HF Analyst Comp and PnL Netting
Folks, I'm an analyst at a $5Bn+ L/S fund. 2Yrs of sell-side + 2Yrs PE + 2 Yrs at my current fund. Fund overall is doing "well" (up MSD % on the yr) this yr given the industry backdrop. I have $20M+ PnL (not a lot of dollar, but high % return on gross exposure of my names, partially cuz I was lucky with my factor tilt), but my sector team is losing dollars, call it -$10M (we have a "sector head", or "sector PM", however you wanna call it; very sharp guy, just unlucky with factors).
My current comp structure isn't formulaic (i.e. as % of PnL), I was told $200K base + $300-400K expected bonus, but "could be higher if I do well" at the beginning of the year. I don't have full trading discretion, just research and pitching, but also for us need to pitch with sizing and specific trading actions. I'm likely going to have a conversation about my comp structure in the upcoming review and hopefully can make that formulaic next year.
Have 3 questions:
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(1) in this scenario where my sector team isn't doing well (each sector team has different PnL), would you think I shouldn't expect a high number? I can understand that if it happens, but also feels strange given I'm personally doing ok, and the fund itself is doing fine. What would you guess is my number this yr? --- I'm going to find out in a month, but I want to set my expectations correctly, and know how to leverage that for my go-forward comp review
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(2) as an analyst in a "sector team", is it normal to take netting risk at "sector PnL" level, or should I ask for a cut on my "gross" only? And a similar question: do analysts normally deal with watermark issues on personal level or at team level?
- (3) for my go-forward discussion, what's a reasonable cut these days: I've heard base + 5% of PnL being reasonable, but want to confirm if that's been the latest number
Appreciate all your help. Maybe I'm a little too anxious re the comp discussion, and I'm in-experienced. Regardless, I would be happy to report back and contribute a data pt.
Do the sector heads at your fund have trading discretion?
Yes.
Don’t know why you’re so anxious especially since this isn’t your first year at the firm. Your sector head will get some allocation for bonus since the fund is up but because he’s lost money he’ll probably get less than expected. Within that pool - he will try to distribute whatever he thinks you deserve.
No one has a clue what your place is like but if he isn’t getting paid much himself - don’t see why he wouldn’t just give you the amount you were told as expected.
5% is probably too high given you’ve only been there for 2 years. Let us know if you get paid your 7figs (5% on $20m) but I’d be pretty shocked if you do given it’s not a pod. Tbh - why don’t you just go be an analyst at a pod if you want something formulaic with high payout?
Thx for the color. v. helpful. I was more so trying to think about what to ask with regards to year 3 comp structure. This year totally agree, I don't expect anything close to 7-fig. Reason i'm staying here instead of pods: (1) best and nicest ppl i've worked with and they taught me a lot of things (2) flexibility around gross/net/duration
What's the typical structure on comp at a MM for someone with that much experience?
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