LO PMs/Partners make 8 figures??
Met up with former b school friend who mentioned average/middle of pack partners at the top 2 big LOs are making 8 figures…
News to me. Can anyone confirm this? Capital group/wellington. How are you paid as a PM/partner at these firms (do you get equity in the Capital group/wellington partnership, or do you get some % of the fees you bring in)? 8 figures by early 40s and 7 figures in your 30s sounds pretty sweet to me, l/s is too hard :(
Can anyone provide comp progression by YOE for these 2 (and similar caliber LOs)? Like what does comp look like for a regular analyst, senior analyst, PM, partner?
Following
8 figure is 10M+. Of course they are making that much, nowadays most good PMs can make that much in good years
Wow didn’t realize. How does that work? Which of following assumptions is wrong? PM runs $5bn fund, LO charges 50bps, $25M in fees that go to LO GP. So PM gets 40% of that ($10M)? Seems pretty high
Unless average fund size that PM’s run is much bigger? Can you elaborate on your upside case math? Seems like much better R/R than PE or HF
By taking risk and generating unexpected gains. Some PMs make 20M at early-30s.
Guys check this persons comment history they don’t know wtf they are talking about…
I see this often, a form of the dunning–kruger effect
Trying to associate outlier achievements with oneself, even though they themselves are nowhere near that level, in order to downplay or look down upon other's achievements or think more highly of oneself
And how long does it take to get to 8 figure comp level? 15 years? 20?
It’s not about YoE and climbing ladders. It’s about 1. managing your own book 2. High AUM 3. Take risk 4. unexpected gains. I’m in quant strategies though, not sure about fundamental LS
Del
LOs don't make money on returns, they make money on AUM
if you started in the biz 30 years ago you're ~50, and if youre the successful ones who ended up climbing the LO corporate ladder you're now a lead or co PM of 2 - 5 1B - 5B type funds - your total "AUM" can easily get into the 5 - 10B range
you're still on the legacy fee structure so your gross/raw management fee is somewhere in the 10m - 100m range
a lot of money to go around purely off mgmt fees even after all the costs + the partnership economics since if you've done this well you're almost certainly a partner
all you have to do is staying within a couple hundred bps of your benchmark
sounds great but theres no way anyone starting now/started 10 years ago is ever going to reach something like this
Not seeing the math. And I think as HF guys we’re both off on the total AUM overseen #.
If LO guy oversees $5-10B and the average fund charges 50bps, that’s $25-50m to the firm, is the PM getting 20% of that? Some of these funds have like 8 PMs on them
The reason I think the 5-10 # is too low…for example CapG has funds that are $50-500bn with 8 co-PMs. So if you have a 100bn fund charging 50bps = $500M, I could understand some really high numbers for each of the PMs. Would love thoughts from anyone at capG or Wellington
At Capital and Wellington $5-10M for a tenured partner is very realistic. But one has to understand that these two (maybe three, along with Dodge and Cox) are complete outliers thanks to the high AUM, and (maybe more importantly) the private ownership structure. Note that to reach those numbers at a LO, a private ownership structure in and of itself is not sufficient. At these places, there is no single person or family who owns the lion's share of shares to disproportionately participate in the profit sharing scheme. These details, while seemingly superficial, are very important when thinking about the long-term upside.
No way will the average fee on a 100bn fund be 50bps. Think closer to 30-35.
there are comp structures where the PM's are paid on percentile rankings by Morningstar/lipper/Russell, etc and thus on performance. This is derived from the sales organization and senior execs doing specific analysis and making assumptions that if we get X returns, our net flows will be Y, and our AUM will grow or very large AUM will stay the same.
Then what is the ceiling one could expect if they started working in a hedge fund today.
So it seems like senior LO comp is just based on how much AUM you oversee, which is largely a function of how long you’ve been there?
Would appreciate any actually data pts from CapG or Wellington jrs, if you’ve heard any. Friend said TMT PM cleared $12M last year and had ~17 years there
What do you make at these firms in years 0-3, 3-7, 7-15? Do you become partner after 15 years? What % of analysts make it to PM and to partner?
Not sure if comp is a similar structure to PE (it seems like it is given private partnership structure), but how many points in the CapG Wellington bonus pool do you think a partner has? LSD or 1%?
