Typical PM economics at Citadel
As the title suggests, curious what standard and max economics look like currently for a standalone equities PM at Citadel, in terms of slope, kickers, cost structure, and so forth.
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Based on the most helpful WSO content, here are some insights into the typical PM economics at Citadel:
Payout Structure:
Capital Allocation:
Performance Metrics:
Bonus Vesting:
Risk Limits:
Team Structure:
Equity and Additional Compensation:
These points provide a comprehensive view of the typical PM economics at Citadel, highlighting the importance of performance, risk management, and structured compensation.
Sources: Citadel Equities analyst terms, Citadel Global Equities (pay, culture, career path, lifestyle), , Performance of the best PM’s at MM’s?, Hedge fund volatility strategy PM returns and drawdowns
(Equities) Assuming SrAn./PM lateral from elsewhere or Analyst promo internally:
Avg Book: $1.5bn
Avg Vol: approx. 3% (for books in lower vol sectors, book value will be higher) but risk dollars will be similar across for the most part (assuming no PM tenure at Citadel)
Typically have a team of 5 + you at that size, return target is a 1 sharpe (this is a “good” year)- means PnL is $45mm - payout is 20% - so your team made 9mm - costs probably 1mm all-in (travel, BBG, sellside research/calls,etc)
You as PM probably keep 4mm so 50%, you likely have a tenured sr analyst who will probably take 15-20%, then more jr analyst who will have 10-15%. The three juniors on the team split the other 20% amongst the 3 of them.
1 sharpe is a good year and comp is good, but bad years come eventually…
Citadel typically doesn’t offer huge guarantees to outsiders like MLP and Baly, so economics are less varied than at those places that are looking to hire superstar PMs. Bigger on both internal and external promotes
Wouldn’t think about it like this. They think terms of $vol. Not $GMV. And even then, $1.5BN is on the smaller end. A scaled team is $2-4BN.
Last I checked with friends, take-rate ~18.5% and then they nickel & dime you for stuff, so the net take-rate is a bit lower than that. As you last/make PnL, take-rate goes up. Maybe for fresh guy, starts at mid-teens and ramps over time (along with $vol, of course).
Analyst getting HSD% up to 10% of their PnL + whatever deal they have on pod’s total PnL (usually some element of retention economics). PM keeps majority of center-book PnL if they run one, otherwise split PnL with analysts running carve-outs, but %s and splits etc can vary a lot team to team.
I worked there but no longer there. PM still is. We were a big team and aimed for ~$100 of PnL. Some years higher some lower. In the 100 scenario, PM would take ~HSD millions to $10m, analysts would get the rest depending on their PnL contribution. PM ate the netting, not the analysts.
Helpful. If the average slope is 18.5, then fair to assume it caps out at lower levels than other shops, 20 percent perhaps?
Accurate IMO. That little centerbook part you glossed over seems meaningful though, what are the PROS for the sr analysts of PM of sleeve ideas? Is it just that basically they get more discretion on the sleeve?
What? Man I love interns. Lol at Citadel not throwing out guarantees. You have no idea. They outbid Millennium all the time. Just because you don’t see BBG articles about it doesn’t mean it doesn’t happen…how do you think they get senior talent?
Analysts have PnL attribution. They’re paid a % of their skill based PnL. And not sure I’d say 1 sharpe is a good year. It’s okay. It’s not a repeatable thing, but there are guys that have done 5-6x sharpe on your $vol budget assumption…
Agree with this. Didn't even get the titles right (analyst, associate, etc.)
I was under the impression that in equities, compared against other multistrats, they seem to develop more of their talent internally. Looking at PMs across Citadel/Surveyor/Ashler does not look like a lot of them have prior multimanager PM experience. Would imagine that to be a requisite of the largest of the guarantees.
Not saying this is correct, just wondering
Dear Diary,
Today I learned that 1x Sharpe is a “good year.” How come I get fired?
Love,
Unemployed PM
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