Bonus for AN1
Hey folks, I'm an analyst at a $200M L/S shop. I'm an undergrad from a target who has been with this firm since January. We're a pretty lean team of 4 people including me & my PM. One Sr. analyst and the other is a quant-ish guy who was only recently hired.
We're up a little over 20% YTD and PM expects we'll finish the year strong as the only thing left right now is to not make bad trades for the remainder 5 months. My contribution to the existing performance has been significant.
By significant I mean at least 30% of the YTD PnL is directly from my trades/ideas within the sector. My PM is not a stingy guy and has been fair so far. My base comp is below street (~$80k) as I am still too young and only recently graduated.
With the above in mind, I would like to know what my year end bonus figure will look like. I know that it'll be capped because it's my first year here and it's still early to worry about my bonus, but I can't help but think about it. At my base pay I'm living way too under my means, eating the same prepped food everyday and so on, the dollar only goes so far in NY.
I realize it's discretionary but I've known my PM for almost a year now and he is a very good person, leaving his temper aside. I've luckily not had to bear his anger because my ideas contributed significantly so he takes me out for a beer every couple weeks haha.
I don't want to be upfront and ask him straight away because he is a little old fashioned in some aspects. But he is very open with me regarding PnL and the book in general.
Any idea what to expect? Will be helpful in tempering expectations as part of me is thinking I'll have a big payday.
I hope you have a big pay day but part of me is very skeptical because he is paying you well below street base comp and probably thinks he can get away with not paying you substantially more in total comp because 1) you’re new and 2) you’re inexperienced… along with some false promises of how you might get a lot more later on. Typically the PMs at these subscals funds are stingy from my experience.. but for your sake I hope yours isn’t
Thanks for the reply. I hope the same. If he does turn out stingy, my image of him is going to shatter into pieces. He never really made any false promises, the only reason I am paid below street base is because like you said I'm new and inexperienced and he plans to ramp up base to street going forward, I'm not really concerned about the base pay for now, but street comp sure would raise my standard of living.
He did say this is an eat what you kill environment. I know I will get to eat what I kill, the bigger question though is how much of it will I get to eat.
Eat what you kill is true but he also needs to provide you a respectable base pay that’s in line with the rest of the industry. He can’t expect you to be focused (not saying you aren’t) on making an amazing bonus when you’re anxious about living expenses on a low base in a HCOL city.
Have you tried to preview anything with him? Or has he hinted at a range? I only say this because I had the exact same experience as yours and unfortunately only woke up and learned my lesson after being strung along for a few years. Got out to a great place and never looked back.
you say you know he's not stingy
how do you know this?
Talked to people who worked under him before. That's what I've been told, and these people have no incentive to lie. They're not even working for him anymore, some of them were brutally honest with me about other aspects, so doubt they'd manufacture only this part of the conversation.
It’s very rare that someone who’s base pay is low because you’re new and inexperienced happens to also contribute a significant amount of self driven ideas that contribute to significant pnl.
I've done multiple internships prior to this role and also got FT offers but they were LO. I am very much new to L/S, not used to thinking in quarters & months. One thing I appreciate about my PM is that if I pitch something, he'll grill me on it and if I'm able to defend my position then we all take a look into it and he does add it to the book.
A few shorts paid out very well along with one or two longs. I must admit, or maybe it's because I can't position anything, but my PM is very good at it. If he thought a pitch was working our way he'd ramp on the name pretty quick and vice versa.
I also saved us from a few bad holdings through earnings, these were not big positions anyways and their effect on the book wouldn't have been material to a big magnitude so I think this is immaterial, though it does elevate his impression of me.
If he doesn't pay up, start getting ready to interview at other places
He’s not paying you. Print another great year, document your results, and reach out to the folks at DSP/Odyssey/SearchOne to find you a good home. Good luck.
Thanks guys for all your input. I'm a little scared right now, will tell you all what the number was come bonus season and how the review went.
