HF Bonus Questions / Etiquette
Hey all - work for a sector-focused fund and prior to that worked at a smaller fund to cut my teeth (<$50M AUM). All in, about 5 years of buy-side experience with a couple of those years spent in private markets.
I've been at my current fund for ~2 years (north of $250M AUM). My current comp structure is base (think 100k-150k), discretionary bonus, and profit-sharing / % of PnL. A few questions:
- Assuming the fund as a whole is up double-digits for the year (think mid-teens to twenties), what do you think is a reasonable bonus here? I understand this is a question that has multiple variables, but I'm trying to set appropriate expectations to ensure I'm aware of the baseline / getting paid what I deserve (ballpark).
- I don't have access to my direct PnL - not a lot of transparency here, although I've been paper trading my picks and trying to follow them independently - and using this method, I should conservatively be up mid-teens for the year. I understand this is more a "back of the envelope" method to track returns and may not be entirely accurate, but is it "etiquette" / appropriate to ask: 1) How my specific PnL did for the year as compared to the fund and 2) the exact formula on which I'm paid?
- What's your take on negotiating bonuses? Is this common practice and/or acceptable in the HF world? In the event that you were paid less than you thought you deserved, if you've negotiated your bonus in the past, any tips on how to go about doing this successfully assuming you don't have relevant pieces of information (such as your exact PnL, etc.)?
TY in advance.
your pm will probably tell you to fuck off
The amount of transparency into PnL and bonus will depend by firm, and I haven’t seen a place that doesn’t share that information by default but is willing to share it as part of the bonus negotiation. The exception would be a place that hasn’t really had junior employees before and so hasn’t figured out the right balance of what information they want to share.
I would expect the fund performance to be represented in your profit sharing, and that number should be clear to you.
The bonus would be based on your contributions, and I would expect at a place like you describe will be driven more by how the PM feels and whether he/she thinks you will go somewhere else. Unless you have an agreement on something formulaic, you won’t get that, the PM isn’t incentivized to share that info with you.
You should know the culture of this place better than any of us, but like I said to start the post, generally how they handle the info around comp and the structure will be how they handle it during your reviews.
As for negotiating a bonus, yes you can do it, but you have little leverage at the more junior levels (and without a formulaic approach harder to point to any one thing). So if you have other offers, know of higher numbers, etc, then you can have that conversation, but with one sided information as you describe it is really hard to prove your worth.
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