Seven figure salaries in hedge funds?
This may be considered a stupid question, but I am curious and have not found the answer after searching the net so I will ask anyway. I have read that "it is not uncommon to see a person in their late 20s or early 30s pull down $5 million a year or more in one of the right positions at the big funds" but most of the positions I have read about, even at places like bridgewater, only make low six figures. Maybe the compensation is higher including bonuses, but it seems like the way to make millions is to start your own fund and hope it does well. What would be the best way to make the most money in HFs?
This is my first post, and I don't want to seem like I'm not genuinely interested in finance and all I care about is money lol. I have been browsing for a while and I'm wondering about what seems like contradictory information.
Also interested.
Also interested.
It depends on the fund and
It depends on the fund and your seniority. I think most junior traders, analysts, risk management, etc. get around 200k+ on average, but once you get closer to the money(portfolio manager) and more responsibility, you will get paid more in line with what profit you generate. It also depends on the size of the fund, assets under management and profitability.
I believe in the hedgefund industry, the pay is overly skewed at the top level (say top 20% of the performers), while the average fund does not pay outrageous compensation. With all the recent competition, it's going to be harder for the smaller funds to exploit opportunities for profit.
here is a prime example of
here is a prime example of how journalists overstate the general pay in the financial services industry. Usually only actual portfolio managers at big funds are making that kind of money and its very rare for them to be that young.
it is very very uncommon for
it is very very uncommon for someone in their 20's or early 30's to make 5MM in a year at a large hedge fund. Sure, it has happened but it is not common at all. To make 5MM at a hedge fund you generally have to be a PM running a good amount of money and put a good return on it. Depending on the payout your talking about somebody who made like 20% on 250MM or something comparable...very rare for someone in their 20s to have that type of capital. And I have never heard of an analyst making that type of money.
I wanted to reiterate what
I wanted to reiterate what was said above regarding analyst salaries - they are typically in the low six figure range. It seems likely that what is being reported is a 'skewed' average? Consider the hypothetical where 100 analysts make $200K each (which I think is on the high side but lets play along) and there are 10PMs who make $20MM. This skews the average hedge fund salary to $2MM. Perhaps the median or modal salary would be a better indicator.
Ante UP!
how does that work for a
how does that work for a value oriented fund that might only have one gp fulfilling the "portfolio manager" duties. funds like this can manage 1bln and have 10 investment professionals. with a 20% return, there are 40mm in incentive fees. in this scenario could the senior analysts (in their late 20s/early 30s) be making 3-5mm?
Titan, good point.
Titan, good point.
According to Alpha Magazine's
According to Alpha Magazine's 2007 Compensation Report, the median salaries for jr analysts and traders were about 200k while Sr PMs made about 500k. A nytimes article from the same year seems to give the impression that people that work at HFs can make much more.
http://www.nytimes.com/2007/09/16/business/16mba.html
Mr. Hammond started his own hedge fund instead of getting an mba, and (at the time of the article) manages 300mm and makes seven figures at 28. Later the article states that analysts and researchers at funds managing 1-3bln will make 830k.
Both of these are a few years old but perhaps they hold some relevance.
The key to making millions is
The key to making millions is to start your own...anything. Though I'm not sure "hoping" it does well counts as a sound strategy.
With respect to hedge funds, just like most of finance, the majority of comp comes in bonus form. I have a friend, 30 years old, who was a PM at a very large distressed debt shop. His salary was ~150k range, but his bonus (2008, the shit) was around $550k. Scale that down on both sides for the analysts. Hell, Lloyd Blankfein only pulls mid-six figures in salary (even before the crash). It's bonus, stock, and that magical "other" that line the pockets.
The same is true of almost every high level executive, at least in public firms. There are very, very few public company CEO's whose actual salary is 1mm+.
It's not entirely unheard of
It's not entirely unheard of for hedge funds to give guaranteed seven-figure contracts to traders and PMs with very strong track records. The 28-year old superstar trader at Morgan Stanley left for a hedge fund that guaranteed him $25 million. And SAC Capital guaranteed one trader $5 million/year.
Just to reiterate chimpb's
Just to reiterate chimpb's post, how do analysts at value/event-driven/activist type funds do? I know overall fund performance is a huge component, but in good years can analysts, say late 20s, pull close to a mill base+bonus or is that a range average PM's make?
Smaller shops is where you
Smaller shops is where you can make a killing. Get picked up by a smaller shop and they are typically very generous.
thinker481 wrote: Smaller
Smaller shops is where you can make a killing. Get picked up by a smaller shop and they are typically very generous.
atin
7 figure salaries are paid more frequently than everyone here is thinking
1B fund - will generally have 3-6 analysts and 1-2 fund managers depending on structure - no more than 10-20 people in the entire fund.
Off the 1B you are taking in $10mm management fee - this should cover expenses pretty easily. If the fund does well and generates 20% for the year you just pulled in another $40mm to be payed out in bonuses or deferred comp.
If you splurge like a rockstar and spend all 10mm from fees you still have $40mm to pay out amongst 10-20 people, with the analysts and managers taking the bulk of it.
Never underestimate the
Never underestimate the cheapness of hedge fund managers. I work at a top macro fund and million dollar salaries are very very rare for analysts even during years when the fund takes in hundreds of millions of dollars. Bottom line is that people start hedge funds to get very rich and they are going to keep as much as they possibly can without causing massive defections. The bigger the name of the fund the more they can squeeze the analysts. I have some stories that would curdle your stomach about analysts playing big roles in making huge sums of money for the firm and then either getting an insulting bonus or even getting pre-emptively fired so that they cant state their case for getting their fair share of the cash. It's a very cut-throat World out there. Bottom line is that to reliably make 7 figures at a hedge fund you have to manage money, not just funnel ideas to PMs.
Analysts generally are considered interchangeable and portfolio managers who know how to trade and manage risk are far more valuable and much more rare then analysts who can help generate trade ideas.
Bondarb is 1000% correct.
Bondarb is 1000% correct. Top guys and girls at hedge funds are hesitant to admit it, but they are phenomenally greedy and stingy. The logic probably comes from a scenario where he or she felt short changed at an earlier career stop, so they went out and started their own fund.... When it succeeds, they have a money hoarding mentality. It's just mother nature's way of insulating them from the bad scene from earlier when they thought they deserved more than they got.
The only way around it is to put lots of money in the top guy's pocket, and then have something in writing which states the relatively paltry sum that will be tossed your way. Wall street pay, much like life, is not fair at all. So swing for the fences if you ever get the chance.
I want to be the best paid nobody that you never heard of.