Citadel Equities analyst terms

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I know analysts at Citadel Global Equities are given a capital allocation for them to manage under the PM's supervision. Does anyone knows how the pay-out is structured for this? (i.e. does the analyst get a 10% of the P&L from that sleeve and the PM a 5%, etc? Also, what is the average AUM allocated to a Global Equities analyst? Are we talking about $100m or is it much larger in the $500+m ballpark?

Comments (31)

 
  • Analyst 3+ in HF - Other
Jul 13, 2020 - 6:27pm

I've heard PMs at Citadel get paid a lower payout (~10%, net of pod fees) in exchange for much larger books 1bn+, so I'd be surprised if they gave out 10% carry to sub-PMs. Would guess it's around 5-7% handshake deal (aka discretionary). Also Citadel is known for meticulously tracking and ranking analyst ideas in paper trading books before giving them risk to run, unless you've ran significant risk before.

 
  • Analyst 3+ in HF - EquityHedge
Jul 13, 2020 - 8:21pm

10%? One can dream.

Its purely discretionary by the PM. Generally the PM will payout 20-30% of their take to the whole team. So just go from there.

 
Jul 20, 2020 - 3:42pm

LinnaeusMaximus:

I think 5-7% is about right for the Sub-PM arrangement. The Lead PM ultimately still owns the risk (and probably has to waste some $$ hedging around the Sub-PM who may be able to take more directional risk as a result if he covers a sector) so they are still likely getting 10-15% on this as they should.

Yeah, it’s MSD, sometimes even sub-5%. Benefit for sub-PMs is simply to get given opportunity to run money and big money at that. The Citadel sub-PMs often run more than the average MM PM, just at 1/3 of the payout cut. Plus there’s risk that your PM doesn’t make money when you are, that eats into what you can be paid.

Citadel sub-PMs cannot really take directional view, it’s the same as for the PMs, that stuff has to be factor neutral.

PS by sub-PM I mean “Analyst” in Citadel jargon.

 
Jul 14, 2020 - 10:29am

I work at a place with relatively similar arrangement to Citadel and my terms are something along the lines of 10% total team payout plus 50% of any payout related to my performance/sub-strategy. Again, all handshake / completely discretionary.

 
Jul 14, 2020 - 10:41am

Its 50pct of the payout. Our payouts are smaller (more like 10-12 pct) so it nets to around 5-6pct P+L (similar to what others have said above). Not in the equities space, but not sure if it makes a difference.

I agree its generous and a good deal w/ a fair + respectable PM. I have no complaints and feel fortunate to have a good seat given what the industry looks like these days.

 
  • Analyst 3+ in HF - EquityHedge
Jul 14, 2020 - 7:35pm

I think we meant the same. 50% on your strategy vs 50% on sleeve is effectively 50% of PnL attributable to your strategy.

Repeating what I said last post, that is very generous. It does sound like though that your PM has not negotiated the greatest deal for him/herself though. Unless its a multimanager that's more generous with risk limits.

Generally quant PMs give out 5-7% max for quants bringing quant strategies and that's already quite generous. This is usually for a PM with a 15+ % deal with the platform.

 
Jul 15, 2020 - 9:23am

Your numbers seem right. Baseline I've gotten from a reliable source is:

Jr. PM 15% of PnL
Seasoned PM 20%
Analyst cut of book 5% (remaini g 10-15% to PM)

So 7% could go to Sr analyst level (who are on close to getting PM seat usually).

Analyst 3+ in <span><a href=/finance-dictionary/what-is-a-hedge-fund-HF rel=nofollow>HF</a></span> - EquityHedge:

I think we meant the same. 50% on your strategy vs 50% on sleeve is effectively 50% of PnL attributable to your strategy.

Repeating what I said last post, that is very generous. It does sound like though that your PM has not negotiated the greatest deal for him/herself though. Unless its a multimanager that's more generous with risk limits.

Generally quant PMs give out 5-7% max for quants bringing quant strategies and that's already quite generous. This is usually for a PM with a 15+ % deal with the platform.

 
Jul 20, 2020 - 6:50am

The PM I know that started off at 15% was there for years before the promotion, who moved up through the ranks and could ramp up quickly vs. a fresh hire who doesn't know the systems and processes in place.

10% net just seems too low. That means on a $100 million net PnL you're taking home $10 million for the team. Not enough imo.

Sr PM get 20%. The very best of the best become partners and own equity in the firm.

rumplestiltskin:

JR PM is more like 10-15, and mostly closer to 10 - especially to start if you get a good deal.

Note that is only for a place where the PM is senior and getting a full 20 net.

PM takes netting, so likely wouldn't do 15 unless high sharpe.

 
Jul 22, 2020 - 1:43pm

10% is too low for any PM at MM. I've only heard of that at MLP PM training program and that's for upcoming PMs with no team. Not Citadel.

