Analyst variation within pod
Say you do really well in a given year in a large pod while the rest of the team essentially breaks even. You have no carve but do have p&l attribution. Curious how situations like this have played out for others in terms of comp. Anyone run into this issue?
Based on the most helpful WSO content, it seems that the compensation for analysts in large hedge funds can vary greatly. It's not just about individual performance, but also about the overall performance of the team or "pod". If the total book prints nothing or negative, there might be no bonus to be doled around, even if you personally did well.
However, if you're in one of the high performing, consistent money-making pods, you could potentially make in the mid to high 6 figures as a senior analyst. But remember, those seats are few and far between at the big platforms.
In terms of P&L contributions, junior and mid-level analysts are often considered to be commodities until they can prove that they can consistently make P&L contributions to the firm. So, even if you do really well in a given year, it might not immediately reflect in your compensation.
Remember, the real differentiator in this business is if you can prove that you can be a consistent money-maker and be one of a handful of key decision makers entrusted to put the firm's capital at risk. So keep playing your cards right at the poker table, and over time, your market value should become apparent.
But hey, don't take my word as gospel. Every firm is different, and these are just some general observations from the WSO threads.
Sources: Large hedge fund analyst compensation, https://www.wallstreetoasis.com/forums/mm-analyst-comp?customgpt=1, Podcasts about recent deals
Depends on how the head of pod runs the team. Some pods are more individualistic, some are more socialist ish type. I understand that you do wanna get paid when you’re making money even when everyone else isn’t, but when everyone else is doing well except for you, you would be wishing for them sharing some their PnL with you. So the answer is not really straightforward.
Yeah this is generally a hard one - in my experience on both sides of the discussion there will be variation between you and the rest but you won't get as much as you hope for.
In a concrete example for a team of 3 analysts with no carve + PM, let's say bonus pool is 4mm and team net P&L is 20mm with all 20mm coming from your coverage universe. In this scenario I think it's reasonable for PM to get 3mm, you 500k, other analysts 250k each. While only a ~2.5% take on "your PL", your PM wants to get paid and retain talent (if they believe the other analysts are competent contributors). He/she will likely promise that the reverse holds true in future years if you have a less than optimal year and offer you non-monetary incentives, like pushing for promotion to sr. analyst/giving you a carve in order to retain you.
Totally fair, but lets be real the PM is making clear every analyst is replaceable in this scenario. This is why pods and SMs are not as different as people think.
PM, is giving $250k as a future investment to both analysts. That should come from PM payout not deduct top analyst. Cause in a year everyone does well, the PM does better than everyone.
You get what you get and you don’t throw a fit, I’m not saying I agree - but 98% of the time you get paid the minimum required to retain you - so increase your market rate over time cause across many shops and friends I have never actually heard a first hand account of anybody being surprised to the upside on comp. From PM perspective, sure perhaps the 250k each comes ‘should’ come outta his pocket but…. He gathered the capital… and he’s got kids and a family and avg pod tenure is like 24 mos so gotta take feast in anticipation for famine. Anyway you’re young and single and remember those three times PM overrode your trade and those were good, now forgetting anything else did you actually do any of that pnl? Hard to say hard to say. Anyway you’re in a good seat and learning a lot and PM also got snubbed when he was an analyst but that’s just how it goes.
this is how PM brain works when they have to make a large you-vs-me decision and not bound by a formula. This also goes for the nicest and greatest guys, it’s just what happens to the brain. Accept it
the REAL problem is not ur example of $20m pnl all from 1 analyst, but rather situations of +30 -12 -18 for bonus pool of zero w no perf fees. And if anyone leaves the bigger hole to pay back A1 kills teams
This is why I’m anti subjectivity in comp, the more that can be agreed on pre-ante, with clearer heads and an if x then y formula the better for all.
Totally know people who were told 3%, got 1.5% on 100mm plus book. Knew that is the highest bonus they would ever see and were happy. Main issue is no one wants a donut coming from PE/Tech/SM. Just letting people know Iggy/Ken leave that decision to the PM.
Did not see your full response, you nailed it. Everyone considering MMHF should read this.
To your point of x->y numerical scenarios, my first boss at an MM gave me the choice of how much PnL volatility I wanted. He was a pretty seasoned PM and had enough credibility/accumulated lifetime earnings for the fund that he could probably go 1-2 bad years before being let go which allowed for more flexibility.
He asked if I wanted my comp to be based on:
Admittedly most PMs don't have that luxury, but having the ability to choose was very validating for a young analyst and made comp one of the easiest conversations. I chose 1).
Just to add do not think any PM is starving and worried about their kids nor do they plan a lifestyle on future bonuses usually.
The point about “how many times you used the analyst put” or “i saved you from yourself” is the key motivator for discretionary payouts and next year one of those 2 other analysts may save you.
Similarly not totally sure it is so much “the luxury” but rather the many threads on here that show that many people now choose #3 these days. They are coming from high comp roles and #3 fits best. Well now I have to hire a developer maybe or central resource so analyst is focused on not making data/dashboards. Then I have to pay for the right tools for that analyst to succeed. So sure no issue offering my deferred to get a floor for your TC but if we need more technology resources or so will you pay from now your “analyst deferred”. The answer always is no and the above cycle happens.
This is why nesting never works. This same conflict comes up over and over again. Not only do you personally need to do well, but the group as a whole must succeed. Everyone always promises to take care of you when times are lean if you take care of them, but anything that gets netted away from you is never returned in a future year.
If the PM is nice, he'll honor your cut of the PnL (lets say it's 10% in this scenario) and pay everyone else a small bonus from the remainder. In this scenario, he's probably not left with very much himself. On the other hand, if he's mean, he'll pay himself the exact amount he would have in a normal year, then pay everyone else zero and give you a small bonus.
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