Help me frame my YE meeting
Work at a SM L/S in the $2-5B range. We are having a lights out year and I have contributed significantly.
For those with 3-4 years of experience in the seat, what is the range of outcomes that are standard for year end? If I’ve generated 100 million of PnL at >40% ROIC on my sub sector sleeve , what is a ballpark % paid to analyst of the 15-20M of incentive fees we will clip from that PnL? I’ve heard anything from 5-10% to as little as 1%, to basically it’s up to your founder fully discretionary (which i know is the case, but still trying to figure out what’s reasonable). Enjoy where I work and willing to take a hometown discount, but also don’t want to leave a ton on the table.
Alright now I’m starting to see what people mean when college kids just shit post here. This exact post was made last year
Idk man. How much of the 100 is alpha? $30? I think the PM will pay you 1-5% on that, not the 100
It’s not college kid. We’ve been under HWM since I started like many growth SMs after 2022, and this is the first year fully above combined with significant contribution in the year.
So I don’t have a great baseline and have not made a ton of money thus far to base it off of - nor do I have family in the industry or someone to help me game plan my YE. I cover a sector that on relative performance basis was one of the worst in 2024 and generated significant amount of alpha.
The answer, unfortunately, is whatever they want to pay you. None of us can come close to knowing. If you want contractual pay for performance, have to jump to pods, otherwise its a game of politics and up to the founder to do whatever they think is appropriate. Some non pods will do a good job of setting expectations on what comp should look like ahead of time, with a more thoughtful process and scoring of some sort... but if that were true you wouldn't be posting here.
You can try and frame some stuff to your advantage obviously, but then again, there are a lot of dynamics at play.
Was it your fresh ideas? Who did position sizing? Who made final trading decisions? Did you do all of the work alone? How many of your bad ideas were nixed by someone else? How much was your subsector up YTD already? How much was beta and alpha? What is the risk of you leaving immediately if they don't pay you? If you leave immediately how much in future returns are they giving up?
Another unfortunate reality is if you only earned lets say $500k last year, they prob aren't going to dump $2mn in your lap suddenly. They'll think hey this person only ever earned xyz before doesn't make sense to 4x what they made before.
If they were under HWM, they probably are trying to make up for their own few years of lost earnings as well.
The closest you'll get to figuring it out is the following: reverse seats, and be very greedy and skeptical of what you should pay your analyst and why.
You may be right because I've never been paid 10-15% of my P&L at an SM but the fact is the PM is being paid based on all the incentive fees, alpha or not
He didn’t say 10-15% of pnl, he said 10-15% of the incentive fee generated from his pnl, ie 2-3% of pnl. Work on your reading comprehension.
Do the sensible thing and simply ask. Ask about YE comp calculation before you have your YE meeting. It's a fair question to ask. This will provide you with some preliminary insight into what to expect and give you time to think ahead of your YE meeting and potentially pose an alternative formula going forward. Just my $0.02.
I’ve put some time in at the fund and this is the first year I think I could take a step up the s-curve. I plan on getting clear direction on a go forward basis during the meeting, but for this initial one somewhat flying blind. I’ve made good money just nothing crazy this far.
If you like the shop and the people you work with, then I wouldn't sweat this single bonus too much. Know your audience, make your case for yourself, get clarity around go-forward expectations. If this singular check is extremely important to you & isn't commensurate with your perceived contribution, can't hurt to (respectfully) lay out why you feel you've earned more. And have datapoints on hand/be ready to quantify everything to support your argument.
No. The answer he will obviously get is to wait until the conversation is had. No one out there gives a "bonus conversation prep". There might be some expectations management coming from them, but you can't ask for it. You ask about details when you have the scheduled conversation.
Agreed, do not have a bonus conversation prep. If your comp wasn't already formulaic and agreed upon at the start of the year, you don't have a case. You should focus on asking how they arrived at your comp before steering the conversation toward how your comp could ramp in the next 3 years and asking for a comp to be tied to P&L.
edit: If you want P&L linkage, you would probably start at lsd % of your P&L, with growth to msd % if you're doing well. Wide range of outcomes at every fund, but that's a decent baseline if you're doing well.
Don’t necessarily agree - if you’re feeling undervalued and have other options (don’t be wrong about this) then no need to wait for an inevitable expectations reset 2024, just give another full 2025 of potentially free labor. Better not to bluff. This whole song and dance is the worst thing about non-formulaic pay. Honestly more stressful than drawdown limits etc in pod world
Damn first time being on the receiving end of monkey shit, haha! In all seriousness, are you guys like afraid to just talk to your PM about this kind of stuff? Guess it's fair to just wait until the conversation, but can also casually just bring it up - "Hey man, was thinking about budgeting for next year, I know we've had a slam dunk year and wanted a refresh on comp formula structure. I'm not asking a dollar figure, can save that for our meeting. Just wanted some additional color ahead of time if you don't mind". What's your PM going to do, slap you?![]()
Nobody is saying workplace violence will occur as a result. We are mostly saying that most legitimate shops, asking such questions is naive. The people in charge of pay are not going to be caught off-guard and tell you something new. You will very likely get a canned response. If you work at a place where this isn’t the case, that is great. Most of us do not.
