Anyone have any examples of PMs getting >20% payouts? Under what circumstances do you get higher than 20 and typically what is the max payout seen on the street (don't count BC's 30% because it's heavily deferred so not competitive)?
Also referring to the actual full contractual payout (e.g. not accelerators to cover deferred and that BS)
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Yes. The highest I have seen in reputable firm is 60. But you need a sharpe 10 for it. For slower strategies I would expect the ceiling to be 30.
Assuming those 60% payout HFT strategies are heavily capacity constrained? Like 5-10m of PnL?
I’m referring to payout on higher capacity 50-100m+ PnL strategies
30 then.
Jesus what kind of strat runs a 10 sharpe? Guessing it's something quant/HFT?
I was recruited for working at a newly starting HF. And the strategy showed a ~10 Sharpe ratio, lol.
I thought too good to be true and made an excuse of how I could not be of a value add. Haha
30% payout. Was used to poach by a firm who didn’t want to pay high guarantees.
gotta be some kind of catch, clawback, tight risk etc
Please tell me you are not the same poster who said we should all go work at Citadel/MLP. Yes, they exist at smaller platforms and yes expecting 25%-30% and massive guarantee is overly silly.
Big gap between "5-10mm" P&L and "50mm-100mm" P&L also the payout you are looking for is more in the middle. Say you manage 500mm AUM, return 3%-5% at a large MM smaller platform should be able to offer a similar deal sort of thing.
Agreed on the quant HFT, crazy sharpe shit.
The highest I've seen is about 30% from bluecrest but it comes with caveats
1. you need to have a proven track record generating $50M+ of PnL per year for several years to get a number this high. normal PMs can expect more like 20%
2. They don't like paying multi year guarantees. You can get your deferred paid out and maybe some startup cash but that's it
3. your payout is deferred over 2 years. There are positive and negative parts about this. The positive is that they let you invest it in any stock/ETF/mutual fund you want so you're not losing out on interest. The negative is that deferred pay can be clawed back if you generate losses in year 2. The positive is that you don't get an arbitrary PnL reset to 0 on January 1 of each year. You can use your deferred from last year as a capital buffer and the management doesn't care if you lose it all so long as you don't go negative.
4. There's a team in the middle office figuring out how to replicate your strategies which is a bit annoying
If you form your own hedge fund and charge 2/20 it works out to about a 33% payout over the long run assuming you're targeting 15% gross returns. Therefore it's difficult to imagine that any MMHF will pay you much more than this. Most platforms can only sustainably offer payouts like 15-25%. If you want more payout, you gotta go work for a prop shop (although the $ payout is probably going to be lower since they are much more sensitive to drawdowns).
This is interesting thanks for the info - curious in your opinion what circumstances do PMs get a 25% payout versus the standard 20%. Is it Sharpe/capacity/better negotiation etc.?
Thanks for the insights.
Is it not improper to try and replicate the PM's strategy?
How successful are they at doing so? And if they are, will they not just fire the PM and run the strategy independently.
They don't replicate his strategy, they replicate his trades.
If they fire him and he isn't trading anymore, there's nothing left to replicate.
Super helpful, thanks.
What are the drawdown limits at Bluecrest?
Thoughts on potential $700M fine as per below?
https://finance.yahoo.com/news/bluecrest-loses-bid-block-700-140003574…
When you say "deferred over two years" do you mean that the full bonus is only paid out after two years? What is saw at a mid sized MM was 80 percent immediately, 10 percent after one year and the remaining 10 percent after two years. Just from a personal cash flow and risk perspective I would see it as a massive drawback if a large proportion of my bonus was deferred over such a long time.
Usually family office style like a bluecrest
Honest question: assuming the fund charges investors a standard 2-and-20, how can they pay you more than 20? (And even if they charge higher fees, they still need to pay the founder and all the backoffice people, so where does that money come from?)
Pass-thru fee structures have been explained 73 times before in previous threads.
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