Junior PM at a platform - How to negociate salary
Hi,
I joined one of the main trading platforms (Millenium, Citadel...) in London 2 years ago and 2019 is my first full year as a junior portfolio manager. Right after graduation I did 1 year as an analyst but my pod blew up so I got a job in another pod at the end of 2018 as a junior potfolio manager. I am part of a bigger team but I have my own pnl and I work 100% on my own. My boss is just the boss of my team and manages the relationship with the trading platform but never interacts with me on the trades. I do what I want as long as I stay within my limit of risk and drawdown. I made $1m of profit this year with very high sharpe so I have very good confidence in making $2m in 2020.
When I got from analyst to junior portfolio manager one year ago, I asked a salary increase which was refused as I "needed to prove I could generate consistent pnl first". Now that this is done, I want to renegociate my fixed salary and cut on the pnl. I am still at $50k annual salary which is completely off the market. I know they are skrewing me and I wonder how much I should ask and how I should shape the negociation. I understand that my boss and the fund are very happy to have found a cheap guy making constistent pnl out of school only 2 years ago. I didn't say much about my sh*t pay as I was very happy to have my own pnl and be independent. The fund considers me as a call option: I make very good risk adjusted return on my own and I find my own strategies so there is potential for much bigger pnl generation in the coming years. And if I fail, well my fixed salary is so low that they would not have lost much money...
For the cut it's quite simple, I know team bosses take a 20% on their team pnl and usually redistribute 10% of the pnl (or 50% of the cut) to their junior PMs so that's what I will ask. The big issue is the fixed salary. $50k is ridiculously low. I would be happy with getting $80k so I can decently live on the fixed salary without spending in advance the bonus. However, the platform's central management are giant asshles with fixed salary. They have no problem with paying large bonuses but they hate fixed costs. They will use any bullsht argument and will lie to justify not raising me much. So I have to be very smart in shaping the negociation (which will be with my boss first), asking the right amount and be prepared to fight all their lies. They are very happy with my work so I have that on my side + the $1m pnl of this year. I know that in my fund these kinds of negociation are harsh, they take several meetings, PMs and management yell at each other until the final number is agreed and then everybody goes back to work and is happy as if nothing happened.
I never negociated anything before and I know it might be tough which is why I am asking for you advice guys. How should I proceed?
Thank you so much for your help!!
So your getting a 50k base, but but how is your bonus right now calculated? Is it a percent of P&L? Are you getting a bonus right now? Sorry I’m just trying to understand and clarify
My first bonus was discretionary as I was an analyst. I got $50k bonus so $100k full comp. I did not get my second bonus yet. The year just ended so it will be decided in January which is why I need to be pro-active and negociate in advance.
If they are as fair with me as with the average junior PM of the fund (everything is negociated case by case, there is only an "average case"), I should get as bonus equal to: (Total pnl - Fixed Salary - Other fixed costs such as Boomberg) * 10%
That calculation makes fixed salary very attractive as you deduct only 10% of your salary from your bonus and is the reason why management is very harsh at negociating them...
Got it. So your first year bonus was purely discretionary (not based on % of P&L, but what they want to give you subjectively), and your second one I assume will also be discretionary like the first year's. I doubt they'll give you your bonus calculated based on that formula (which is based on percent of P&L) since you didn't negotiate that ahead of time last year. Going into this meeting, expect another "discretionary" bonus BUT make sure for next year to negotiate bonus calc to be a percent of P&L, and GET IT IN WRITING
I'm more suprised you're on 50k? If you're in London that's crazy. Analysts should be on 120-180k as base. Also, are you discretionary? And what is your background, did you finish undergrad, masters, phd etc? These things count towards negotiating.
Out of Masters I directly joined the fund. I am by far the youngest guy on the floor. At platforms, young analysts are paid quite badly vs. banks or other funds because they usually do not employ young people out of school as investment profesionnals. In general, only PMs and very senior analysts get a good pay there. But still, I know I'm getting skrewed.
