In a move that highlights the rising cost of attracting top-tier technology and quantitative talent, hedge fund giant Marshall Wace has informed clients that it will begin passing on a range of personnel-related expenses tied to artificial intelligence, systematic trading, and risk management roles. The London-based firm, which manages roughly $82 billion, said the new charges will apply to investors in its systematic TOPS funds beginning January 1, according to details shared in a recent investor communication.
This decision is one of the clearest signs that hedge funds, especially those heavily dependent on quantitative and machine-learning strategies, are facing unprecedented cost pressures as they compete intensely for data scientists, machine-learning engineers, and risk professionals. While multistrategy hedge funds usually pass on operating expenses to clients, this is rarely seen with long-short equity firms like Marshall Wace.
A Rare Shift in Cost Structure for a Major Equity Hedge Fund
Marshall Wace framed this change as necessary to maintain its competitive advantage. They told clients that hiring and retaining “people of the highest caliber” is crucial for the evolution of its investment strategies. The firm emphasized that the technology and data infrastructure supporting the TOPS system—a model that generates trading signals from thousands of contributors-relies more and more on advanced AI and machine-learning capabilities.
Maintaining this infrastructure requires specialized talent whose skills are in high demand in the global labor market. Since these roles are now vital to the fund’s performance, the company said clients should cover part of those costs in addition to the usual management and performance fees.
The new charges will encompass a wide range of expenses related to technology, trading, and risk personnel. This includes base salaries, performance bonuses, recruiting costs, signing and retention bonuses, payroll taxes, and benefits like medical and disability insurance. The fee will also cover costs for external consultants and advisers working on related functions.
AI Talent War Intensifies Across the Hedge Fund Sector
The rush for artificial intelligence and quantitative expertise is changing cost structures across global hedge funds. Roles once seen as “back office,” such as risk engineers and cloud infrastructure specialists, are now considered central to strategy development. Compensation packages have surged, and hedge funds compete directly with major tech companies for talent.
Bartt Kellermann, CEO and founder of Battle of the Quants, stated that attracting elite talent has become more expensive than ever. “There is a real talent war that keeps heating up because technology changes so quickly,” he said. “It’s not unusual to see starting salaries for top-notch quant researchers exceeding $1 million.”
Firms like Viking Global Investors, which recently introduced its AI chatbot “VikingGPT,” are rapidly expanding their internal machine-learning capabilities. Others, including Citadel, DE Shaw, and Two Sigma, are known for offering competitive compensation packages to data scientists and quantitative researchers.
In this context, personnel costs have become some of the largest and fastest-growing expenses for hedge funds using systematic and AI-driven strategies. For certain multistrategy platforms, total compensation for a high-performing team can go beyond hundreds of millions of dollars in a single year.
Clients Expected to Shoulder $35–$40 Million in New Costs
A source familiar with the situation noted that Marshall Wace expects to pass through $35 million to $40 million in talent-related expenses next year. For investors in the TOPS strategy, this means about 0.09% of the fund’s assets under management. While this percentage is relatively modest, the shift represents a larger trend of hedge fund operational costs being shifted directly onto clients.
This decision is significant because Marshall Wace is not a multistrategy platform—where cost pass-through has long been standard—but a long-short equity manager recognized for its sophisticated systematic strategies.
The firm stressed that these changes are essential for meeting the growing technical demands of quantitative investing. As AI and large language models become more integrated into portfolio construction, signal generation, and execution algorithms, the demand for high-performing technical teams has increased significantly.
TOPS Strategy Shows Solid Performance Amid Rising Complexity
Marshall Wace’s TOPS strategy, which manages roughly $48 billion, uses a proprietary system to aggregate and analyze input from numerous market participants, converting their insights into systematic trading signals. This hybrid approach—combining human market intelligence and computer-driven models—requires strong technological support, which the firm states is now inseparable from AI and machine learning innovation.
The Market Neutral TOPS fund, one of the firm’s flagship offerings, has shown strong results in recent years. It increased nearly 15% in 2025 through October, following a 23% gain in 2024, demonstrating the strategy’s ability to navigate volatile markets and benefit from the growing sophistication of its quantitative framework.
Given this performance path, the firm argues that investing in top talent and technological capability is essential for maintaining returns. The personnel costs passed on to investors are seen as an investment in preserving and boosting the strategy’s edge.
Not the First Time Fees Have Shifted to Investors
While this represents a notable change for the TOPS funds, the practice isn’t entirely new at Marshall Wace. Two years ago, the firm asked investors in its Eureka fund to cover recruitment and bonus expenses. However, those costs were capped at 0.75% of fund value, with Marshall Wace taking on any excess.
This time, no cap exists for TOPS, meaning clients will pay for the full amount of personnel-related costs without a predefined limit.
The lack of a cap suggests rising confidence from the firm that its performance history and reputation can support this change, even as investors across the hedge fund sector become more sensitive to fee structures and pass-through expenses.
Hedge Funds Brace for a New Cost Reality
Marshall Wace’s decision highlights a broader shift underway across the asset management sector: advanced AI capabilities are now essential for gaining a competitive edge. Building and maintaining these capabilities requires significant investment—not only in technology but also in the people capable of designing, training, and scaling complex models.
As the race for AI expertise intensifies, more hedge funds may follow Marshall Wace’s example by passing these costs directly to clients. Investors will then need to consider whether advanced systematic strategies—and their potential to generate returns—justify the additional costs.
For now, the message from Marshall Wace is clear: the future of systematic investing relies on top-tier AI talent, and the cost of acquiring it is something clients must share.
