Comp across the industry
Although I am aware of the very high ceiling in HF, that is based purely on performance. So how are (top) hedge funds going to respond to the PE and EB raises to base (guaranteed) salary?
Furthermore, I struggle to believe that mid 20 something year olds at funds like Citadel, P72, D1, Coatue, Tiger Cubs etc… are pulling in 600k casually and 1 mill in some cases. Can anyone put some truth to these claims?
I like your user name.
Me too
No one is pulling in 600k ‘casually’. But yes those numbers are real. It’s hard to imagine when you compare it to other normal jobs but that’s the wrong comp set. Maybe MF PE if you want to compare something (I cringe even saying that). Much easier to understand it when you look at the scale of PnL that some really good analysts are pulling. A tiny cut from that PnL is meaningful as an employee.
600k? There are outliers making mid 7 to 8 figures in their mid to late 20s, especially if they started in the industry early (eg 1 year after banking and had a few good years to be in a senior enough role)
Would appreciate some stories for these late 20s outlier folks lol. Also guessing this is only for $10bn+ l/s funds
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This forum inflates numbers a ridiculous amount. Yes, there are people making bank in good years, but you're looking at the far right tail.
To put it into context, a 20 something analyst starting L/S Eq in London is looking at 80k GBP base + 50% Bonus in a decent year. Scales up with experience and contribution to pnl.
There was a London PE comp thread and 1st year MF assocs there were pulling GBP 200k+. Doesn’t GBP120k post banking for L/S seem low? Or is it one of those situations where you are paying early on for higher expected upside in the future if you’re good?
Yeah, chances are that a first year analyst fresh from IB or even ER (which is more common in London) doesn't add to/might even be a drag on team performance. Comp really scales well once you're embedded in team processes and contribute to $. Not v familiar on the PE side, but IB experience is much more relevant there, and pretty much a plug in for execution stuff after a couple months- so comp is done accordingly.
Your anecdote is a far right tail. If you’re making 120k all-in in your mid-20s at a Hf you’re not working at a real place, or their returns are dog shit and they basically hoping for a Hail Mary while winding down.
$600k isn’t crazy at all, neither is a million. The latter isn’t at all the norm, but you could get paid a million bucks where you did a B+ job and the firm crushed it. That’s not at all an outlier scenario.
The magic of the HF model is if you’re a 27 year old that does a B+ job when the firm has a great year you’ll make $1m. If you’re a 27 year old that does an A+ job when the firm has a great year you may make $5m or more. Heavily depends on your contribution and whether the founder is willing to pay you for it.
Sb’d! I think most people reading these comments make the assumption that “oh gee HF at age 27 means I’ll be making over a mil / yr”. That’s the upside case like you said, but absolutely, that’s the beauty of the hf model. What kinds of funds can you crack mid 7 figs at roughly that age though? Was under the impression that mosts late 20s ppl were analysts, and that analyst comp had a ceiling. Any examples?
Those numbers are definitely real but that is probably referring to the top quartile if not the top decile of the industry
100%. In every one of these threads I get the sense there's junior people making stupid career decisions based on these ridiculous outliers.
Imagine deciding to pursue a pro tennis career because you heard how much Federer makes.
I agree with this, but the framing of the questions also leads to this. This person is asking about the top funds and then asking if $600k is realistic. Well, yes, at the top funds, which are already the top small percent of the industry, it is more common. But the HF industry has many average funds that won’t pay anywhere near that.
How about earning a spot in the industry first and then assess do you have what it takes to become a Federer? Then the money should follow.
Otherwise, futile to ask about unattainable comps. It's value-based profession.
Also, maybe I am wrong but based on following this forum PE firms seem to hire an army of junior staff. MF PE even. Compare that to some of these funds who maybe add 1 person a year? I have to think PE firms are leaning on their juniors way more.
I definitely think PE firms lean on their juniors a ton, but I think you'd be surprised at how few juniors they actually hire to do all work vs. what you would think from the size of banking analyst/associate class phalanxes. I want to say Apollo Corporate PE in NYC has maybe 6-7 associates tops for each year, and there's 4 years till principal and many cut out halfway, so call it ~20 - 22 tops PE juniors in NYC for a giant ass MF PE arm like Apollos. Crazy...
Anyone who actually works at Apollo can chime in if my math is accurate :)
Thanks, this makes sense. Guess when bored I sit on here and read too much banking kids threads where someone says "how good is BB/EB" and responds with oh they sent 2 to xyz, 1 to abc, 2 to deft hah. In reality yah the #s prolly way smaller. My take is these firms hire these people with the assumption they will do a certain amount of work and why it is worth it to them. While buyside (more MM world) never really hire someone knowing that person has to do a certain amount of work as it is really hard for a junior to add value right away but instead with the focus they are a smart investment to a long-term asset to the firm. Ofcourse the people targetted could be very skilled and the return starts very fast for the firm and they receive the compensation OP stated could be possible.
