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This industry has an entry level salary of $335,000

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Stack of 100 dollar bills.

Hedge fund professionals have seen higher compensation for the third consecutive year, with the average salary for an entry-level analyst at a mid-performing hedge fund totaling $335,000 in 2013, an industry report has found.

Portfolio managers at large hedge funds should also be grinning right now, given that average salaries have reached $2.2 million, the 2014 Glocap Hedge Fund Compensation report, released Thursday found.

The hike in compensation levels was largely the result of an increase in bonuses rather than base salary rates, the report found.

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"Hedge funds' bonus pools were fueled in 2013 by the combination of increased performance fees and additional management fees generated on an increase in investor capital allocations," said Anthony Keizner, head of Glocap's hedge fund practice.

"These larger bonus pools will be passed through this year as higher compensation for key staff," he added.

Entry-level analysts at large firms saw a rise in bonuses between 0 to 10 percent in 2013, while portfolio managers and other senior professionals at large firms saw bonuses ranging from a decrease of 5 percent to an increase of 20 percent.

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The burgeoning pay packets are testament to the thriving global hedge fund industry which the report said had reached record levels of investor capital in 2013, with $2.51 trillion as of the end of the third quarter.

Average compensation across the industry rose between 5 and 10 percent in 2013, the report said, with portfolio managers, senior analysts and risk managers at top performing funds seeing the highest relative increases.

Meanwhile the Hedge Fund Research Weighted Composite Index - an index designed to represent the whole hedge fund industry - rose 5.5 percent year to date, while the percentage of hedge funds which reached their high watermarks - a set performance level a manager must reach before receiving a bonus - rose to 62 percent year-to-date through to September, compared with 48.4 percent last year.

Hiring was also increasing, the report found, and as a result qualified candidates more frequently received multiple offers and the duration of job searches (from posting to filling the role) had become shorter.

(Read More: Asian hedge funds shine in stellar month for industry)

There was a trend among large hedge funds of hiring managers who had experience managing portfolios during the crisis periods of 2008 and 2011, to show they can weather market downturns. In addition, hiring managers were also more likely to require candidates to show an ability to generate performance without overexposure to risk, as risk limits continue to tighten, the report said.

Factors which impinged on further pay increases in the hedge fund industry were a decline in compensation levels in the banking industry and a flat compensation environment in private equity.

The report was compiled by executive search firm Glocap and data provider Hedge Fund Research.

(Read More: Singapore-based bankers have high hopes for bonuses)

—By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie

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