% PnL at Single Manager

Any thoughts on the below payout structure for a sector head at a single manager fund?

Context:
$5B fund
~5-10 years experience
5% of profits (aka 25% of 20% incentive fee) on solely generated ideas

Comments (19)

Most Helpful
  • Research Analyst in HF - Other
Sep 19, 2022 - 2:50pm

Pretty fair. I get the same with 6yoe at a bit smaller SM. Average %P&L take in our fund is 2%, highest is 10% (>10yoe). 

  • Quant in HF - Other
Oct 6, 2022 - 4:52pm

Don't get me started again about the whole MM vs SM shit that seems to be a recurring theme here. Intellectual bragging rights are great, but I'd rather have dollars on my pay stubs. And if you really feel this way, then there's a whole industry of LO/AM where it's about as beta as you could possibly be, and those guys can make decent money. I don't hate them for it...good for them getting paid.

Oct 7, 2022 - 11:02am
FIG newton, what's your opinion? Comment below:

Think about it though: if an LP wanted beta exposure, they could get it practically for free. Even LO shops survive by generating alpha, otherwise no management fee is justified

Most reputable SM's and LO's have some sort of alpha compensation built in. Compensating only as % of absolute returns incentivizes vol maximizing (which is bad)

Oct 7, 2022 - 12:46am
TopBoy, what's your opinion? Comment below:

That makes a lot of sense in terms of incentives driving outcomes. Are you at low-moderate net firm or there is a lot if flexibility in exposure? What is your %PNL based off alpha generation and shorts? And how does that compare to your total comp?

  • Analyst 2 in HF - EquityHedge
Oct 7, 2022 - 2:41am

I ran out of SB so want to reply in support of ur point. It's a typical setup in SM. Paying straight on % returns incentivize people to become beta timers and fight for BS

Oct 7, 2022 - 10:58am
FIG newton, what's your opinion? Comment below:

Idk where the hate is coming from. This is how you make sure a fund lasts through multiple cycles

Oct 6, 2022 - 2:23pm
cm45, what's your opinion? Comment below:
shoshin

Any thoughts on the below payout structure for a sector head at a single manager fund?

Context:
$5B fund
~5-10 years experience
5% of profits (aka 25% of 20% incentive fee) on solely generated ideas

Depends on your $ sleeve as well and how the deferral looks like.  Sounds about right at first sight.

  • Associate 1 in IB - Gen
Oct 7, 2022 - 8:58pm

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