Hi,
I thought it would make sense to compile payout terms and drawdown limits for the major multistrats in one place, rather than scattering through different posts. If you know (directly) of terms for PM's in different asset classes, post below and I will keep a list up here. Everyone's deal is a bit different, but figure having some samples should help us all in terms of targeting/navigating opportunties and negotiating.
I'll start:
Millennium macro - 18% payout; 2.5 / 5 / 7% risk thresholds
| Best Public Markets Gig? ER, MM HF, SM HF, or LO AM? | 13 | 2d | ||
| +42 | How to start a family office (HF rainmaker) | 17 | 22h | |
| +34 | Law to Quant Pivot? | 10 | 1d | |
| +20 | People who work at hedge funds, what made you interested initially? | 13 | 10h | |
| +20 | How to destress at Pod HF? | 8 | 4h | |
| +19 | Hedge Fund WLB | 6 | 22h | |
| +19 | HF Final Round Interview | 4 | 4d | |
| +17 | Most appealing public credit seats out of RX? | 1 | 4d | |
| +16 | good fundamentals, bad chart | 8 | 1d | |
| +16 | Which Funds focus on timing the broad market rather than L/S individual equities? | 10 | 12h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Balyasny macro: 16% payout, 1/5/10% risk thresholds
For the noobs among us: what does this mean? Payout as a % of what? Are thresholds related to losses that trigger drawdowns for PMs?
Payout as a % of PnL. So generate $10M on a $100M book, get ~$1.6M bonus (base is covered by ~$1M or so provided for expenses). Maximum daily var is 1%, 5% drawdown gets half your capital pooled, 10% and its game over.
Don't do macro so I have no idea, but risk limits seem harsh. Don't think you can put up great numbers under those conditions, but your numbers don't need to be incredible for you to get paid well.
[]
Two more relevant parameters are: a) costs/hurdle return; and b) duration of the clawback, if any. I think most large multistrat funds (e.g. Brevan, etc) out there are similar to Millennium payout structure, give or take a couple of percent and other small variances. Bluecrest is an exception, as I understand it, as their approach to risk is quite a bit more draconian.
Obviously, there are other ways to skin this cat and some large funds out there operate differently. Reason being that, to some people, it doesn't make sense to do proper macro with 10% drawdown limits and extreme focus on risk management.
^^can you expand on your comment about bluecrest?
From what I've heard, their "serious" drawdown thresholds are around 3%.
i asked a friend of mine who works out of london and he says its 4 1/2 - little better, but still lower than other competitive multistrats.
May I know what's the minimum return that one has to meet in these firms?
anybody have numbers for Tudor?
Throwing another question in the mix - what is the minimum amount of capital your strategy should be able to handle while still hitting the target % return? $100mm, $500mm, $1bn+?
mrmarket, is this VaR limit based on daily 99% VaR or daily 95% VaR ?
Would love to hear more about equity L/S terms as well if anybody can share.
I think it’s pretty well known that MLP offers 20% payout with no deferred so if you are getting less you left some on the table.
I’ve heard Exodus offering 25-30% for the first year in lieu of guaranteed bonus
There is a ton of variance around the deal you get depending on your situation and perceived ability. For Senior PM the structure is usually as follows: note that sub PM is totally different and you have limited to no leverage
1) Payout: Most relevant thing, but clearly not all that matters. Can be 15-25 %. Depending on factors. 20% is a really good deal, getting over 25% is usually for some limited period of time and has a Sharpe hurdle of 2. Only really attainable if a firm wants to move you and you're already getting 20% or something like that.
2) AUM: Can be relevant but risk capital is fake and they can change the terms on you anytime. But keep in mind that if you succeed they will push capital on you, so really your payout is more important as it is a lot harder to make $s in a MM context than % contrary to the totally uninformed people on this forum. You will never understand this until you manage a portfolio.
3) Fees: can be gross or net. This is really where you need to be careful and places can and do screw you. Citadel is famous for it and really how they make most of their money. They take 15% gross payouts down to 8% net after nickel and diming you on everything. A good deal and that same 15% can be 14% net. Also really important for if you want a team. Places like bluecrest don't have investors and only do net fees
4) non-compete period. Self explanatory but a good deal is 6 months. Also bonus structure, it is possible to get 100% cash payouts no claw back. If a place is deferring your comp, you never made the money. Pretty self explanatory unless you work forever.
