Natural COI between PM and analysts
Haven’t quite seen any discussion on this but why would a PM ever wanna promote their analysts to sub-PMs and later PMs (at least in the arb businesses where things are more zero-sum)? Same COI when it comes to comp: the more you pay your analysts the less you get for youself as a PM from the shared pool. Asking mainly wanting to understand how analysts can break out of this ceiling
Some pms are greedy. Some pms are not.
A good analyst should be helping bring more $ to the pnl pool than if they didn’t exist so the PM should be doing better by having them on the team (see below for an important caveat).
Secondly, a good analyst makes my job easier - I can work a little less, go to a few less conferences, etc.
Thirdly, it’s the right thing to do. An altar who is with you a while should be like family.
Fourthly, at some asset class disciplines (converts, cap structure, merger, index), it takes longer to get a true PM seat away than it takes to get sub book or carve out in LS (most places don’t do them bc it’s the same ideas and there are far fewer pm seats), so the analyst stays on the team longer.
Fifthly, book sizes can be quite large in those areas, so pnl opportunity is big and so even if it is a zero some game, it’s not hard to pay well in a good year.
***The caveat to number one is that since there aren’t ideas to generate as much in some of these, you have to show value above replacement (VAR) - like moneyball. If I could grab someone else and they could mostly do what you do, then you’re not getting paid like you have some unique skill / value-add.
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