Negotiating MM equity PM offers

Based on the most helpful WSO content, here are some key points to consider when negotiating a standalone equity PM offer with one of the larger platforms:

Flexible Parts of a Compensation Package:

1. Bonus Structure:

   • Some firms may offer 100% cash payouts with no clawbacks. This can be a significant point of negotiation.
   • Be cautious of deferred compensation; if a place is deferring your comp, you never truly made the money unless you stay long-term.

2. Non-Compete Period:

   • A good deal is typically around 6 months. This is often negotiable depending on the firm and your leverage.

3. Drawdown Terms:

   • These can vary significantly. Some firms may offer partial credit for P&L in setting subsequent drawdowns, which can be a point of negotiation.

Clauses to Be Careful About:

1. Intellectual Property (IP):

   • Ensure you understand any IP clauses, especially if you have developed proprietary strategies or models. You want to retain rights to your intellectual property where possible.

2. Calculation of Sharpe Kickers:

   • Be clear on how performance metrics like Sharpe ratios are calculated and how they impact your compensation. This can affect your bonus and overall earnings.

3. Non-Compete Clauses:

   • Review the duration and scope of non-compete clauses. These can limit your future employment opportunities.

4. Drawdown Provisions:

   • Understand how drawdowns are calculated and how they impact your capital and compensation. Some firms may reset from zero, while others may offer partial credits.

General Advice:

• Career and Development Path:

  • Ask about the career and development path, including what future opportunities look like (e.g., investing in the fund, cut of P&L).

• Market Comparables:

  • Look at market comparables to understand what is standard in the industry, but be aware that smaller firms may have more variability.

• Future Payout Agreements:

  • Ensure there are agreements on what future payouts could look like if conditions improve. Firms that don't have these agreements may undervalue you over time.

By focusing on these areas, you can better navigate the negotiation process and secure a more favorable compensation package.

Sources: What to pay attention to when signing a contract?, , Is this associate compensation competitive?, PE associate comp, https://www.wallstreetoasis.com/forum/investment-banking/qa-md-in-ma-and-capital-markets-with-bulge-bracket-and-boutique-experience?customgpt=1