Thoughts on sending a 3P comp report to my PM?
Hi All,
Taking the temperature on how many think this is appropriate. For context: I’m about to finish my second year as a L/S analyst at a single manager fund. Fund performance has been strong both last year & this one, my personal performance/contribution has also been strong, I’m in my late twenties, & I plan on being in this business for a very long time. Was previously on the sell side for close to 3 years. My long-term goal is to run my own show but I think I’m about a decade out from that (would like to expand my circle of competence / develop more pattern recognition / build more relationships / accumulate more personal capital before striking out on my own)
According to this report, I made about half the median amount of analysts with my similar combination of experience / location / firm AUM & firm performance last year, and I’m hoping that’s different this go around.
I recognize that 1) there will be some pod shop analysts who hit “gold” and skew these results up, 2) it could also be in Odyssey’s best interest to skew these results up so they can piss everyone off and encourage more turnover & recruitment, 3) my seat is about as stable as it gets and the long-term value of this is not lost upon me, and 4) as of right now I’m getting everything I need from a learning & growth standpoint as it relates to increasing responsibility, corporate access, sell side phone lines, 3P research providers, the ability to follow multiple industries, and the autonomy & empowerment to focus on my best ideas (most of the time)
That said, I really don’t want to get low-balled again if I can help it - I’m about to start a family and could use every financial boost I can get. So my question to PMs is the following: if one of your “star” analysts were to attach the Odyssey comp report in an email ahead of a year-end comp discussion after knowing he/she was dissatisfied following last year’s bonus, how would you react? And to other analysts: have you ever done something like this after a great year? if you have, how did it go?
I’m also open to any other feedback as it relates to my thought process above if my thought patterns are too young / naive / nearsighted etc. Open to all viewpoints. Thanks in advance
Don't have to give exact numbers, but what fund size/type/aum per IP and rough comp
Fund size between $500m & $1bn, aum per IP north of $100m, & rough all in comp was between $230k - $260k
That’s a pretty small fund and low AUM/head.
do you have a sense of fees? At that size and and number of employees I would assume the management fee is fully eaten up.
The next thing to do is consider how much fees the fund generated off your ideas. You’re still relatively green here with ~2 years of experience on buyside and so the split you should consider is nothing to 50-50, with 50-50 being when you are the true idea originator.
I think a better approach is to say I contributed idea x, y and z and they generated x$ of p&l. Then you can just ask how the PM thinks about comp in that context.
Do you mind sharing the report?
Can I be there when your PM gets your email please
I don't think you should attach the comp report - its kind of passive aggressive and could put the whole comp negotiation process on the wrong foot. I feel like some PMs could be pissed off, especially given there are so many people with huge egos in this industry.
That said, I don't think it is wrong to negotiate your comp with your PM. But just maybe find a more tactful and diplomatic way.
This is a dumb idea all you are doing is signaling flight risk and you may lose your seat (unlikely) or they will quietly start reducing their dependence on you and give you a modest raise (more likely) which will be long term bad.
Wait until your next bonus discussion, it is only your second bonus cycle and it could be much stronger than you expect. Before the meeting, come up with a framework for what you think is fair comp for your performance contributions, and if the bonus doesn't meet your expectations, share that framework. Be careful about this conversation - frame it more like you are curious how they are arriving at the bonus number, you were thinking about it more like X (good management will always give you an opportunity to do this and will ask if you are happy or surprised with the bonus).
If they still lowball you, start recruiting. It is often much easier to increase comp by working at a place that matches your comp philosophy vs. getting management to change the way they operate. In my experience, when there is such a large gap in expectations vs. reality negotiating just kicks the can down the road and leads to more frustration.
Where’s the comp report
I have done this mini-rant before, but really put yourself in your PM's shoes and reverse roles.
Founder of this business grinded for decades, got stiffed by bosses over the years, went through bad years and maybe got a donut.... eventually he gave up lots of compensation to leave wherever he was, and then invest his life's savings into starting his own business. Wife was probably scared as well. He then raised the money off his own reputation, and took all of the risk. He probably maintains vast majority of economics at this size. He feels he deserves it - this is his show, and he makes the most important decisions that determine the success of the firm. It lives and dies off what he does daily.
He hires a PM who probably had a similar trajectory. The PM took a risk on a smaller shop and getting pts in the GP for a chance at wealth down the line. The PM still fighting to get better economics for themself each year.
The fund is still on the smaller side. Not huge yet, so not like there is tons to go around (even if there was, wouldn't matter much tbh)
Hire an analyst...
Now how much does this analyst do for us? Did he go out and build his own coverage, and bring each new idea to the team? Did he make the final say on entry and exit, and pound the table yelling at us for a 50% home run? How many ideas were things we already knew, thought looked interesting, and tossed to the analyst for more work? How much of the coverage was just going up in a good year and riding the market? Would we have made that much anyways?
I say this because everyone is greedy. Everyone overestimates their own contributions. And there is very little incentive usually to be charitable. I'm talking the founder and PM here btw. It sucks, but its the reality.
How replaceable are you? How much will it cost to find someone else to do what you do / the value you add?
Even when $10bn crush it, and the profit pool is hundred of millions... there is little reason to give a younger grunt $1mn over $500k.
So what to do....
Compensation and incentive alignment is incredibly important, and deserves a lot of time and attention. Do what the other said, and explain you want to understand the path to growth looks like.
In my experience, I think people tend to get paid more fairly than unfairly.
This is how I read these compensation reports.
I don't remember the details, but when I dissected one of these Odyssey reports a while ago, I concluded that they were trying to inflate the numbers in every way possible (based on how they sliced the data, what data points they excluded/included, how they defined their metrics, etc.).
Even if they tried their best to be honest, they'd still have all kinds of biases in their data.
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