Single Manager PM Payout Formula?
I recently saw the thread concerning HF PM payouts at a MM - does anyone have any thoughts on what the payout would be at a SM, assuming a 2/20 structure, and no leverage? If you were the only PM at the shop (working for a CIO), would you take home a flat single digit of PnL (5-8%)? Or would there be some other formula? I would assume that hypothetically, if you took home a single digit of PnL such as 5%, you would be getting 25% of the incentive fee (5% / 20%) - am I mistaken in thinking this? Can anyone help?
bump
In 99% of SMs, the PM and the CIO are the same person.
It depends. In the SM I worked at there were 3 sub-strategies (merger arb, special sits and credit) and each had its own PMs and analysts. The CIO/founder had final say over all investments but he was more of an arb guy so less interested in the other 2 strategies (unless they were losing money). The goal in a SM is to become a partner in the management company so that you share in the upside. At my fund the partners (almost all PM's were partners) received their share of the income of the management company based on their stake in the company so it was not really tied to P&L streams as much as it may be in a MM. My guess is any SM with a % of P&L payout will structure it in such a way that you cap out at a level that is lower than what the founder/equity partners would get.
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