You're saying a first year PM can't make $100mm at PnL in first year at Citadel @ 15% cut? You've gotta be kidding. Keep in mind that $15mm would have a big chunk in a 3 year vest. It's just a different animal when it comes to MM.

20% is PM cut. Partners get equity. Totally seperate topics.

rumplestiltskin:

10% net is too low for a senior PM, but 15% is too high for a JR PM. You used 100mm net PnL in your example, which is definitely not a JR PM. Senior PM is 15-20%.

20% + equity? Where?

 
Jul 22, 2020 - 2:39pm

Let's unpack this. There are a lot of senior PMs at Citadel who get paid out 10% NET of expenses - especially in GFI. This is a fact, I don't know how to debate it with you.

There is also an associate PM structure at a lot of these shops where the netting is done on a team level. Plenty of associate PMs (working under a senior PM) have deals where 10% payout would be good - so the senior PM takes 10% and the sub PM gets 10%. This is also a fact. Again, I don't know how to debate that.

What is a first year PM here? Coming over as a senior PM from another shop? An associate PM on the first year of their deal and first time managing risk ? Let's assume later. How many of these have made $100mm dollar pnls and gotten paid out 15% of that? I MIGHT know one but generally it is impossible. Imagine you got a 25mm drawdown limit (super duper generous for first year), you would basically need to deliver a 4 sharpe to get that 100mm at an acceptable vol - your first year as a PM... um?

Citadel vests bonuses over 3 years? Are you sure?

 
  • Analyst 3+ in HF - Other
Jul 22, 2020 - 2:58pm

+1. I've also heard from first hand sources that GFI senior PMs tend to net at ~10% payout. Do you know why that is lower as compared to Equities Sr PMs (assuming Equities net out around 15%+).

For everyone who is new to the business to get a position as a PM at Citadel you need to show that you've been able to put up 50mm+ per year, which is incredibly difficult. A new PM at Citadel typically running a book size close to the largest at the other MM platforms (MLP, BAM etc.). A tenured PM at Citadel is running multiples of the larger book sizes at the other platforms.

 
Most Helpful
Jul 22, 2020 - 8:04pm

Edit: thought about this a bit more. When I talk about PM 20% just net of expenses. If I think about paying an analyst 5%, associate 1-2% etc I can see net of everything payout being closer to 10%. I thought rump was referring to just net of expenses, before paying out rest of team.

Ok, I see where the disconnect is. Full disclosure: I worked at Citadel (global equities or Surveyor) for 4 years. I won't disclose any further (when, which group, location) to maintain privacy.

So everything I'm talking about is GE/Surveyor. I never worked in GI, don't know pay structure, only talked to one credit guy in my four years there. So I have no idea how shit works there.

When I talk about new or junior PM, I'm talking about someone who has worked as an Analyst or Sr Analyst in the Citadel equities model and has managed capital already. A Sr analyst on my team had a $1bn+ book, which was part of the $3bn that the PM ran. In many teams, PM doesn't even run capital or just runs a center book, taking best ideas from analyst books to scale Analyst ideas.

I guess you can call some analysts Associate PM since some PM don't run money, but it wasn't an official title when I was there. These guys have been running books and know the process, risk model, etc. and can step in as a PM quickly. They've already proven high Sharpe or they wouldn't have gotten the seat. If they weren't a good analyst, they'd have capital cut and be fired. Happens all the time.

In this model from my personal experience, The cut is 5-7% for Analyst level, 15-20% for PM level. I'd never heard of 10% at PM level and nobody on other teams I talked to had a PM paid below 15% of PnL. Again, I'm referring to someone who came up in this structure, knows the risk model, and has managed a book and people (1 or 2 associates). Maybe GI pays 10%, I have no clue.

On the pay side, when I was there any bonus comp over $750k would start to be paid out as a mix of cash and investment in the fund that vested over 3 years. So let's say you're an analyst and make $50 million PnL for your team (some make way more). Your bonus is 5% or $2.5 million. Of that, you could end up taking $1.5 million cash and the rest goes into GE or Surveyor fund (which always make money anyways) and vests over 3 years. If u keep putting up big PnL, that money adds up. This is why Citadel can force people into 1 year garden leaves (nobody else can) when they leave the firm...because they have millions tied up. They either don't work for a year or their new form has to buy out the vested funds. I've worked at 2 MM since then and all bonuses have been 100% cash, so garden leave much shorter.

I hope that clarifies things. I think we were just talking about different things. I have no idea how quants, commodities, credit, or anything outside of equities works and things may have even changed on the equities side since I left.

 
  • Investment Analyst in HF - Other
Aug 13, 2020 - 3:56pm

Are these GMV or LMV numbers being thrown out? What's considered small, medium and big at Citadel on LMV? What's typically the first drawdown limit for equities?

 
Aug 13, 2020 - 4:59pm
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