How does your team split the performance fees?
Having been fortunate enough to survive a couple of years at my fund and managing to earn some P&L, I have started thinking about how our earnings are distributed across the team. Being at the bottom of the totem pole (analyst), I don't know what's the share of the rest of the team (one other analyst, two PMs/senior analysts and the fund's CIO/founder) and I do not know anybody at a comparable fund, so I am curious how does it look like for other people. I think my terms are quite fair, but as I am becoming more and more valuable for the team, I wondered whether I should negotiate something better.
In my case it's like this (ballpark numbers):
- Ideas attributable directly to me are c. 15% of the fund's assets. I can and often do share the attribution with a PM, so if we have 5% of AUM in a stock and I do 50/50 attribution with a PM, then I am getting paid based on 2.5%
- I expect my ideas to earn, on average, 15% IRR
- Our fund has a standard 20% performance fee (with a high watermark, but no hurdle)
- I am getting 25% of the performance fee from the ideas attributable to me
We have c. $400m AUM, so with the above figures, it would be a total of $450k gross of bonus for me in a typical year. The caveat is that my base is on the lower side, c. $125k gross, as the head of my fund strongly believes in eating what you kill and not getting lazy earning a high base.
How does it look compared to your situation?
Looks completely fair to me, maybe even a bit high for a fund your size.
That's a solid deal, your PM is being fair / generous
Consistent with other generous-PM-led funds I know.
I don’t want to give % I’ll give structure
Minimum bonus X% long p/l, 2X% short alpha. Nice incentive to focus on shorts as was requested of me, tho this year short p/l would’ve been a lot cooler than short alpha and the distinction was my own suggestion and long run it’s prob good.
Competing pod offers ~3.5X% pnl on a similar base, w/ more capital but (in my judgement) lower alpha generation potential.
I think lower % is justified for the single manager benefits, though must be mindful of capital constraints on that side (looser risk, but hard to assess what % of the book you’ll be able to get on which can make a big difference in forecast)
Subj to netting, slightly above mkt base
I think that you are in a good situation! Our mid-level analysts get a discretionary bonus with no profit linkage so there is limited upside (but also limited downside). Our senior analysts get a % of total incentive profit pool (so not tied to individual performance). If compared to them, then you are below range. But each of them probably have 5+ years of experience on you.
What percent of incentive fees do senior analysts usually get? Can u provide a range?
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