Compensation for Engineers at Hedge Funds
Hey, so I'm deciding to make a move from a large tech company to well-established hedge fund (AUM ~$17B). I've gotten an offer from them but I don't quite know how to decipher it. I was curious if the end-of-year bonuses for the engineers are similar to the quants/modelers. My guess is no but I know so little about the industry that I thought I'd post it here.
What are you having trouble deciphering? Isn't it base & discretionary bonus?
Well, there is a base salary and then a guaranteed year-end bonus for 2014 only. Going forward, I will be "considered for an annual discretionary bonus subject to the firm's policy". I'm trying to figure out what that policy is.
Kinda hard to figure out if we don't know the policy either lmao.
What type of work are you doing? I don't know what type of engineering work a hedge fund actually needs done. If you're not working for a front office team, you're probably not going to get a huge bonus. Bonuses are highly variable by fund performance and department you're in. If you give us more specifics on your title and possibly salary, there may be someone who can provide some insight. I imagine you'd be close to what a software engineer makes, probably $130-200k after bonus, depending on your seniority.
I seriously don't know what the hell a hedge fund needs an engineer for in their front office, unless you did doubled major and have solid understanding of finance together with industry experiences.
It's actually pretty common, especially for funds running more quantitatively-focused/data-intensive strategies. The most obvious examples would be things algorithmic trading, but it's also common for lots of derivatives and statistical-driven arbitrage strategies and mortgage/structured-credit related investing. I've seen it a lot with more qualitatively-driven/discretionary macro strategies as well, especially since the implements that you use to express views can are often very complex.
The actual role can range include developing software systems/applications and ad hoc programming projects to more direct investing tasks like writing programs/algorithims to actually recommend trades or analyzing data (say for RMBS collateral).
Without getting into a big WSO fight about front vs middle office, many of these roles are definitely part of the investment process and can be very well compensated as such. That said, definitely important to figure out what they see you doing and how you would interact with the actual investing decision making process (and the people who run it).
Also while it's true that hedge funds are probably not hiring software engineers to be fundamentally-driven stock-pickers, I think you might be over-emphasizing how prepared the typical business-major undergraduate is to be a contributor to the investment process, especially for more esoteric strategies.
I think your best move move at this point is to email them back and ask for more clarification on their "policy". There is nothing wrong with that, in fact, it gives off a sense of confidence that you are comfortable with asking questions and seeking clarification.
Yeah, I was planning on emailing them asking for more clarification. My role is a little weird, actually our group is a little strange. Our job titles are a very generic "Software Engineer" but we actually work with the modelers to implement the strategies so in that respect we're a little different from other support engineers.
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