Does your firm (SM or MM) pay for more PnL dollars produced from shorts vs longs?
Have heard that some firms offer higher payouts for shorts since most people don’t like working on them (have to size them smaller, market goes up over time, positions that succeed shrink your dollars at work, etc).
Would appreciate any numbers / data points around this.
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Hey shoshin, I'm here because nobody responded to this thread after a few days...maybe one of these resources will help you:
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You're welcome.
Yeah a lot of firms pay more for short pnl - imo payouts should be on alpha, not PnL - and higher for shorts because they are important but much lower return on time due to sizing / lack of compounding that you mentioned. MMs pay on PnL but since you’re market neutral it’s effectively paid on alpha.
Wanted to bump this in case anyone has data.
For a single manager that only cares about absolute dollar profits, what % of pnl would be fair for shorts?
For reference, a $5bn SM I know pays ~5% on longs for ideas sourced by senior analysts. But it would seem unfair to do only 5% for absolute profits on shorts given that the market is up 50% since the start of 2023.
That's interesting. Does that SM net out more dollars for losses on shorts as well (is just overall higher risk both ways to recommend short positions)?
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