Hedge funds are suddenly doing ok: returns are up, redemptions are down and they’ve had the best start to the year in a decade. Unfortunately this does not mean that they will be paying large bonuses.

Following closely on from last year’s disastrous performance, many hedge funds are still below the high water mark at which they can charge the 20% performance fees that become bonuses. Deprived of these, they’re having to make do with 2% management fees, which are themselves being compressed to 1.5%

None of this is good news for people hoping to get rich at established funds. “A lot of people are just deciding to give up and sit on beaches,” says John Godden at hedge fund consultancy IGS Group.

Examples of such behaviour apparently include Julian Barnett, who left hedge fund Polar Capital earlier this year for ‘family reasons.’

Instead of hanging on until the high water mark is reached and performance fees are available again, junior traders are leaving established funds and joining new set-ups without high watermark issues.

“Some managers are calculating that it could take 1-2 years to recover and they’re therefore better off jumping ship and setting up at a new fund that can afford to pay them,” says Christopher Miller, chief executive of Allenbridge HedgeInfo.