I currently am a first year analyst at a mid-size hedge fund (~$2bn AUM) with no bonus guidance. Based on my discussions with industry peers and past WSO threads, it sounds like the typical comp range is $100-125k base plus $100-200k bonus in a normal or good year. However, the fund is having a bad year (down >10% YTD).
Does anyone have insight on whether the ~$100k bonus is a reasonable lower bound for an analyst who presumably has little ability to influence fund performance, or if the bonus could be significantly lower than that?
Don't be surprised with a 0. Your bonus is you can keep your seat. Anything more than that is gravy.
I would say assume that $100k is about right and go get one of those payday loans so you can spend it now, what could go wrong?
When I was a junior analyst at a USD 3 bn event driven fund I still got paid in the bad years as my comp was not tied to any P&L. My PM told me that generally speaking funds view paying junior guys as part of the overall cost structure of running a fund. Obviously the higher up you get the more your comp is tied to your calls and you have much more volatility in your overall number. At the junior level comp is more tied to your work quality and if the guys on the team like you. Having said all this each fund is different so take with a pinch of salt.
Thanks for the informed thoughts. Completely understand that it varies widely by fund and PM, but one data point is better than none. Would you mind sharing how the bad year bonuses compared to the normal/good years, whether in absolute dollars or percentages?
Sure, happy to help. I joined the fund in June 2013 as a junior analyst and left after 2015 (2.5 years) and got 3 bonuses during that time. 2013 was a great year for the fund and I got my base again but pro-rata for 6 months of work. 2014 and 2015 were tough years with the fund posting slightly negative returns in each of those years. Despite this, I got 75% of my base in each of 2014 and 2015.
Funnily enough, I found the transition to the HF space to be a tough one and I felt completely out of place in my first 3 months on the job but managed to pull it together by year end and was pretty shocked to be given 100% of base that year. Fast forward to 2015 and I had become a good analyst generating lots of ideas and doing solid work and yet I got paid less given the overall weaker performance of the fund.
Thanks, I really appreciate the color. Hope all is going well for you post-HF life.
If you don't mind me prodding a little further, what was the base progression like at your fund? or did you even get base bumps in down years? Not looking for specific $ numbers, mostly just wondering how different this aspect is vs. sell-side.
No base bumps over that time period. I think the real focus is on getting linkage to P&L which leads to the real money in this business. Basically if you're good and generate money-making ideas you will start to earn respect and trust and it will be easier to get your ideas into the portfolio. Top analysts at my firm (+5 years experience at the fund), in our NY office, were taking home over 1MM USD a year and I would assume a huge chunk of that was bonus money.
It's a fairly simple path actually, you progress into an idea-generating analyst who eventually gets P&L linkage or you don't and leave the industry or look for a seat at another fund. I left the industry to join a long only deep value fund as I was sick of the short term nature of the event driven strategy.
Agree with what Gray Fox said below, funds usually invest a lot of time and money to make sure they hire junior people that they believe can grow with the firm and will buy into their strategy. Also, investors hate turnover as it may indicate problems at the fund and it takes up valuable research time interviewing new candidates. Having said this, you have no leverage and funds will fire you right away if they think you're a cocky bastard and start asking for more money in your earlier years.
You should still get paid. $2bn is big enough that and I'm guessing the staff is still lean enough that paying junior guys in a down year isn't going to really affect the liquidity of the firm of the lifestyle of the PM.
Nobody likes turnover. It costs $$ and time to hire new people.
While there is no standard for funds, in my experience at a small shop is if the PM really likes you / doesn't want to risk losing you, you will be compensated but it will still likely be down. If the PM is more indifferent towards you it will be even lower. I've seen 50% base in down year but there is a meet me in the middle aspect with a salary bump the following year. So while its hard to say - I think realistic could be anywhere from keeping your seat to 100% - more likely in the 50% range.
Echoing above, you may see 150% to 200% of base in a good year, 100% of base in a flat year, and 50% of base in a down year. However, like said above, it really depends on your fund and how much the PM likes you.
this thread is amazing yet people still think it's MF PE or bust.
Couldn't agree more. The responses from kids in college or at IB boot camps about the buyside make me chuckle.
Had a bad 2015, but the junior analysts were still comped at 100%.
In a bad year I believe the floor would be 20% of salary maybe if you're lower on the totem pole. A bad year for a senior analyst would be maybe 75% floor+. PM would still be 100% of salary.
All of this is just inaccurate
First off a bad year for a PM / senior analyst and you can get canned. Best case you get a 0 / get to keep your job. I've never seen 100% salary minimum for a PM, but I have seen them let go over sub-part performance
Junior salaries tend to be more insulated from the P&L. You generally share in some upside if the fund does well. To the person that had their fund +15%... depending on AUM / headcount, you should get some upside. The PM is incentivized to incentivize you. If the fund is up +18% and he gives you an additional $100k, that can move the needle for a 25 year old.
While I agree that there is less job security in certain types of funds, it sounds to me like you are referring more to the culture of a PM running a pod for one of the multi-manager platforms. Single-manager funds like mine with relatively) longer-term time horizons don't have the exact same dynamics since there is only one PM and senior analysts don't have full discretion over what goes in the book.
we have 3 analysts for 2b. i hope youre right, the girlfriend is really looking forward to a vacation in greece
"Well, we didn't accomplish shit--can we still get our bonus?"
I'm in the wrong business. I should've gotten into the business of raising AUM.
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