Hey guys, I was just thinking about the typical pay structure of hedge funds and how our performance fee generally have a high water mark. So i'd assume all the salary and op ex costs should be covered by the management fee. But are some of the bonuses covered by management fees as well, or is it all from performance fee (i.e. don't reach water mark, no performance fee so no bonuses from anyone)? Thanks in advance.
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I don't work for a HF but if I had to guess I would say that the bonus / comp structure is such that the fund will pay out the least amount of money possible to have its employees not leave regardless of a good year or bad year.
Edit: Only slightly sarcastic.
bill murray is the fucking man...sb for you
Depends. Usually there's some bit of bonus held out in the management fee depending on how much fixed and other costs were, but most of the variation is going to come from however big the performance fee is. PMs and other money guys are going to get a % of the performance fee or something based on how large it is, and the discretionary bonuses for analysts are going to be more or less based on how well the firm did too, so there's that. But at the end of the day, you can't give your analysts goose eggs if their base salary is $100K just because you had an off year or maybe they entered while you were well below the high water mark and you had a good year. In short, yes, some will come from management fee most of the time.
As always thanks for the good info BH. I assumed the lower lvl will get it out of management fee while PMs and such would get chunk of it from performance fee but wasn't exactly sure how much of the overhead the management fee covered considering performance fee is like 40-60% of the total take home revenue given the firm is over the water mark.
Comp volatility increases as you get more senior
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