Was an intern, can confirm PM comp of $10M+ with 20 years at the firm. I was also talking to a guy that came over from a MM HF and previously top IB (decided against MF PE due to WLB) and he seemed really happy with the comp structure and basically 0% chance of getting blown up with similar upside. He works in the internal HFs
Without giving too much detail, how much AUM does a partner need to oversee to make that much? $20bn+ (~100M of fees and 10% of that would be 10M)
Can you elaborate on comp structure for the other guy?
Have heard first year comp post-MBA is ~$350k at Cap / Wellington - this "guaranteed" so not sure if there is any upside to it. Real money starts when you have a sleeve of your own to invest which I believe can start in year 2, though I'm not sure of initial $ amounts or the comp structure around your sleeve performance
i can generally corroborate this. $350-400k and some sort of long term options / performance units is typical for top long only, post MBA roles e.g. T Rowe, Capital, Fidelity, Barron, Dodge & Cox, etc.
Something feels way too good to be true here. You can’t just sit around underperform the market and get paid 10 figs. I believe the numbers being cited are Folks who started in the 80s and have been around for awhile to milk it while it’s still good. To a new MBA, apart from the lifestyle trade offs I don’t see how this is a trend that continues
I was an intern at a top LO and was similarly skeptical about the success of long only managers continuing into the future.
While networking, a few PMs explained that the purpose/advantage of active management is to not only perform decently well, but also to actively manage personalized client investment strategies (think private wealth advisor but for huge pools of money - these investors don't want to just throw their assets into passive or purely PE/HF without diversification to weather the market long term). For example, a large endowment or pension looking for stable, long term outcomes prefers an actively managed strategy that is customized for their specific goals. Large LOs (Wellington, Capital, etc) who offer a selection of strategies are very attractive for these types of investors. Wellington is on great footing as they also offer alternative strategies in venture, private equity, private credit, and long short, and it won't be long before the other big LOs expand into these areas as well.
Smaller managers without differentiation and mid returns are facing the most headwinds. I think the larger asset managers are still one of the best seats in finance
Based on your title it looks like you chose the IB route. After interning at a LO and speaking with PMs I'm curious, is LO still your end goal?
Don't WM arms of IBs offer this though?
I thought pensions and endowments already had allocators who select strategies themselves. Why would they delegate that to a LO?
Right, the industry is moving towards more personalized goal based investment management
It is a distribution for very fat tails. I came very close to switching to a major LO 6-7 years ago. Getting a share of partnership is the key driver for these places.
These were the ballpark numbers for a ~ $80B pool of capital. The firm had other business lines, I am guessing it was similar for those funds/business lines as well.
-60bps average fee level. $480M of revenue. The house got 60%, leaving $192M for the 8-10 partners.
-The three most senior partners had been PMs for 20+ years and had approximately 20 points each, making $40M/year.
-IF an analyst made partner they got 1-3 points to make $2M - $6M a year. If someone wasn't deemed to be partner track, they were cycled out.
I didn't take the job because I didn't want to switch cities and there was a girl involved... it was by far and away the dumbest financial decision I made in my life. Everything worked out ok in the hedge fund world, but there is not really a cushier seat in the world than being an established long-only fund PM.
I will say that these seats are dying. Capital and Wellington are Capital and Wellington. If you don't manage huge amounts of money the economics are not even the same planet. I know PMs of $2B - $4B funds at long-only managers that make $1.5M - $2M. Total firm AUM is not same planet as bigger firms and they still have to pay a lot of analysts, accountants, compliance, etc. And fee compression is very real.
That’s helpful. What did you mean by the house gets 60%? Who’s getting that (if it’s not the partners…)
Do you have intel on how the economics at Cap and Wellington actually work? AUM in the trillions but partner count much higher (my guess in the hundreds)?
How long does it take to become a partner at these firms, and what’s the comp delta between an analyst, sr analyst, PM, partner (unless PM = partner)?
And what’s the delta between CapG / Wellington and everyone else, comp/economics wise?
wow giving that up is wild...
i get HF game looked better 6-7 years ago
It's that second part that all the newcomers on this thread are missing. A few senior partners really do make tens of millions a year; but add up what percentage of the employees are senior partners (don't forget to include all the former employees who washed out before they made it) and then ask if you really think you'll be able to beat those odds and get there yourself.
Have heard partners at Pimco (~80 of them) each get paid $5M+, highly skewed to the top 10 guys.
