I Know I Am Underpaid. How Badly Though?
A bit of background: I have 6+ years buyside experience (3 years in special sits post-IB, 1 year at an LO post-M7 MBA, 3rd year at my current shop)
Part of a small (2 investors, 3 support) $300mm AUM special sits fund on the east coast. We launched in 2023 with ~$250mm, the delta is performance. Of that $50mm, $40mm of that has been my equity/credit picks with the balance being an investor who left us late 2024.
I'm on a $150k base, full benefits with a generous 401k. My first year bonus was 1x, I just got year two and it's the exact same number. I own ~1.5% of the GP but the CIO can decide when to make distributions and hasn't yet.
I know I am underpaid. Just how badly am I underpaid? I am in late interview stages with two much larger special sits fund and want an idea of what "fair" comp is with my experience.
Thanks in advance
seems in the right ballpark to me. can maybe be a bit higher but doesn't sound grossly underpaid
How much do you expect to be paid in this scenario? Not to be a dick, but assuming you launched Jan 1 2023, you've underperformed H0A0 even with equity exposure. The capital you launched with most likely has investor friendly terms so its possible you guys aren't earning performance fees, or if you are, it is not that much. I think you could make an argument your salary should be $25k or so higher, but that is not a hill I would die on. 1x salary sounds right for a bonus in this situation...you take a pay cut to join these start ups in exchange for 1) the GP points, which we hope will hit, and 2) a smaller team to distribute performance fees when they are earned. I would be more concerned that you've already had an investor pull money.
Agreed. If you underperform your benchmark you shouldn't have a bonus at all imo....
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If you already have a share of the business why don't you go and help fund raise + manage IR? Idk you sound very entitled to me and expect the founders of the fund to do all of the work when you are also a business partner and aren't really pulling your weight. It's not enough that you bring in returns (i.e. can buy low and sell high) now you have to help make the CIOs life easier by thinking like a business partner and helping build the fund up. Don't they teach you this in business school?
Great feedback. Thanks.
It would be helpful to know what the fund's fees are, but speaking from personal experience, 1.5% is ass. I would ask for at least 5% and think 10% would be fair given your two years of P&L generation. If I had another good year I'd probably be asking for a bump to 15%. For the interview processes I would probably ask for 5% of the incentive.
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At 18% I'd say more like 5-8% than 9-10%, but that clause is some bullshit and I would also be looking for a new job.
When you say special sits - what do you mean? More distressed / credit or more event driven equities / merger arb?
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Bump..I was thinking with 6 yr+ of experience like OP, we should expect at least $400k TC, but it seems like everyone thinks it is within the ballpark. No wonder everyone went for the pod route.
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What was tc at the LO and why'd you leave?
Leave asap. Why did the other analyst generating $10mm leave? Founder not willing to pay even when talent bleeds. Fund will not scale. Especially with underperformance the path of travel is AUM bleed. You can get $500k+ for 6 yoe at a real credit HF.
i don't think you're horribly underpaid but largely the bet that comes with working at a sub-scale startup type HF in any strategy is the ability to scale and then ultimately play more materially in that upside. you have a small % of the GP but in reality if you get to $1bn in AUM while your % share is increasing in the next 2-3 years then those numbers become much bigger. i'm in a similar seat to you with a fund that's raised a little bit of $ in AUM but still broadly sub-scale and my share has scaled dramatically over the last > 6+ years to a point where that's now typically worth in excess of 1x my base salary, before even worrying about returns/performance....
you have to weigh it as 1) a bet you guys continue to perform well and 2) a bet that the PM/team can raise more material capital over time.... my own personal anecdotal experience frankly though is that having 1 of those 2 is enough to get paid OK (maybe high 6-figures) but not enough to really start making millions... the math really starts becoming favorable if you can raise some capital, have decent returns, and your economics continue to improve.... but again this happens over time of being at a place....
You have more leverage than you think. I spent my early buy side career in a similar setup (same story of overpromised verbal commitments, tiny initial stake, and my P&L contributions responsible for most of performance). With an IP recently departing on such a small team and weak net returns, if you also leave that will raise flags and be investigated when clients redo their ODDs. If that causes even a single client to pull and other clients to then reconsider / traction on any growth to stall further its a massive headache for the founder and easily worth a multiple of your comp to avoid. Not to mention having to replace you and take a risk on someone new (anyone good is going to ask why everyone left) while also pacifying the other investor on your team whose job just got harder and whose leverage just went up considerably.
Carefully evaluate if you like your current set up outside of comp. If you do there are paths to asking for aggressively more and staying in your current seat. I would recommend asking for a formulaic bonus that is between 10-20% of the carry pool with a step down as the fund scales up so it covers your risk when sub scale and aligns the founders incentives with scaling up the org. Have a backup option ready if things go south. Very unlikely for the founder to retaliate short term for the reasons mentioned but will likely start pushing you out long term if founder doesn't see it the same way and thinks you will leave.
Small SM funds can be really great or horrendous, there are very few that are in the middle ground.
These roles are a big bet on the head person, not only in their ability to manage the book / raise capital / outperform, but also in their ability to reward you when things go well.
The market is filled with small SM HFs where all the upside accrues to the head person and the culture is questionable. These funds never scale, have high IP turnover and should be avoided.
The counter is there are some really really great SM seats where you can spend your entire career and achieve all your financial goals and more.
It's hard to know what exactly your situation is, however when red flags arise, and it seems there are a few here, it's time to consider other options.
I'm happy to chat directly w/ you as I've spend most of my career in the event space. Feel free to reach out.
Best of luck!
Can you pls elaborate what should the comps arrangement at exemplary "great SM seats where you can spend your entire career and achieve all your financial goals and more" look like?
Currently considering joining a similar startup fund of this size but not sure if the comps is good or not or how to negotiate a better one.
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