Our bonus paid in January so for tax/planning that excuse doesn’t work great. I can and have gotten feedback but the $$ talk happens during YE and there isn’t clarity before. At least for someone at my stage. Again the reason I don’t have a good idea is because I’m in year 3-4 and this is my first shot at some good dough, I’m sure in future years I’ll have a baseline off of this to benchmark.
If you get a canned response, push back? My shop is anything but illegitimate, I'm just not one to tuck tail and take it...To each their own!
Strategically, an environment of uncertainty optimal from a cost control perspective. From the asker’s perspective it’s not riskless. There’s always a risk PM just decided ‘welp his 3-yr trajectory is unrealistic and he’s fungible, so no reason to pay nicely this year - since it sounds like analyst will be disappointed and leave either way’.
Have also seen cases where the asker is comfortable and does really WANT to open Schrödinger’s box - cause they know the cat is dead and complacency is comfortable.
Without an attribution framework and formula, it is INEVITABLE that both sides fill in subjective gaps in their own favor that works out to about a market competitive rate
the Schrödinger’s box analogy is on point
The answer is you will get paid what the founder thinks you are worth and what he thinks he can get away with.
Ask yourself a few questions:
1. It’s nice that you think it’s your pnl, but is that how others see it? Were you making the calls, fighting/debating to make those calls against a divergent take? Or were you going to mgmt meetings, taking notes, updating models, and sharing information? There’s a huge pay delta between people aggregating, cleansing, and reporting information and those ingesting information and making decisions. From your post, it’s not clear you say you generated x pnl in your sector sleeve, unless you’re the sector head, that is an untrue statement. If your just a part of a team that has that pnl, completely different story. You’re a tool that is used to open packages that have ideas in them. The PM and sector head look inside the box and figure out what to do with the contents. The opening of the box, while necessary, has limited economic value. Sure, you’re a precision instrument, not just a box cutter. But you’re still an instrument… in that scenario.
2. How essential are you to the firm? If you left tomorrow, would they will your seat and will life go on as usual? Or will they potentially be at risk of losing your significant contribution going forward? Answer that honestly.
3. How did your sector perform? If your sector was up 50% and you were up 40%, PMs view is that his sector exposure underperformed because his team underperformed.
4. What are other costs? You’re not operating in a vacuum. Portfolio hedge costs? Were there other teams that had negative pnl or meaningful underperformed? They still need to be paid. That will come out of the broader bonus pool.
5. How tenured are you at the firm? If the fund has been below it hwm for years, there’s a bunch of hungry mouths that haven’t been fed in years. Founder is most likely to overweight his loyalists.
Based on answers to the above, the answer to your questions (what’s the range of outcomes for someone 3-4 years in a SM seat) who’s group has $100m pnl… if they hate you $400k. If they like you $500-800k. If they love you, $600-1500. If you were the obvious-to-everyone contributor (your ideas you fought to get into the book) contributor, low single digit millions, 1-3m, possibly more based on your founders temperament/how essential you are.
This is all wrong. I am the only one in my coverage. As a firm we are very lean. What I say goes without question for large part of the time. They may make the incremental sizing decision that could differ from my rec, but for large part if I pitch something it’s in the fund. And positioning is usually ballpark aligned with my recs.
My names are tied to me. Myself along with everyone else can see what I and other contributed. Each name is tagged to who is responsible for it and visible to everyone. For the most part the PMs have never met with the companies we own. Maybe if they come into office but as observers.
Running at greater than 45% ROIC with a sector that’s up less than 10% YTD. North of 40% of the total return is alpha. My book running at a 3 and change sortino. This is a sector where a lot of pods were getting shoulder tapped. Not an easy year.
Not asking for help on if this is my credit or others - I know what I contributed as did everyone internally.
I am asking about ballpark bonus ranges to help figure out if I’m in the general range I should be in. Despite my contributions I’m well aware in this model the CIO can decide to pay me as little or as much as he wants.
Thanks to those who have helped, much appreciated.
It’s not wrong at all, you just didn’t provide any relevant info.
The ballpark bonus range is based on the answers to those questions, which you didn’t provide.
I can’t imagine anyone in your shoes is coming on WSO to get advice on how have a YE conversation. But I’ll bite…. If your sector is up 10% and you’re up 40%+. And you have $100m P&L. And you’re a one man band. You should get paid $10m. That’s not a range, that’s a hard number. That’s what those stats are worth. Proven money maker. Put your balls on the line. If you’re unhappy, the firm is $15-20poorer next year. Pretty simple.
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