Sub-PM / PM Negotiations & Career Advice
A few negotiations & career questions for the community, would really appreciate some colour and help:
- can you advise on negotiating strategies for sub-PM / PM terms on main MM platforms (e.g. having competing offers on the table, exc.)
- on point above : which terms would be n.1 priority (i.e. %pnl cut, var limits, soft stop, hard stop factor limits (if in EQ ) / DV01 limits (FI), breadth of mandate exc. ).
- still on point 1 how to structure sign-on + guarantee especially if you have long Non-compete? can you be bought out of deferred comp? can you play on figure of deferred comp you leave on the table with perspective firm or do you need to be precise? can you leverage structuring of guarantee as function(current PnL / sharpe, expected future PnL/sharpe, opportunity cost, soft capital, set up built, rump up period at next platform especially if quant, exc.) at current shop to make the move worth to new employer?
- in terms of costs: which can be passed through to LPs? e.g. some platforms allow base, some others see it as draw of PnL; how about infra costs, data costs, hiring costs exc. which can be quite cumulate if somebody runs a quantitative strategy for example. --> what is min PnL required to breakeven basically... inputs x-strategies from various PMs on this would be v much appreciated
- difficult one: when to step up from sub PM to PM especially if still relatively young (i.e. only seen limited market regimes, pre 2020 QE low vol, 2022 so on one hand feel haven't experienced enough on the other hand being a sub pm is effectively same pm business risk but with worse economics so...)
- notice / Non compete: how often can you negotiate reduction of those terms with current firm or you take as it is?
LOT of questions in there. There is an enormous difference between navigating this as a sub-PM and a PM. As a sub-PM, you are going to be dealing with more of a handshake vs. contract deal with the PM and you are largely going to inherit most of the terms the PM has vs. have leverage to negotiate yourself. I would also expect it to be harder to negotiate a contractual guarantee with PM as he/she is going to be paying out of their P+L pool - sure, if you join mid-year and PM is up a fair amount, he/she might offer something for guarantee but if performance suffers then it might not be honored.
In terms of structuring deals, my personal view is that you should prioritize longevity when you are more junior (looser drawdown limits, more flexibility) and then prioritize payout terms when you have more experience and can fall back on track record if performance ever suffers and you need to find a new gig.
This is the right answer - the name of the game is to keep your trader's option open for as long as possible. If you are a newer PM also think about how the terms you are demanding will affect your leash. If you are asking for a lot of guaranteed comp, management will be way less tolerant of drawdowns/ periods of underperformance/ long buildout etc. and they can let you go even if you technically haven't breached any of the parameters of your contract (e.g. drawdown, VaR, etc.)
Thank you for the above yahoo, much appreciated. Tagging Silla, HFPM, MMPM - followed thoroughly your inputs on this platform over time and hugely respect you all for the consistent high-quality content and help to the community. Would be great to have your opinions.
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