5) Drawdown. Usually structured as % loss, capital cut in half, % loss again and you're out. How contractual this is varies tremendously, so I'm not even going to mention it. The difference with firms is how they credit you for pnl in setting subsequent drawdowns. Some firms it is from 0, most is not with a partial credit like 25-50%.so yes, you can theoretically stop out with positive pnl, but I have never seen it.
6) do you want to start a fund? What did you sign away on capacity and equity?
I'm not sure how much to post on individual firms, but I can tell you what is a good deal and a bad deal.
1) For quant strategies, how long does the MM give you to build out trading infrastructure before demanding returns?
2) I think a lot of quants are worried about the MM raiding their computers to find the strategies and then firing them. How do quants protect against this?
3) Can you negotiate with a MM to keep your intellectual property? How does that go?
4) Some MM's agree that you can keep your intellectual property. Do you get a lower payout b/c of this?
You need to negotiate it.
Yeah, can only echo this - if we distill it all to a couple of basic variables you want a mix that is comfortable to your style between PnL cut and risk limits. The rest falls into the “devil is in the details” bucket.
Out of curiosity, whats the best place nowadays in your opinion for quant equity PM in terms of not being screwed out and having good deal in general?
what about schoenfeld's quant multi manager?
Lots of good information here. Agreed that Citadel has much lower payouts though I’ve heard that it’s because they give you huge books to run rather than nickel and diming you. So while MLP might give you 200mm starter book at 20% payout, Citadel will give you 1bn at 10%. Citadel is also more friendly to risk takers, eg looser drawdown limits.
Also, getting a PM title at citadel is serious business, like you have to show that you are capable of generating 50mm of annual pnl. Most other MM platforms will take a shot if you can show 5-10mm of pnl
Correct, It is my view that Citadel is best as a "last stop" in your career, since they will let you take massive amounts of less idiosyncratic types of risk even recklessly. You can extract maximum value from the traders option that other places will not let you do - nickle and diming you is definitely a thing though.
For equity guys, the other thing you need to watch out for is "Hedge Fund 2.0", which basically means that instead of increasing your AUM, they will run a shadow book behind you and not pay you for it. If it is a centralized execution type place, they will even execute ahead of you.
Some PMs will nickle-and-dime associates/analysts for bloomberg or whatever when the bonus time comes around... beware of those
Is 1bn book considered an average size across all pods at Citadel ? Any knowledge on this ? What's the largest book there that anyone has heard of?
Citadel payout is not 10%
This thread was needed for those who want to go into the HF space.
Thank you for clarifying
mrmarket, is this VaR limit based on daily 99% VaR or daily 95% VaR ?
Any insight on schonfeld advisors pay? Point72 PM pay today?
Bump
Bump
A upcoming eq l/s pm told me that p72 does not have a VaR limit. Is that even possible? I’m a macro PM, there is no way VaR limit doesn’t exist for macro strategy.
Can confirm a macro var limit
Are VAR models across platforms pretty consistent or do they all have different in house models? Wondering about derivatives. Are there opportunities to test their VAR calculations or do you find out when you start trading?
Everyone uses JPM RiskMetrics
Bluecrest offers higher payouts than most on the street. 20% is normal, 30% not uncommon, 50% for a select few superstars with capacity constrained strategies to incentive them to stay and not accept a large upfront bonus from Millennium. As mentioned earlier by others they do make you defer some of your comp.
At Bluecrest the payout is also more efficient as there isn’t the crazy high seat cost found (expenses for the desk such as Bloomberg, data feeds etc.) like at Citadel, Baly etc.
Voluptas soluta impedit quae porro est non et magnam. Nesciunt sunt sequi aperiam. Accusamus hic dignissimos laborum harum sit. Ut dolores ad voluptatum et. Non perspiciatis eum est culpa distinctio.
Nihil provident voluptatem laudantium voluptates ut repellendus sint. Nemo et deserunt commodi ut est. Suscipit doloribus error odio. Necessitatibus sunt quaerat error enim libero est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ut est voluptates tempore quia commodi. Commodi ut saepe aut at. Deleniti illum in in sunt iusto exercitationem occaecati. Impedit consequuntur consequatur quas.
Cumque qui in earum reprehenderit aut. Quae et dolore voluptatum ut et. Sed accusamus ratione deserunt cum sed. Enim qui aut qui culpa et ut.
Facilis sit unde veniam hic laudantium debitis velit exercitationem. Saepe consequatur nemo est. Aut quia harum dolorem nobis ducimus vero nulla. Qui consequatur vitae placeat voluptatem ipsam non tenetur veritatis.