Been talking with a 100m long short with 2 founders and wondering what a reasonable comp expectation is. Fees are in the 1.5/15 range and I have 5 yrs of experience (2.5 yrs buyside). They have said carry will be part of comp after yr 1 but trying to gauge the base + bonus expectation.
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i like ur username and pic, it's hilarious
$125k + 0-300% (of base) is fair given the smaller AUM base
1.5% management fee would mean $1.5M of fees for the partner’s salaries, overhead, trading, etc. so $125k is feasible
Assuming a good year (I’m assuming 20% gross performance), this would imply $3M Carry dollars for the 2 partners. Obviously their mouths will be fed first and the majority will go toward them. But a payout of $375k from that $3M Carry pool is not that unreasonable if you contributed and performed.
so all in $500k is pretty solid in a good year. Your goal should be to maximize the amount of Carry you get in the next few years because, assuming the fund scales nicely, ur comp will increase nicely as well
Yea tbh the economies of 100mm among 3 IPs is pretty horrid if single manager. You shouldn’t expect much by way of comp
Not if you perform however and do it consistently
500k way too high for 100m AUM imo. Maybe in a generous and excellent +20% yr. Take an avg +8 to 10% year on $100m capital base and there’s not much to go around. It’s not even a given that many places can grind out those returns either.
No shit Sherlock. That’s why I said in a good year (20%), and is the reason I have the range above
pizz have you ever made above 500k all in comp in a year?
I would expect ~200k all-in to start, caveats apply
So basically, my offer for 1st year will be ~$150K (probably will be down 30% from what I am currently at), and 2nd year I will get MSD to carry or slightly higher if I perform well. They are up low 30% YTD, so I would think they can raise some money into year-end as well.
I would go for it.
I work a a 100mm fund with 4 IP. All in comp was 150k with base = 85k. Return was XX% (below teens, double digit) in 2020. 1.5-2years out of college.
Hope that helps!
EDIT: Fee Structure is 1.25/18 with no hurdle
This is really great for 1.5-2 years out and the AUM / IP ratio. Seems like it’s a generous PM and you’ve found yourself a good seat
Thx! Hopefully the comp scales with performance over time. And FWIW, we have a 1.25/18 fee structure with no hurdle
Didn't realize there were so few funds at 2/20....
Unless you're one of the dream funds (Melvin/D1 etc), 2/20 is a dream
I work at a no-name 2/20 fund...
classic pizz
are they really at 2/20? thought lower. feel like only the true neutral pod shops are 2/20 these days
thanks for the context...that is helpful. Did they say how your comp would scale if aum increases?
I tried getting that information during my review but the comp is decided by the person whose name is on the wall and it's very opaque. Don't know how that would scale but I doubt our AUM is scaling...it hasnt really scaled for the last decade.
hey ICG, what's your eventual comp for the year (base/bonus) and did it scale with carry in year 2? Thanks.
I wouldn't join if i were you. It's really difficult for smaller fund to scale up - not because the PM, CIO lack skills, but because they started so small from day 1 that other investors would be reluctant to join. These days, I really think decent starting AUM needs to be min. $500m. Yes, you would have an upside if your firm works out, and if your PM is great. But, if they were great, why did they raise only $100m?
Location?
Don't join a 100m L/S
All you need to know lol.
SM $5-10B>>>SM $1-2B>>MM>>>>>>>>>>>>>$100M SM
Everyone should read Marc Rubinstein's article on starting a hedge fund. $100MM is the absolute minimum scale to even play the game.
Are they starting with $100mm AUM? That's a pretty big number nowadays (bad raise environment this past year). To raise $100mm means that they must have a decent pedigree and connections. You will surely take a hit on day 1 comp in hopes that they quickly scale, a few quarters / years of good performance with a strong network of potential LPs can skyrocket that AUM quickly to $500-1bn. If you don't want to bet on that, or are unsure whether their strategy is repeatable/viable, then I would pass on this opportunity.
I know that the past decade is not a great comparison for today since it was easier to raise money back then but I know of a founder who quickly scaled from <$100mm outside money to billions just after a few years of ~15% CAGR. But it requires pedigree (i.e., Tiger lineage) and connections.
However, if they've been at that number already for a few years, have a dwindling rolodex of LPs to talk to, then this is not as great of an idea.
Don't take this job.
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