1/10/17

Hello - I have my year end review coming up at the end of the week and wanted to get some different points of view on how to think about my range.

For background: I work at a ~10B MM fund. I have been on my team for nearly 3 years, I have a good relationship with my PM, and we had a very strong 2016.

I have seen the rules of thumb on 1-2 year analyst HF comp posted here but was hoping someone can help me get a better view on how to calibrate expectations in a big year. For the sake of not turning this into a massive comp circle jerk, PMs are welcome.

Ultimately I would like to get a sense of what type of split I should be expecting / how others have calibrated expectations and how to negotiate need be.

Thanks

Comments (12)

Best Response
1/12/17

The amount of qualified opinions here are going to be low. I work at a single manager, but there are former MM PMs in the office and I'm close with a couple guys that are currently working at P72/Millenium/Surveyor etc. The payouts at every place are different but I'll use some baseline assumptions.

-$500mm pod that has to be run market/beta neutral
-One PM and 3 analysts
-The book is up 12% - this is a big year for being beta neutral. $60mm in profits
-Payout to the PM of 15%. These have moved up in the past 3-5 years. $9mm total pod comp pool
-I would expect the PM to take $7mm and divvy up the rest based on analyst performance. That works out to anywhere from $650k analyst to $1mm/analyst. If its someone's first year they are not getting $650k, or even close to it. If someone has been there 5+ years and generated a lot of ideas they could probably get over $1mm. At 3 years and a strong relationship I would say 600k-800k all-in compensation is a reasonable baseline.

Obviously, these numbers are built on a lot of assumptions. Tweek the payout ratio, returns, or slice given to analysts just a little bit and the final result can change drastically.

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1/13/17

Are these figures comparable for a single manager?

1/17/17

I think the 12% return you quoted will make people overly excited? Citadel/Pt72 last year were up 12-15%, but that's a levered return. These beta neutral shops target 3-5% unlevered returns. So the math in reality I think should be 5% return on $500m = $25mm in profits and $3.75mm to the pod.

Let me know if you agree

1/26/17

The return possibilities vary a lot based on team/ style. Mid single digits on gross (HSD/LDD on long) are considered good for many low-risk, beta neutral strategies. Keep in mind that in any given year some (a lot) of PMs will lose money/ get fired, so the successful PMs need to put up decent returns to get to that 12 - 15% levered.

1/12/17

I concur with GF's estimates, with the caveat that it can and does vary a lot... If you can do a rough calculation of what the "fair value" of your actual PNL contribution was, it can help you have a sense.

1/13/17

Very helpful thank you

1/15/17

i am a PM at a multi-manage and can tell you that it varies a lot. I would say the numbers quoted above are plausible but on the generous side. It all depends on how generous the PM wants to be and what the term "analyst" really means (ie are you really adding value in terms of ideas or just crunching through numbers/models(.

1/17/17

This - if you are generating original ideas, and thereby contributing to PnL, then the above numbers make sense...however, if you are just doing what you are told to do, then you are just a well paid staffer.

Could the PM have made the $$ without your unique input? Were you just a cog in the machine? Are you easily replaceable? All these things will determine how much % of the pie you will get.

1/17/17

Thanks for the input. As a PM do you normally think about compensating your analysts as a percent of the pool or within a set dollar range depending on performance? Assuming the analyst added a lot of value in terms of PNL contribution (not just crunching numbers).

1/19/17

I have one analyst who works for me and I start with a range in terms of percent of total pnl and adjust by looking at the trades which generated that pnl and considering how much he contributed to those ideas. Not in terms of hours worked but in terms of "would I have been in this trade if he wasn't here".

1/20/17
Bondarb:

I have one analyst who works for me and I start with a range in terms of percent of total pnl and adjust by looking at the trades which generated that pnl and considering how much he contributed to those ideas. Not in terms of hours worked but in terms of "would I have been in this trade if he wasn't here".

What would you say is the "normal" range in terms of % of PnL that an analyst can get (I appreciate the term "analyst" can mean a lot of things)?

1/26/17
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