on average by 10 per cent across varied roles in 2011, according to new research.

Compensation, however, varies widely between and inside firms, driven by the roles, seniority, experience, fund size and investment performances of funds, according to the 2012 edition of the Glocap Hedge Fund Compensation Report.

More positively, the total hedge fund industry surpassed previous record levels of total capital under management in both the first and second quarters of this year, reaching $2.04 trillion, before declining sharply in the third quarter as performance deteriorated sharply, according to figures from Chicago-based Hedge Fund Research.

Performance in the latest three-month period was the fourth worst figure in the industry’s history, with the HFRI Fund Weighted Composite declining by 6.2 per cent, HFR said.

 The growth in assets under management led to an increase in overall management fee income that partially offset the decrease in incentive fee income, however. Also, despite the weak third-quarter performance, the percentage of funds reaching their performance high watermarks in the trailing 12 months continued to rise, exceeding 70 per cent as of the end of the third quarter, which further stabilized the pool of income available for compensation.

The decline in compensation was not evenly distributed across roles and fund types. Mid-to junior level investment professionals experienced year over year compensation changes ranging from increases of +7 per cent to declines of -10 per cent, with fund performance the most significant variable.

Senior investment professionals, who have greater ability to influence fund performance and a greater component of incentive income, experienced a wider range of compensation in 2011, from flat year over year to declines of 30 per cent.

Professionals in operations, including marketing, client service, accounting and compliance generally experienced flat to modest increases in compensation, the report said.

Glocap is an investment management executive search firm based in the US. It has been tracking compensation systematically since its creation in 1997 and has a database of more than 500,000 professionals in the industry.