Guys like Andrew Balls, Christian Stracke and Jason Steiner are probably making so much fuck you money. I would kill to see their pay stubs.
PIMCO has, what, $1.7T in AUM? On an average fee of 40bps, that's $6.8BN in fees. If 25% of that is comp, that's a $1.7BN pool. That's $550K per head.
In the Gross-El Erian days, partners would take in half (yes - half!) of the comp pool. Across 80 partners, that would be a whopping average of $10.6M per head. These days, the "star manager" isn't much of a thing anymore. I imagine the partner comp pool is 25%, which would equate to $5.3M per head. That's broadly in line with your estimate. Though partners include those in sales and those in PM.
Why do you think less is being paid out to partners these days? Is that driven by fee compression?
PIMCO MD's split 30% of the firm's profits, it's absurd. In 2013 Gross made $290mm, El-Erian $230mm, Ivascyn $70mm, head of product management $50mm, CEO $45mm. Was a $1.5bn bonus pool split amongst 60 MD's. Meanwhile, the lower level heads are underpaid compared to street.
Yes, highly skewed to the top 10 guys. But they have 3,365+ employees (plus countless former employees who washed out before getting anywhere near the top) so you can figure out the probabilities of you personally getting there.
I am at a large LO. Mid hundred billion $ figure total AUM.
Total comp pool for our team is 25% of fees. Our $10bn fund = $60M in fees = $15M bonus pool. We have 7 IPs including 2 PMs. Some of that bonus also goes to 3-4 dedicated support staff as well. Don’t know actual comp but our PMs are probably taking $3-4M each, rest of us splitting the difference in varying amounts.
The above numbers are probably more towards what is realistic these days at funds that are not the enormous scaled ones. And fees are compressing with flows being challenging too. Still very high comp though. And less fear of oblivion vs HF.
Yes Wellington and Cap Group PM/Partners make a ton but that’s equivalent to assuming you have a shot of becoming a GP at Blackstone. Very very few of those people out there but they are the best seats in finance.
This is the correct math. Investment teams at private LOs may get a bigger cut of the fees but at public shops, 25% is a good rule of thumb.
I did a quick search and saw people at CapG or Wellington that are CoPMs on multiple funds (3-5), each of which are 50-200B. Even if you’re only a coPM on one of these, a $100B fund that charges 40bps brings in $400M. If that PMs split 25% of that and there’s 8 PMs, that’s ~10m for each and then the analysts/BO split the rest?
Then when you layer on being a PM of multiple funds (as they all seem to), the numbers multiply by 3-5x…seems too good to be true? Do you need to be partner to get comp like that, or does PM work? How hard is either to reach?
My perception of LOs was “don’t lose money, show up with smile on face for 15 years, and you’ll be PM or partner”…to what extent is that not the case at CapG Wellington?
Seems infinitely better than being GP at BX - more money and less hours/stress?
I’ll keep it simple. Yeah PMs/partners at those firms make 8 figures. No it is not easy to do nor is it an outcome you should expect.
You seem to think breaking in to a top LO is an easily achievable goal to have. It’s not. Those firms you listed are exceptionally hard to get in to, and once you do it’s not “just sit around and wait to be made PM” like you seem to think. You actually have to perform well, and at the large spots you mentioned there is also a considerable amount of politics involved.
We’re talking about 0.1% of the people in the industry here. It’s insane to think it’s realistically achievable unless you are both extremely talented and lucky. It’s equivalent to saying “Bill Ackman is a billionaire, why doesn’t everyone try to be a PM of a multibillion dollar hedge fund.” as if that is something anyone can do with some effort.
The realistic (and still very difficult) goal to achieve is to be a PM of a decently scaled fund making LSD millions. And even then those seats are disappearing over time.
What do numbers look like for career analysts? My perception is that at Wellington/Cap Group, if you’re well liked and do well enough, you will most likely have the option to be a career analyst if you’re not up for PM. How does comp look for analysts in their late 30s/40s at these firms?
Bump
Generally around $2M in your 40's.
Not to throw water on the hype, I’m at a private LO, and I know for a fact there’s only a handful partners pulling in HSD to 8 figures money every year; they’ve been partner for at least 15 years, and they’re the heads of the division/CIO level or the lead PM for a double/triple digit billions fund. Your “average” lead PM for a fund / less than 10-15 years partner is doing LSD/MSD.