You're definitely getting played. If you are actually at one of the big 4 platforms then there are plenty of analysts out of masters on 3x your base. Also, what is the rough range of AUM of your sleeve? At the moment you are taking a lot of risk but not getting rewarded for it. If the AUM is big enough and you think you are good, do it for another year to build track record then move.
When you moved from analyst to junior PM and started managing your own book you should have negotiated your comp. Asking for a salary increase was the wrong strategy, you should have asked for a % if PnL.
From both the firms perspective and your perspective PnL makes a lot more sense. The firm can keep you as an analyst and keep paying you, or move you to a junior PM role, what changes when you move to junior PM? Well you have your own book, you are much more in control, so you should enjoy the ups and feel the pain when down. You totally changed your risk profile (you are in control making decisions) but asked for a fixed pay increase when you should have gone for variable (aligned with your new role, think about it, the downside is getting fired, you should want much more upside than a salary increase).
Now with that said. $50k at a large fund is low so it is reasonable to also bump that (I am less familiar with London pay). But you should be pushing for PnL.
Also very hard to tell if $1m is good, you say high sharpe but even that can be misleading (sharpe over a year?), and without knowing how much more it is hard to tell if that is a good year.
Finally, I am less familiar with multi manager than single manager, so I won’t comment on specific numbers but you do seem to be on the lower (to very low) end (using nyc as a comparison)
Thanks for the reply. It's fair to assume that I should have negociated salary and bonus calculation when I got promoted. However at the time I was in no position to negociate. When your PM blows up (which happened to me), all the team is fired immediatly and then they tell you that if you find another job then they will hire you back. So when you're hired back, well, you're happy to stil have a job... Also, getting a book at 25 is such a platform is very rare, I'm for sure the youngest junior PM of the platform so I was not is the best position to negociate anything...
But yeah I get it, % of pnl is much more important than fixed salary.
I understand your points and at some level you should have the attitude you have (“lucky to have a job”), way too often people are entitled and that doesn’t come across well.
But there are a few things that don’t make sense:
1) you say you were in no position to negotiate, yet you tried to negotiate anyway and did so on the wrong portion (salary vs PnL). I only bring this up because it reflects some on how you are approaching these issues and negotiations. Maybe you didn’t think about it for much time, but my feedback is more around how you are approaching the problem and then coming up with a strategy (mainly I don’t think you are thinking about it from the employers view which is important, it also sounds like you picked a random number, you need to back up your views with info/data)
2) negotiating on PnL would have been (and probably still is) less risky. Again the employer in that case only pays if you make them money
3) you can also look for roles outside of this fund if you don’t think you are being treated well and compensated fairly. While, yes, you are lucky to have a great opportunity to run a book, that probably means you are also good enough to work at other places (other top funds) and receive a fair, market rate comp package.
4) I find it a bit odd that you are almost defending the outcome by pointing to being the youngest junior pm. That’s great, and a great opportunity, you must be doing something right, but if a firm values you they will give you the title and the comp. They didn’t just give you money to manage because of a coin flip, they must have a reason to trust you in that role (if not why not just take all these $50k a year analysts and give them small books) and if they trust you like this they should value you with market comp as well. Another way to look at this is that you are also probably the worst paid junior pm at the fund (this is mostly a guess based on my understanding) so you can wear the “youngest junior pm” as a badge of honor or view it as the lowest paid performer at the job.
Anyway, in general you should look at this as a great opportunity but you should also make sure you have all the relevant information when making these decisions. These things can be tough to balance, I think it is important to balance the “I’m lucky” attitude with making sure you are being compensated for the risk and responsibility you are taking on. All of this goes much better if you do your market research and make the case based on numbers. Do not make a comparison based case (I.e. well John makes X), use market rate, but more importantly talk about the value you deliver to the firm and what you think that translates to. Hope this helps.
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