Hey, I have no experience with hedge funds but purely out of interest, I need to know. In a multi manager hedge fund a PM is allocated 100MM. He has a great year and brings in 15%, meaning 15MM profit. Now what? What does he get to keep besides his base at a mutli manager fund? 5?10?15%? Thanks for any input.
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What I’ve seen at MMs, is that the pod takes ~15% net PnL (after paying for data/infrastructure costs). Keep in mind that these pods run incredibly low risk as they are generally market neutral and get shown the door with small drawdowns, so 15% return is not what you expect, more like 3-5% (but you also run higher aum at the top places), might be different at other places.
Is the 15% payout after PM and analyst's base salary? Say one PM has one analyst and another other PM has 3 analysts, are PMs paying analysts' salary out of the bonus pool? If not, do PMs have to get approval from the fund when the PMs want to add additional analysts?
15% profit? Lol, if you pull that off without getting pulled into risk dept you are a god.
Typically base salaries are draws on the 15% P&L payout.
so, lets say the PM and 3 analysts have total base salary combined of 600k (150k each)
Typical MM pays 15% of P&L total comp pool to the PM after tech costs which are subtracted from book P&L....and the PM decides what to pay his analysts out of that 15% pot...totally at the PM's discretion. Lets assume that after all tech/data/infra costs, $15mm of P&L remains
15% of 15mm = 2.25mm...this is all the money available to be paid as comp
First, subtract the 600k base salary draw from the 2.250mm...so now 1.650mm remains
if the PM pays each analyst 200k bonus (so, 350k total comp per analyst)...that leaves 1.050mm as bonus to the PM + 150k base draw = 1,200,000 total comp for the PM
some MM firms take the base salary off the top line of the pod P&L, rather than from the bonus pool....but that is not the norm
This is not true. For the major platforms, salaries are top of the line expenses.
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