It’s just a different model. The range of responsibilities for a jr HF analyst is to have a decent handle on 30-50 companies. Update 30-50 models a quarter. Go to 50-150 meetings a quarter. And still be responsive to real time action.
PE (traditionally) you would have 2-3 portfolio companies you were responsible for. And would do MAYBE 1 actual deal a year. In that pursuit, you would turn over 5-10 rocks in a meaningful way. That entailed building a model in a level of detail where it may take a few days to a week of focused work and late nights to have it fully buttoned up. You’d spend easily 10-20 hours with a single management team. You’re sifting through an aircraft carrier worth of information in the data room, and have a handle on ledger level financial details. Plus lenders, consultants, accountants, investment committee.
The work product/output to put $200m to work at a HF is 1-2 weeks of intense work, a 2-3 page printed model, and 10-20 pg deck. Then it’s a slow burn of maybe 2 hours spent here and then to keep rounding out your body of knowledge/thesis.
The work product/output at a PE firm to put $500m to work is a 20-50 page model, 3-4 months of VERY intense work, and maybe over a hundred pages of actual slides/analyses/exhibits. Now multiply that by 5-10 to account for the hit rate of rocks meaningfully turned over vs checks written.
It’s cultural but it’s also driven by the asset class and scale. You can spend 3-4 months making a decision in the HF world. Frankly, I don’t even know how you would, you have very limited access and information. But if you’re wrong, it’s very easy to course correct. If you make an unforced error in the PE business, you’re fucked.
It’s really quite amazing. No wonder why the HF guys make so much more. Find an interesting idea, do your research, set a price target and buy as much as you want* when it gets there. PE, scurry hurriedly when a banker calls with an interesting idea, work your ass off and hope you’re the highest bid**, put out as much as is feasible, with the caveat that most checks are $30-300m***. Add to it that at a HF prob trying to make 10-15%, you make 20/0 as carry****, and it pays out annually. PE, the fund prob has mandate to make 20%+, your carry is in the money after you make the LPs 8%, and it pays out at end of fund life***** 8 years later. If you want to make money there’s no question in my kind on where you want to end up******.
*obviously limited at a certain point, whether due to bid ask or risk mgmt
**sometimes seller choses a group for reasons beyond price, but your price has got to be pretty damned close to the top
***excl MF target sizes.
****understood that the house and PM take their cuts so you’re only ending up with smaller piece
*****some firms have better structures whether that be an open end fund structure like a fortress or an American waterfall like at TPG
******altho job security does sound scary at a MM HF
I do find it a bit amusing that almost all of the responses are focusing on the top quartile comp element, while admonishing kids for being too focused on top quartile comp at HFs, and no one even attempted to answer the original question.
Personally, I don't think HF comp is going to adjust that much industry wide because of the new comp increase at banks. It's a results based industry, and it recruits people who all think that they will produce. So the funds won't want to pay analysts inflated numbers until they earn them. And, even if IB pays $350k for A2As, all the IB analysts trying to get into HFs think they will be the ones that make +$600k in two years because of their performance.
Excluding pnl cut / performance based comp stories, which are more idiosyncratic (so more susceptible to outliers) in nature, giving you a few examples of top-of-the-street guaranteed 1st year all in comp I've seen (note different career stages / YOE). Again, these are at top firms, some of these are standard at that particular firm for that particular seat, some are based on competing offers/negotiations.
Top Tiger Cub (after 2y IB/ 2y PE ) -> pushing 1m
Top PE MF (after 2y IB) -> 450k
Top MM HF (after undergrad) -> 400k
Ofc this is just headline, so there are questions around recurring comp/cash comp/ etc.
I’m very confident that MMs are not paying 400k out of undergrad for any non quant role.
And I am very confident they do.
Never said its the norm, hence all the qualifiers in my post, but it is also not an outlier (read: can be done with the right leverage at the right place).
There may be 5 of those top tiger cub seats open out there TOTAL in a given year, if that. Meanwhile the 8-12 or so MFs hire 8-12 associates EACH. Then you’ve got another 20-30 UMM funds hiring 2-4 associates each.
Who cares about total comp when we have a 29 y/o hedge fund bro flexing his $34MM PA in the who manages you money thread. Just do what this guy did, amirite? Such blatant trolling.
Over the long-term, I think a decent analyst at a decent fund (i.e., not Tiger Global etc) is going to average $450-650k/year. It varies massively but this isn't 2010 anymore. The key word there is "average". There are good years and bad years.
What are the top cities for hedge funds outside of nyc?
Greenwich CT
Is this range for a senior analyst or a more junior one with discretionary comp?
Also when you say "decent fund" what kind of AUM do you have in mind?
Depends much more on aum / investment professional. Generally $150m/IP.
I'm talking about senior analysts. My experience is that a junior analyst is just someone whose just joined the buyside. I've typically seen those kids get paid $250-350k
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