To reiterate, being a partner is not the given/normal outcome, and these seats only getting rarer. At some point you’re literally waiting for someone to die/retire.
Correct, but by the time they hire a PM you are already retired. No churn whatsoever.
I will be at one of the two firms you listed and have a mentor who I have grown very close with who is a partner and PM at the firm. This person has told me that the majority of his comp comes from his 7 year performance (meaning how he performed against his index over a 7-year period). He, and many of the more junior partners at the firm, are not comped as much on AUM as they are on performance. This is not typical for the industry, but these firms are outliers in the way they do things which is why they are so successful. Moral of the story is there is a lot more that goes into comp than how big of a fund you're over (although this definitely plays a role). If you want to be one of the partners that makes 8-figures. You cannot just coast to the top and make a ton of money, you have to perform. Everyone I have met at the firm is both extremely smart and hard-working, albeit in a different way than what is typically portrayed in finance (PE, IB, Etc..). They are not "sleepy" like people often say on this site.
I have heard figures consistent with what you have mentioned for tenured partners at these firms. My understanding from my bschool friends is that comp doesn't really inflect until after you make partner and start getting distributions of the firm's net profits. Up to that point, comp progresses on a more linear path.
In terms of what experienced analysts make, here is a data point from a lawsuit from an ex-Wellington employee who was hired as an experienced analyst and was in her mid-30s and had around 13-14 years of experience at another mutual fund. Her offer was for ~$650K-ish back in 2014. She left the firm in 2017 and was making ~$750K.
1) "After negotiating for higher compensation, Plaintiff accepted Wellington’s offer for the position of equity research analyst within GEPM annual salary and bonus opportunities of $650,000 USD."
2) "...Plaintiff’s continued employment at Wellington at approximately $750,000 annually."
I think there are a few things to keep in mind: a) This was 7-10 years ago; b) at the time she was terminated, she was a bottom-bucket employee. So I think we can all make our own adjustments to the figures. Therefore, if I had to guess, I would say that comp for an analyst at Wellington goes from $350k-ish out of MBA (this is based on someone else's data point above) and probably ramps to $1.5mm for a late-30s analyst.
Correct. I heard you tap out as an analyst in the $1-2m range unless you make partner in which case your comp essentially doubles. To make more than that you need to be managing big money
So yeah the average partner at Wellington might make mid to high single digits - but skewed towards the outliers who are making a ton
i think there are a lot of factors that may contribute to 8 figures. Just keep in mind, that there also LO guys that make money on how much alpha is generated - a lot of clients like this because of aligning interest
So within equities what are the most lucrative firms to be in? Only the Citadel’s?
How big of a risk is future fee compression/outflows to someone entering the industry now considering it takes 10+ years to make partner?
If you can’t make basic assumptions to do the math yourself, what business do you have asking about how much money you’ll make when you get to the top of the top in an organization full of analytical overachievers?
I've researched this topic as someone considering pursuing AM and have made my own assumptions of how I think this will play out. I don't really think it's unreasonable to look for additional opinions on a forum where discussions between college students and older members is the norm... Unless you're an idiot I find it hard to believe you blindly took the job you have now without asking lots of questions to people in similar roles and asking for additional povs
In my opinion, less than you'd think. The active to passive shift has already largely occurred. 50%+ of equities are now managed passively. I don't think that will trend towards 100%. I don't want to call a top but even at 50%, it seems like the tides are slowing. Fee compression should fall correspondingly. At a certain point, asset growth will supercede fee compression as an impact on mutual funds fee growth algorithm and the industry will get back to being a GDP+ grower, as the combined market cap of US traded stocks supercedes US GDP growth (in turn due to the leverage inherent in the US economy) generally. I think fee compression will continued but more like 50bps trending to 40bps over the next two decades (so a ~1% headwind to fee growth per year), not from 100bps to 50bps over the past 20 years (a ~3% headwind). In addition, the # of analysts in the industry is generally flat. There is a perception that other buyside firms (namely MM hedge funds & private investment firms) are "the future" due to them offering better products to their LPs when in reality both of those investment models are more capacity constrained than long only. Multi managers can only make up so much of the trading volumes before they need to trade with themselves and days to cover on the short side necessitates a pretty high bar liquidity wise which precludes both investing in small caps and lower float mid cap. PE has already picked through most of the quality privately owned businesses in NAM and have now resorted to buying outside the US, buying shitty companies and dressing them up just to swap them to a larger fund, cutting the business to the bone to turn it into a YieldCo not a going concern, etc. and are probably close to their tipping points. In addition, PE looks a lot less attractive to investors that view them through a "public market equivalent" lens i.e. the underlying assets are not in fact less volatile just because the assets don't get graded in real time like publicly traded assets do. This is the career bet I made 2-3 years ago when I switched from PE to a long only and so far at least the "PE is a bubble" part seems to be playing out.
