Hedge Fund Comp
Work at a single manager that is knocking the cover off the ball performance wise. Fund has 3.5 sharpe and about to generate ballpark 100m in fees based off performance this year and 2 and 20. There are 30 employees. Prob 15 are HR/compliance/admins/ops. Other half are traders / investors.
Wondering what typical comp structure looks like. Imagine founder grabs 50% of economics? Imagine 15 back office employees are on fixed salaries prob like 200k? Leaves a hefty pot for everyone else. Think 5-6 partners total.
Wondering what comp can look like if you are mid level analyst that is contributing meaningfully? Firm takes a “team” approach to risk on in the portfolio so we all take meetings together, ultimately partners decide what we are going to pull the trigger on. So don’t have a PNL attributed to me like most buy side seats. But lots of blocking and tackling and insights teed up that help partners make decisions.
Wonder what people think of when I tee up this fact pattern? How do economics typically trickle down in SM hedge funds?
What's your funds drawdown last 2 years? You sound like you're describing a fund that went -50pct and is now bouncing with market
No drawdown performance has been solid. Flat in ‘22, up 15% in ‘23.
Well done. Could be anywhere from a nominal bonus to millions. Really depends on PM generosity. Have heard sub $500k to $5 million for that level for almost identical funds and returns
Certain CIOs/Founders will look it at the way you do, which could result in $2-3million for you.
But others will approach it from the point of view of what are your alternatives, how much would a competitor pay you to jump ship.. which might land you under $1m . To be clear, under this approach, whether the bonus pool is 100m or 200m, you will get paid about the same.
You will know better than anyone what your founder/CIO is like.. sounds like the fund had a decent 2023 so that should give some cues.
This is the correct answer. Why should the fund pay you 2-3m if every other fund is only paying people your level 500k. If they pay you 501k, will you leave? No because you’ll only get 500k at a similar model elsewhere. Most SMs are like this by the way.
Very insightful. Thanks for the thoughtful response. This logic makes a lot of sense to me. We’ll see how it goes!
so much variability...some have fixed % of the carry that doesn't flex, maybe 2-6% of total pts per partner...others might only guarantee 1-2% but have shared "jump ball" where the remaining carry gets allocated based on perceived performance
you'll likely get $1-2m - how big was your contribution to that $100m of fees? decomp of $100 into mgmt fee vs incentive fee? You're not getting any of the mgmt fee, so deduct that.
sounds like this: $2bn AUM x 2% = $40m of mgmt fees, $60m of performance fees. The mgmt fees accrue to the CIO/the partners. On the $60, how much of the PnL was attributable to you/your partner? Maybe he throws you $1.5m = 2.5% of the performance fees, feels fair given you don't have PnL linkage. CIO definitely taking AT LEAST $30 of the $60, so maybe the partners are getting $3-4 each maximum including their share for the mgmt fees, $1-2ish for the rest of you guys? Sounds about right.
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