This is a milestone year for the Hedge Fund Compensation Report—one that marks our tenth year of publication. As a result, we have had the unique opportunity to analyze the subtleties of hedge fund compensation both before and after the financial crisis.

Unfortunately, this also marks the third straight year we report on a hedge fund industry mired in under performance. The woes facing the hedge fund industry are compounded this year, reaching beyond performance, and creeping into fund raising and industry expansion. This year is witness to net negative asset flows as high profile investors redeem, and actual reductions in the number of hedge fund firms as firm closures outpace new starts.

Despite these factors, 53 percent of those responding to our survey are expecting higher overall earnings in 2016 as compared to 2015. This optimism continues with respect to bonus pay. However, this optimism is tempered by greater alignment with performance factors than we have seen in prior years.

Speaking of performance, 72 percent of our respondents are expecting their firms to be in positive gain territory this year, which is 3 percentage points below what we reported last year. To put this in perspective, in 2013, 90 percent of our respondents reported working in firms with positive gains and 18 percent of those expected gains of 25 percent or more. This year, 5 percent of our respondents expected their firm to enjoy gains of 25 percent or greater, an uptick of just 1 percentage point from last year.

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