Finance/Tech Comp Equalization?
So I turned down multiple tech offers to work at a pod shop (P72/BAM/Citadel). The starting pay is not great probably because of lengthy training period.
For HF people:
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At what point do I start making more than my peers in tech? How many years in my career at a pod shop should I see the possibility of 500k+ TC?
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How many years of experience do I start negotiating for a cut of PnL? How much % cut of PnL is appropriate when starting?
For reference my tech offers: $120k base + $50k signing + $150k RSU 3 year vesting period ~ 220k TC for first year (guaranteed). Pod shop is half that for first year.
For Sell-Side ppl (IBD/S&T/ER):
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How significantly does slowing deal flow affect your bonuses? What are you expecting for TC this year compared to last?
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At what point did you pass 500k+ TC? (Title/YoE/MBA?)
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General answer to all your questions : it depends. Careers in HF are not linear at all, very unpredictable and very different for each person. Don't expect to do 1y in a specific role then have an increase of tour base salary and your responsabilities and move one step up the hierarchy. U will make sudden jumps then maybe stay still for a few years then jump again etc...
This being said will try to give my small insight, but to be taken with a grain of salt (only worked at SM so not expert on MM)
Once u have ur own PM seat, it should be around 15%, but u have to deduct a lot of stuffs from ur pnl.
Thanks very helpful insight. I guess it is true that the career volatility would be much higher at a hedge fund.
For pod shops this may be a tad conservative, especially in terms on how early you get a ‘sleeve’ or PnL linkage, but just a tad
1. Will depend on a combination of your performance, your team's performance, and your firm's performance. Many have starting salaries in the 300-500k TC range (not sure about P72 / BAM, but certainly at Citadel and many other top firms) and start out with a higher starting than tech peers. If you are good, you should have no trouble reaching the upper end of that range in 2-3 years. If you are bad, you will get fired- cutting 50% per year early on is not uncommon, it might even be officially baked into your "training program".
2. Highly dependent on firm, I've seen everything from 2 years in to people in their mid thirties. You should wait until you are confident you can generate P&L consistently on your own, and not sooner. Being an analyst for a while is not a bad thing, you get to make mistakes on someone else's dime. You only get a few shots at running money, so you don't want to waste any pre-maturely. But if you're really, really good 2 years is a possibility. % of PNL depends on ratio and capacity of your strategy. If you are running a high capacity 1 ratio type strategy (e.g. calling quarters as a L/S analyst), expect 10-15% and try to get as much capital as possible. If you are running 3-4 sharpe with capacity constraints, you want well over 20%.
Those tech offers will always be there for you if you drop out of finance. Taking a 50-100k haircut or whatever it is for the potential upside is well worth the gamble.
I see, you're correct that software engineering will always be there.
Might be better for another thread but:
Speaking from L/S fundamental pod, as an analyst at what point would you know that you can generate profit consistently? I’ve heard even the best PM’s only get 51% of the calls correct.
How do you know it’s not just a streak of luck? Hindsight is always 20/20 where you can fit a story into a lucky streak of gains to convince yourself that you’re a genius.
The flip side of tight factor exposures and high velocity is that any PnL tends to be alpha. “The best PMs only get 51% right” is a complete cope, maybe they mean “it’s more about slugging ratio and alpha capture on the 51%. But if you’re running very tight risk on lots of metrics esp across subsector after 3 years in that model you will have a decent idea if it’s luck or skill (especially if it’s through a cycle)
Depends on the sharpe of your strategy. You can *approximately* think of a sharpe like a Z-score. If you achieve a 1 sharpe performance for a year, there is about a 16% chance you could have achieved that or better randomly. If it was a 2 sharpe, only a 2.5% chance of achieving better randomly (as long as your strategy isn't gaming the assumptions this makes, this roughly holds true). Then you add the second year. Running at a 1 sharpe for 2 years, 9% chance it was random. Running at a 2 sharpe for 2 years, less than 1% it was random. So from the point you start generating alpha, you can usually tell within 1-2 years if you just got lucky or you have some edge, and it becomes much easier to tell the higher your sharpe ratio is (measuring precisely how much edge you have is a harder problem).
In your example of an analyst making calls at a 51% rate, that would be an 0.03 Z-Score bet. So you need ~1000 of these bets in a year to have a 1 sharpe strategy, and ~4500 of these bets in a year to have a 2 sharpe strategy. So yes in the case where people have a hit rate as low as 51%, the only way they have an acceptable sharpe is taking a lot of bets. If you take that many bets you will see you have edge even with a low hit rate- a good analogy is that it is hard to see the house edge on a single black jack hand, but easy to see they are making a lot of money across all their tables.
Accurate
Expecting closer to 230k TC this as an AN1. My group’s deal flow isn’t slowing down so don’t think that question will apply to me. Second year comp this year is expected to be closer to 275k for those sticking.
Probably will take 3-4 years to get to 500k (will hit it either as an AS2 or AS3, and bank has a 2 year analyst program).
Don’t know why you got the monkey shit, but great info, thank you!
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