How is compensation structured on the Buy-Side? Repo
Ok. So, I have been put in a very unique situation. I was recently hired on a repo desk that is yet to set up its compensation structure. That being said, I’m being included in the discussion for how to set up comp. There’s plenty of information out there on sell side comp but not much in terms of buy side. Can anyone share some color on how performance is evaluated?
Based on the most helpful WSO content, buy-side compensation often includes a mix of base salary, performance bonuses, and sometimes equity or carry tied to fund performance. Performance evaluation on the buy-side can vary depending on the specific role and firm, but here are some key points:
Performance Metrics: Compensation is often tied to fund performance, with metrics like returns on investments, alpha generation, or other KPIs specific to the strategy (e.g., market-neutral, long/short, etc.). For example, hedge funds may evaluate based on portfolio performance relative to benchmarks, while private equity might focus on IRR or MOIC.
Carry/Equity: On the buy-side, a significant portion of compensation can come from carry (a share of the profits from investments) or equity in the fund. This aligns employee incentives with the long-term success of the fund.
Team vs. Individual Performance: Some firms emphasize team performance, especially in collaborative environments, while others may reward individual contributions more heavily, particularly in roles like portfolio management or trading.
Long-Term Incentives: Buy-side firms often include deferred compensation or vesting schedules for bonuses and equity to retain talent and align interests with the firm's long-term goals.
Risk Management: Strict risk constraints are often in place, and breaking these can negatively impact compensation. For instance, at firms like Citadel, exceeding risk limits can lead to immediate consequences.
Upside and Downside: While the buy-side offers potential for higher upside through carry and fund investments, there is also downside risk if investments underperform, as compensation is closely tied to fund success.
For your repo desk, you might consider structuring bonuses based on metrics like P&L, risk-adjusted returns, or contribution to overall desk performance. Additionally, incorporating deferred bonuses or equity incentives could help align the team with the firm's long-term objectives.
Sources: Is this associate compensation competitive?, Banking vs. The Buy-side: 10.5 considerations, Compensation Structure At Quant VS Fundamental Funds, Reflections from year 4 as an equity analyst, Compensation Structure at the mid-management level in Corporate Development / Strategy / Finance
Any updates on this
It sucks! Get out while you can to another desk
Curious why you say this. What is your understanding of comp? From all the packages I’ve seen, it looks solid. Obviously, slightly lower than a risk taking seat but comes with the turf.
All in TC 2 YOE:180k
Solid WLB
Basically a non risk taker
Pay is transparent and I know for a fact head of desk makes considerably more, so upside progression looks good. Is this not the case at other shops?
If you don’t want to be a risk taker, even within STIR, then sure could be a good spot. If you want to, not a good spot.
Been on both sell side and buy side, sell side is better, in terms of mobility within and comp wise..
Also depends on type of the firm, if you’re in macro HF, prob better, anything outside, no one cares about repo and pay will reflect that
So many red flags but disagree with above. Better to wait a bit.
Update: Actually ended up working out. Very happy with the deal we agreed on. Get compensated very similarly to front office staff w/ way less Pnl Vol.
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