Thanks for the in-depth response. I agree with you that MMs are capacity constrained and that the outlook for PE is not what it once was.
I guess what I am struggling to understand (maybe because I'm an outsider to the AM industry) is this: even if we assume that fees remain between 40-50bps for the foreseeable future, why would any allocator choose this over a passive product that is essentially free and has similar outcomes, if not better net of fees? I've read other threads on this topic and haven't really seen a convincing argument. I understand that active investors will always need be a part of the markets to some extent since passive relies on the price discovery of active but from my pov LO AM in its current format will have two choices to make:
1) Keep fees at 40-50bps like you said which will likely result in outflows and therefore greatly lower comp for analysts/PMs
2) Lower fees to keep AUM which will also greatly lower comp for analysts/PMs
So unless you believe performance for LOs will greatly improve, what am I missing/misunderstanding as an outsider?
The worst is definitely not over on fee compression and share loss. AUM in the active industry is still mostly within the mutual fund structure. The shift to ETFs from mutual funds is the next transition that these companies are undergoing and every single active manager is worse off because of this due to lower expense fees. Sure it's definitely a better product for consumers but institutional asset managers will be worse off given that they will be doing the same (if not more) with less revenue dollars from a smaller fee. I disagree that the share between active and passive has stabilized. Muted IPO activity (+) dominance of a few LC names (i.e. M7) driving index returns certainly don't help with the LO value prop. Now there will always be a certain % of institutional and retail customers that want a active LO type products but in no future outcome do I see the future for actively managed equities better off. At best we could expect to see smaller sized cost structures with consolidation (happening already) + the advent of AI (over time) potentially winnowing the number of heads in these organizations, from back office all the way to junior model monkeys but this doesn't solve the revenue problem. Open to being wrong here, particularly on magnitude but people should really reconsider any move to this industry.
In a sentence, you're arguing against a strawman. I neither said that the passive to active share nor fee compression were reversing, rather that both effects are past the middle part of the S curve and will decline in importance as a new status quo is reached in which active managers still play a role albeit a much smaller one than in the past.
The first derivative (YoY change from active to passive) has slowed. This isn't up for debate, its quite easy to measure. In addition, the first 30 or so points of market share gain low cost, passive will have the greatest effect on fee compression as it already led to a near 50% decline in average fee rates. There simply isn't another 50% to decline.
Muted IPO activity and M7 are temporal. Both of those things very well could reverse in 2024 even. IPO's certainly will, I can say definitively that all sorts of private companies have hired bankers. 2024-2025 will likely be one of the most active IPO periods in history. You have Shein, Stripe, Reddit, Plaid, Databricks all expected to go public shortly.
Automation trends will continue to be good thing for the largest managers (they can use third party tools and also build their own proprietary tools on their proprietary data), bad for the mid-sized (not large enough to build their own proprietary so will be at a competitive disadvantage relative to large), neutral to good for the small managers (they have most to benefit from automation but will need to rely the most on third party vendors). But, automation is nothing new. Its been the story in the industry for 30 years. CapIQ, Factset, etc. have already automated the industry significantly. Think all those junior research analysts throughout every level of Wall Street spreading comps and pulling 10ks via mail back in the 1990's and early 2000's that are no longer necessary. Automating those tasks plus automating various back office processes is far more significant than Open AI drafting ~80% accurate summaries of topics and industries. Fully automated research analysts are decades away, that's going to be one of the hardest roles in the US economy to fully automate.
The outlook is much better for analysts than it was 5 years ago as the supply of new MBA grads entering the space is much, much lower after a decade of belt tightening. In addition, the average long only analyst is now old (at least oldish, my guess is ~40-45) and rich. They're lazy, they show up to analyst days without a good sense of what the companies they're meeting with even do. They're not hard to outcompete and eventually they'll get bored of flying every other week on roadtrips and conferences and just retire. This isn't 20 years away, within my team its more like 2-5 years away.
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