LO fund comp must be crazy
Top LOs have like 300B AUM, with 50bps fee. That’s 1.5B each year with like 200 max investment staff. That’s 7.5M avg per person? Am I missing something or is the top really that lucrative
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These IP/AUM bake in the assumption that the economics will be spread in a relatively egalitarian way. Reality is the top dawgs prob take the most of it and never leaves and the actual fee per IP is likely much much lower than 7.5M u calculated for juniors.
Yup was just using that avg as an proxy. The top dogs must be making 50+ each year and this rate given that entry roles are literally like 120k
You’re forgetting about the massive back office staff, infrastructure, marketing, etc that takes a huge chunk out of the economics. I don’t have specific numbers for you but that’s one of your missing variables.
See below for a similar reply - any other costs that is missing? Like how much can you spend as a firm with 400 people, like no chance it’s gotta be more than half a billion?
Just want to comment that it ain't that simple. I work for a publicly traded company that gives the vast majority net income back to shareholders and only about 1/3 of the company is held by current or former employees. And for every investment person, there's 9 non-investment persons and a ton of infrastructure to support everything.
But for top fund managers it really can be that lucrative, but that's only a couple of people. For anyone but the top dogs, it's not like that; comp is fairly non-egalitarian compared to other areas of finance. But for clarity, it's not as simple as manager gets 20% off the top of a 50 bps fee for a lot of funds, as it might be for a MM hedge fund.
So three points: 1. Most large LOs are massive machines that have other areas to support, 2. If you're public, you have shareholders to return capital to, 3. comp is pretty non-egalitarian.
Yup completely get what you’re saying. Say for example one is at a privately owned LO with 300B aum - one of those has 400 total staff on LinkedIn. A conservative assumption would be 200 investment staff. So with that 50bps of 300. That’s 1.5B right. 200 non investment staff with a conservative assumption of 200k each year and that’s only 40 of 1500M. Even if we assume like 400k that’s only 80. So let’s assume 1400M leftover right - idk what infrastructure they have and everything else but no way they spend more than 400M on infra right? It’s gotta be less than 100M? However for the sake of simplicity assume 1B left. That must be absurd for the people at the top. Like this is a yearly fee. like that’s fucking just compared to PE. Even with MF 10B fund with 5y to deploy/realize that’s only 200M each year of management fees and ofcourse carry which we assume 3x MOIC (which is absurd for 10B) is around 800M per year. Like that comparison is crazy - these LO guys literally get paid to just make a stock picks each year. Like the top of the LO guys must literally be pulling 50+each year just based off fees?
Also would really appreciate it you could shed some light on how LO comp scales, also how is wlb, culture and everything! Appreciate it
Yeah, the comp trajectory is rarely discussed. Everyone knows the LO economics are juicy, and that the top rungs make the most. But how does the comp scale over someone's career? $350k post-MBA, then what?
Hear you on this one as well. Currently tied up but wanted to share some numbers on company expenses.
About 56% of total expenses is for comp. Approx. ~5% of revenue goes to distribution costs, another ~5% to record-keeping, ~9 for technology costs, ~1.5% for advertising, and other ~6.5% in other opex not related to compensation. That's about 27% of revenue dedicated to non-employee costs. The portion of net income that gets distributed to non-employees is about another 25%. So over half of revenue goes back to non-employees. Among employees, it's worth noting that about 90% of overall comp paid out goes to investment persons. So that leaves about 43% of revenue to be paid out to investment staff and another 12% of revenue shared among the top.
That said, again, this leaves a ton of room for people at the top to do very well. Your examples are a good case in point, but still even generous compared to reality. Even if you compress your numbers by another 25-50% less in favor of investment persons, it's a bit closer to reality, but still ridiculously good for people at the top.
Privately owned LO AM is the greatest job ever if you are at the top, or within a few rungs.
Yea I gotta agree with some back of the envelope calculations - see above.
There is so fucking much capital in the world dang
Don't forget about all the distribution costs! Not to mention the back office.
EBITDA margins for LO Asset Managers are very high, implying a lot of that earnings goes to the house (and the shareholders of the firm).
Owning the equity of a LO Asset Manager is where its at (but they trade at high multiples given cash flow profile!)
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