If when you signed on to a $200mn fund he didn't lay out a specific comp plan, and its just "discretionary" it will likely be low, especially since he views $80k as an appropriate base in NYC.
Has the fund been around for a while or is it new?
Considering base at $80k right now, he probably has a number in his head as a % of your base that he feels comfortable with. Could be between $50k-$80k imo.
He'll also likely say "you did great and next year your opportunity will be higher"
Even though your contributed a lot, you just aren't anywhere close to a formulaic payout point right now. And depending where this guy is in the life cycle of funds he has different views on enriching himself, what he wants to build, where you fit in, etc.
Either negotiate points in the fund, build out a more structured discretionary + performance kicker, etc. or just have a direct up-front conversation about comp at this bonus convo. There is a way to be respectful here. Incentives are very important in this industry, and there can't be a massive gap in perception about what you want.
A good rule of thumb in general, when dealing with discretionary bonuses. Be realistic, put yourself in his shoes, and then come away with a realistic + conservative number. Then haircut it by another 25%... there you go, you have your expectations!
yeah agree on this. And in general, since you are very young and new to this, just bear in mind that getting along/trusting your boss doesn't necessarily equate to a payday. He can be a nice guy outwardly and still fuck you over (happened to me few times in my years) . I would be personally very surprised if you get a big payday in your first year based on what you described
Thanks for the advice. I'll try doing that when it's review time.
Questions that make a big difference:
When you say team of 4, is that your team within in the firm or does that cover the entire front office? The amount of folks eating from the incentive fee pie is a critical piece of the puzzle
If 4 is just your team within the firm, how many dollars of pnl were generated by the team?
What's the fee structure of the fund?
A general rule for analysts at smaller funds is the expect something like 1-4% of the pnl directly generated. This is a wide band but its very dependent on how experienced they are, how much is just beta, and the fee structure of the fund.
The good thing about small funds is the transparency, it should be very obvious how much the fund is making and who deserves what slices of the profits. If your team generated $40M of pnl, and you directly sourced ~$12M of this, under $100k is a laughably low bonus and I would take it as a bad sign of management.
Team of 4 covers the entire front office, we only have IP for now. Fee structure is 1.5/20 - 2% of my contribution should be ~$240k, I guess time will tell.
You are not going to get paid 300% of your base during your first year and it doesn’t matter how generous you think your PM is
Being first year out at a small fund with discretionary bonus is tough. Even if you contributed heavily a lot of things are going to influence his decision (he's just a kid, he's 22 I barely made anything when I was that age, 100% of base is pretty good all things considered etc.). When I was at a small fund, the guys that got paid well there took the first one on the chin and used bonus conversations to setup future years. Expressed how happy they were for the opportunity and that they're looking towards the future instead of debating current year comp. This could mean asking what does it look like if the fund performs similarly and you contribute at a similar level next year. If its not materially higher than this year, what are the steps to unlocking $X of pay (whatever your personal target is). I went for getting my base up one year instead of arguing over the bonus figure, as I was similarly behind street.
Fact of the industry is that its highly discretionary and many of these guys just don't have their bearings on what market comp is for juniors these days. Come armed with some data points to reference as well in convo if you feel like you're materially behind, but keep tone neutral and respectful because a lot of these guys can be little tyrants over their fiefdom and get defensive quickly.
Are we talking alpha? I wouldn’t want to diminish your performance but i think it’s important to understand that your PM can’t reward beta or factors profits
Ut iure laboriosam vitae alias. Consectetur molestias et delectus praesentium corporis est nesciunt.
In saepe sed doloremque. Dolore expedita nostrum non delectus molestiae fugiat labore similique. Exercitationem aut aut sit ut fuga. Rerum ut molestiae iste dolore consequatur molestiae beatae.
Animi reiciendis nulla amet et fuga. Qui quae velit aut et et maxime. Iusto dolores pariatur vitae aut quis optio iste.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...