Insane bonuses

Derivatives's picture
Rank: Orangutan | banana points 283

I know banking bonuses have been pretty bad this year, but i've heard some numbers for hedge fund guys and was pretty stunned. One guy at a very well-known deep value hedge fund got around $1.5 million and another at a huge macro fund got around $5 million. Both these people are in their late 20's/early 30's. WTF?

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Comments (29)

Jan 25, 2012

HF salaries tend to track the street much more than bonuses do.

I've found bonuses have little to do with how hard you work or whether Wall St. is paying more - instead its whether your ideas performed, whether the fund as a whole performed, and whether AUMs increased or declined.

$1.5m or $5m for a late 20 year old is many standard deviations from the mean, but the read through is that analyst generated significantly more $ for the firm than that bonus.

Jan 25, 2012

It's just hard for me to see that as 'insane' considering there are young hedge fund guys out there who have pulled down year-end bonuses of like $70 million. Key phrases you used here are "very well-known deep value hedge fund" and "huge macro fund."

Jan 25, 2012
prospie:

It's just hard for me to see that as 'insane' considering there are young hedge fund guys out there who have pulled down year-end bonuses of like $70 million. Key phrases you used here are "very well-known deep value hedge fund" and "huge macro fund."

With the exception of chase coleman, there is virtually no hedge funder under the age of 35 who pulled down a bonus anywhere close to the $70 million range.

Jan 26, 2012
Brady4MVP:
prospie:

It's just hard for me to see that as 'insane' considering there are young hedge fund guys out there who have pulled down year-end bonuses of like $70 million. Key phrases you used here are "very well-known deep value hedge fund" and "huge macro fund."

With the exception of chase coleman, there is virtually no hedge funder under the age of 35 who pulled down a bonus anywhere close to the $70 million range.

Even Paolo Pellegrini, the point man for Paulson's trade on subprime, "only" made ~$45mm in bonus that year. He's also way older than 30.

Jan 25, 2012
Brady4MVP:
prospie:

It's just hard for me to see that as 'insane' considering there are young hedge fund guys out there who have pulled down year-end bonuses of like $70 million. Key phrases you used here are "very well-known deep value hedge fund" and "huge macro fund."

With the exception of chase coleman, there is virtually no hedge funder under the age of 35 who pulled down a bonus anywhere close to the $70 million range.

"Brian Hunter, 32, raked in an estimated US$75-million to US$100-million in 2005"
http://www.canada.com/nationalpost/financialpost/s...

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Jan 25, 2012

The fuck? A 5 million dollar bonus is not insane? I must be a poor fuck.

Jan 25, 2012

$5 Million is pretty awesome money, but it's all relative to the AUM, seniority, merit, % ownership, etc... If you're making that kind of money in your late 20s that's pretty incredible.

HFs are pretty unique in terms of annual bonuses mostly because the performance varies so much across the different HF strategies whereas if the banking industry is slow in any given year then almost all firms are going to feel the impact.

Jan 26, 2012

were they just bonuses or did they have a contractual share of carried interest? Either way, good for them. I like seeing young people get paid properly. I've heard/seen too many stories of guys getting screwed over after a good year.

Jan 25, 2012
Relinquis:

were they just bonuses or did they have a contractual share of carried interest? Either way, good for them. I like seeing young people get paid properly. I've heard/seen too many stories of guys getting screwed over after a good year.

Isn't PE bonuses fairly structured, especially for those at VP and below? Or am I wrong about that? HF bonuses tend to be highly variable, and oftentimes, it's not entirely linked to pnl or performance. It can get quite subjective and is also contingent upon how other groups at the fund perform, not just yours.

Jan 26, 2012
Brady4MVP:
Relinquis:

were they just bonuses or did they have a contractual share of carried interest? Either way, good for them. I like seeing young people get paid properly. I've heard/seen too many stories of guys getting screwed over after a good year.

Isn't PE bonuses fairly structured, especially for those at VP and below? Or am I wrong about that? HF bonuses tend to be highly variable, and oftentimes, it's not entirely linked to pnl or performance. It can get quite subjective and is also contingent upon how other groups at the fund perform, not just yours.

It's structured to some extent in the places that I've been/am aware of, but people do get different bonuses. Also, this is the point. I've seen a colleague originate a deal that performs fabulously, but then they don't get paid all that much because they didn't have carry or any other contractual compensation.

I would LOVE to hear about the experience of others on WSO.

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Jan 26, 2012

If you're going to talk about Brian Hunter, why not mention the guy who took the opposite side of his trades the next year? (http://en.wikipedia.org/wiki/John_D._Arnold)

Jan 26, 2012

$175 million when you're not the one forking over the cash is solid if you ask me.

Jan 25, 2012
GoodBread:

$175 million when you're not the one forking over the cash is solid if you ask me.

Definitely. I don't think he had a single dollar in the fund. He went on to found PSQR. I believe they went heavy short on some tnote futures in late 08' early 09' and made a killing when rates snapped back.

Jan 25, 2012
kingtut:
GoodBread:

$175 million when you're not the one forking over the cash is solid if you ask me.

Definitely. I don't think he had a single dollar in the fund. He went on to found PSQR. I believe they went heavy short on some tnote futures in late 08' early 09' and made a killing when rates snapped back.

Didn't PSQR return investor money last year after a terrible performance? Paolo was bitching at a hedge fund conference about how tough it was to make money in the current market, which is increasingly driven by macro concerns and central bank actions.

Jan 26, 2012

HF bonuses are tied to PnL. If you made your fund 200 million over a year your going to get a bounus in the range of 20mm. Remember that the firm makes 20% of the clients gain. That is 1 billion dollars in revenue to be getting a bonus of that nature.

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Jan 25, 2012
heister:

HF bonuses are tied to PnL. If you made your fund 200 million over a year your going to get a bounus in the range of 20mm. Remember that the firm makes 20% of the clients gain. That is 1 billion dollars in revenue to be getting a bonus of that nature.

Not necessarily. Unless you sign a contract that explicitly states your bonus will be a certain % of pnl, this is not true at most funds. I know of way too many people who have gotten less than what their contributions indicate. The partners dine at the fine feast and give the scraps to the others. Of course, at certain funds and during certain years, this "scrap" can be a good chunk of change.

Jan 26, 2012
Brady4MVP:
heister:

HF bonuses are tied to PnL. If you made your fund 200 million over a year your going to get a bounus in the range of 20mm. Remember that the firm makes 20% of the clients gain. That is 1 billion dollars in revenue to be getting a bonus of that nature.

Not necessarily. Unless you sign a contract that explicitly states your bonus will be a certain % of pnl, this is not true at most funds. I know of way too many people who have gotten less than what their contributions indicate. The partners dine at the fine feast and give the scraps to the others. Of course, at certain funds and during certain years, this "scrap" can be a good chunk of change.

Brady, I know thats not how everyone gets paid. The discussion seemed to be centered on HF portfoilo managers given the dollar range of the bonuses that were being discussed. I mistakenly assumed that everyone would assume that.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

Jan 26, 2012

I would think that HF bonuses would be absolutely terrible in a year where hedge funds didn't generate shit.

Jan 26, 2012

Err brevan howard has never had a downyear since 2003 - there are plenty of firms who are not as public as the other firms that pay quite well.

70mm is a high figure but i know of a few (more than 10) guys under 30 who pulled in 10 bucks

Tiger had a good year last year too - up 50% through privates ...

Jan 25, 2012
DebunkingMyths:

i know of a few (more than 10) guys under 30 who pulled in 10 bucks

this.

Jan 28, 2012

these guys made money for the firm... also not as much fking politics as sell-side