Bonuses and bonus etiquette
Quick question on bonus etiquette.... Obviously we all have a number in our head when it comes to finding out the number at bonus time.
However, if the number is a long way from what you think it should be, should you speak up at the time of finding out. Or, gracefully say thank you and save the discussion for another day because ultimately any discussion isn't going to change the number but it would let my feelings be known.
I'm a buysider at a hedge fund and relatively junior, but over the last year have made a significant contribution trading very specific areas of credit, think High 7 digits , low 8 digit PnL but I fear because my boss is from a BB trading background he may try and apply the analyst comp structure and as a result I could end up getting low balled quite badly. I know his argument will be that my PnL wouldn't have been possible without his blessing and that is the way the industry works.
Any input is much appreciated.
i) depends on your contract, most likely says discretionary if junior, but they prob gave you rough guidance pre signing what total comp per CY looks like ii) depends on size of shop: the smaller the more leeway on jr level iii) if you want to stay long-term, rather take one for team/PM in 1st year, else ask for more based on solid facts (PnL contribution, what peers in space get paid etc)
Interested to hear how you were able to generate that much p/l given what I imagine are low risk limits (as a junior person)...
Thanks for the reply, it worked out ok so no need to have to flag anything. Made my life easier.
bump - curious about etiquette in general.
Gray Fox tempaccount ke18sb are all hedgies, they can probably help better than anyone so far.
It's honestly impossible to answer this question without knowing your firm, your role, etc.
That said, let's say you are in a situation where you actually have some leverage - i.e. good relationships on the street, source some of your own ideas, vocal/respected in meetings, push through ideas that generated returns that you had to navigate some initial internal push back, etc. In those situations I think you should be more direct with the PM in what you think you're worth. Have a list of reasons such as, AUM has grown this much, my investments made this much, I help build these relationships, trains these jr people, etc. If he is worried about losing you then you'll get paid.
However, if you are just a jr. guy without much leverage, I kinda like what KennyPowers said in saying you'd like to make X next year and how do I get there.
Ultimately if you think you can get your number at a different firm then go an get it. If you can't than you likely won't get it where you're at.
The reality is a boss, regardless of industry, tries to pays his people just enough not to quite, not necessarily what they "deserve".
That's why it's always good to have your quitting hat on...one foot out the door at all times...narrow the gap between "what you need to stay" and "what you are worth"
It's tough to really know much about what would be a reasonable # given the info you've given. As a thought exercise let's say you generated 10mm of PNL in excess of base mgmt fee drag. At 20% incentive fee, that's worth $2mm to the GP. That's all well and good, but still: a) Was that incremental PNL (ie better ROIC than if they'd just put it in other positions)? b) How much capital did that take to generate and how big is the firm? The reality is that after a certain point the payout %/ratio (especially for jr people) stops scaling. c) Was that PNL really "YOUR" PNL/your trade etc? Unclear if you're an analyst/trader or what but, right or wrong, there are often multiple hands on PNL at funds (especially if there's not a crystal-clear policy on what "goes where") d) How junior are you?
Anyway setting aside what you SHOULD expect, here's how I would handle something that comes in below expectations: Say thanks, and that you appreciate all the learning opportunities but you had expected more (I would avoid putting out a specific # for your expectations). Have a few qualitative and quantitative arguments for your contributions. Keep it calm and rationale. Depending on how they respond (and assuming they don't come back with a bettter #), say something along the lines of "Ok, well my goal for next year is x; what do you want to see from me to get there?"
I think that in general it's better to have these conversations while the iron is still hot and everyone's mind is on the exact #s. Bringing it up later on in the year (even like a month later) can either feel like griping about the past, or can be brushed off as "well it's only April so forget about even thinking about it."
This is all dependent on a lot of nuanced specifics about you, your boss, the firm, etc of course.
+1 sir. Insightful; especially, "what do you want to see from me to get there?"
my general experience has been don't act happy when you're not, and if people make you unhappy more than 1 year in a row (after you have expressed your displeasure) get the fuck out of dodge. life is too short and there are plenty of funds who will pay you if you can generate real money
Worked out about 3pc of pnl.
I would not complain until you get your ducks in a row. At the day of the bonus simply smile and nod and take your check. Collect your thoughts over a few days, and then come back with a calm and reasoned argument about why you deserved more. Be careful not to make it an ultimatum...you still have no cards to play so don't go crazy. If the result of this conversation is not satisfactory begin looking for other jobs. This usually takes months. Once you have something in hand then, and only then, come back with a firmer "demand" or ultimatum of what you need to be paid going forward. Do not mention that you have anything else lined up, just be much more aggressive. If they don't budge at that point you need to decide whether or not to leave.
I followed this blueprint and it worked well....patience is key, a few months is meaningless in the big picture but storming into the office like a hot head could really mess things up for you.
How exactly did you sequence that? Did you get a firm offer in hand, then tell them (the new job) you needed a week to think on it? Get multiple offers? etc.
What sort of concessions did you get from your current employer? True-up for last year, guarantee for next year/going fwd, promises of % of PNL, etc? Or softer "we'll do better" next time?
Would love to hear perspective from others who've had these convos as well if anyone has a view to share
Bonus Etiquette (Originally Posted: 04/20/2014)
jj
Is your contact for just two years? A lot of PE firms pay their pre-MBAs on an annual basis which is off-cycle from the rest of the company, particularly if it is a limited time commitment. Expect to discuss it in your annual review. I wouldn't be surprised if your contact was a template form they use for all employees which they didn't adjust to your particular circumstances.
That said -- I could be completely wrong. It would also be customary for them to give you a stub bonus (partial for Sept - Dec) to get you onto the annual cycle that everyone else is on. I'm surprised that you've heard absolutely nothing.
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