Am I getting a fair share of bonus?

I am a 3rd year analyst at a London based HF, we do global l/s equity. AUM is a couple hundred million GBP, say 400m.

~2 years ago (beginning of 2019) I negotiated a direct linkage of my bonus to fund's P&L at 2.5% of the fund's performance fee. So in a good year, with a return of ~15%, my bonus would be ~300k GBP (400m * 15% * 20% * 2.5%). My base is on the lower side (75k GBP), as the PM emphasizes the 'you eat what you kill' philosophy.

Is my current deal a good one? I am wondering about renegotiating it slighlty after performance review in early 2021, as my contribution to the fund's P&L has been well and improving. I was thinking about asking for another 100bps (3.5% instead of 2.5%).

As for my background, I never did any IB, but did a lot of internships/short stints at some PE shops and an MBB firm prior to joining my current fund.

Comments (18)

Dec 3, 2020 - 4:57am
junioranimal, what's your opinion? Comment below:

I'd say if you've been with the firm for ~2 years now, are succeeding and are an asset to the firm you definitely have to value yourself and ask for more if you feel you're being underpaid. Maybe don't expect them to give you all 100 points up but a move up to 3% even would be a very solid increase.

Dec 3, 2020 - 7:08am
faceslappingcompilation, what's your opinion? Comment below:

a PM at a multi-manager will make 15%-18% of their P&L...lets assume 15%..with a base case of 100mm AUM per PM

do you feel that if you went over to a MM now, would you be able to replicate your success on your own? (lets say you make 10mm trading....bonus = 1.5mm)

What is missing, if anything, between what your PM does, and what you do?

What specifically is your value add...how easily replaceable are you?  Could you replace your PM?

just google it...you're welcome
Dec 3, 2020 - 10:38am
Delphi, what's your opinion? Comment below:

OP - I think taking a longer term / bigger picture approach may be better for everyone. Approach the conversation this way: let your PM know that you see a long term career at the fund and you want to forge a long-term compensation plan that reflects that. Tell the PM you want to set a compensation schedule where, performance warranting, you earn [10%] of the fund's fee pool after 7 years (interpolated in the interim years). Fill in the blanks as you see fit, but this would get you an annual increase without having to renegotiate so often. I had a friend negotiate exactly this and the conversation was received favorably and ultimately implemented.

  • Analyst 2 in HF - EquityHedge
Dec 3, 2020 - 6:47pm

Normally when people say Pnl they mean direct Pnl not fee level, but also in terms of their own contribution (their names) vs the total book.  

Dec 3, 2020 - 7:00pm
beejay2izzay, what's your opinion? Comment below:

What does this 2.50% translate in dollar terms roughly? Personally, I'd wait a year and position a case justifying the higher share when you have more facts and figures. Or alternatively, if you think the 2.50% is undervalued (if crystallised in today's dollar terms) ... you could ask to reinvest the full 2.50% into the firm for a higher PnL share (and include a risk premium/ i.e. the arbitrage view)... and then communicate a value-add proposition underpinned by longevity and progression. The hedge is your salary (not too far off market) but taking a gamble on the prospect which could turn out golden. Legal terms around the profit share all tight I assume and on an undiluted basis? If this firm gets acquired down the track, thats the added-kicker. Either way, seems like a good ticket. Just depends on whether you subscribe to their vision and growth trajectory, and no blurred lines around cost leakage (especially the discretionary kind). Maybe confirm the PnL share is pre discretionary bonuses ... otherwise your 2.50% means crap if they pay themselves major bonuses to effectively devalue your share.

  • Research Analyst in HF - EquityHedge
Dec 4, 2020 - 10:54am

This is some stupid hardo attitdude. "Yea dude I'm working for no bonus I'm hot shit" ???

 Fair is whatever the market will bear in this case - it's fair if he's ok with it and has no alternatives, it's not fair the moment he's not/someone else offers a better price. And it's not hard to find an offer that's better than zero.

Dec 4, 2020 - 11:04am
beejay2izzay, what's your opinion? Comment below:

Research Analyst in HF - EquityHedge

This is some stupid hardo attitdude. "Yea dude I'm working for no bonus I'm hot shit" ???

 Fair is whatever the market will bear in this case - it's fair if he's ok with it and has no alternatives, it's not fair the moment he's not/someone else offers a better price. And it's not hard to find an offer that's better than zero.

Why why why why why you getting emotional maaan ?

Dec 24, 2020 - 12:27am
marketimer, what's your opinion? Comment below:

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