Start up hedge fund renumeration
A start up (non Marquee founder) I've been talking to wants everyone to work for free and is not giving equity to any employees. Founder who is CEO and CIO says when raise funds people will get a salary and discretionary bonus. This applies to key people like myself as a key sector PM. Despite the team COO, IR and research building the firm animosity seems to be building from what I sensed in discussions. Frankly I don't think the guy is that good to pull this and feel why help someone build a business when one can do it for themself if desired. Any thoughts?
in order to work for no immediate wage, but only for the possibility of payment if a business succeeds...that is the definition on an owner. People should negotiate for an appropriate amount of equity. What is appropriate? and what equity is there? Equity in the mgmt co that will ultimately take 2% of fees and 20% of trading profits? If the fund has not raised $$, then there is no work....no trading...you can't trade before raising capital. So either the founder needs to go raise capital before actually hiring...or join a MM platform (kinda the same thing...except the MM platform capital is more expensive...but easier than raising on your own).
Raising capital should come first...otherwise, you are putting the cart before the horse.
If he doesnt have the resources to pay a small team for a year, he doesnt have the track record and/or street cred to pull this off successfully. Avoid.
I have seen this way too many times. It never ends well. I would not go near with a 10 foot pole.
Avoid like the coronavirus
This is insanity. A founder wants to keep 100% equity, hire people and not pay them, have them do the work to set this up and then pay them once things are up and running. Umm, risk vs reward?
In a very much joking way I admire this person, essentially looking for a risk free setup (outside of the relatively small costs to setup the fund) and driving a hard bargain. But joking aside there are so many red flags as others have called out, and if you are going to take that much risk you should be paid (...equity in fund, you are building it). The level of talent that you can pull in with that structure usually is no good so my bet would be this doesn’t end well.
Totally agree. In the end, the founder knows that there are people out there who are desperate to break into industry and use that as a stepping stone to lateral into a job at a "real" HF later. I think the founder is a POS.
The balls on this guy, if it ain’t in writing it don’t count.
Startups of all kinds without revenue hire staff. There are 2 ways to compensate staff
1) salary, starting on Day1, with a baseline of MINIMUM WAGE. This is, by definition, the minimum. 2) equity. even if a small token amount.
imagine if this fund turns into a 200mm AUM fund 2% of AUM = 4mm/year before expenses...such as salary, rent, software, lawyers, accountants...all that stuff adds up depending on the type of fund.
1% of 4mm = 40k....but of course..most of that 4mm goes to fixed costs like salary and rent...so lets assume you get half of that....20k/year from 1% equity + 1% of the performance fee. Lets assume the fund does great and makes 30% on 200mm = 60mm..and the 20% performance fee = 0.2*60 = 12mm 1% of 12mm = 120k
So, if you got 1% equity, and if the fund does well, you might get 140k/year.
Thats not really enough incentive, considering the probability of that success is less than 10%...so 10% * 140k = 14k. Thats the risk adjusted value of 1% equity in this fund.
He is gambling with YOUR money...and so are you. your time = money...you could work elsewhere and make 150k.year with 100% certainty. The math just doesn't make sense...the Founder is delusional. If he is this delusional, what are the odds that he'll get investors to give him 200mm to gamble with in the markets?
The guy wants to build a portfolio, set everything up and have marketing materials ready. So the team is currently functioning as if launched except for the capital. All key people are working free and they won't be partners nor would if I join. Not Mobdro even a tiny percentage he's willing to give out. I come with some very special skills and a good track record but was rebuffed as unproven and told the others are willing to work for free. Told we would have the chance to buy into the firm.
https://sarkariresult.onl/
Unsure what you are trying to say in your post. It is a ridiculous idea, I wouldn’t do it, I doubt anyone with a proven track record would do it. If you have a proven track record you should be able to get into many other places and get a cut of PnL. Nobody “good” works for free (unless there is equity involved), again if you are taking all this risk you need to be compensated for it. If the fund is a huge success what are you going to get? If you can’t answer that then don’t join.
you should only join this type of platform if you have no other better options....but if that's the case...."maybe something" is better than "nothing" i suppose....but really not much better.
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