MM Analyst Comp
By analyst I am referring to anyone who is not on an explicit PM or Associate PM role where compensation is a straightforward formula
What do people expect? I'm a relatively senior PM, to the point that I am detached and always confused about what to pay an analyst with various degrees of experience that is not directly generating ideas and p&l but more doing operational tasks and directed research.
It shouldn't matter much if the analyst is not coming up with ideas directly? But assume the book is what I would call "successful" at a MM, that makes 50mm+ consistently with a 20% payout for the PM.
Can help on more senior related PM questions in return.
I’m 100% against the first reply. No chance in hell an analyst (especially not a fully independent one that you just leave and collect ideas from) should be scaling bonus comp in line with book size, USD2.5m is totally crazy as many PMs with smaller books don’t even clear that, especially at lower payout shops. It’s more absolute figures you should be thinking / not cut. If you’re the only person running a 1.5bn+ book (which is what I’m assuming if you’re clearing USD 50m+ of PnL consistently in a MM platform) versus other PMs then great, the cut you can take is much higher than someone with an analyst on USD 300m book in same space. So all about next best alternative. Don’t think any analyst, unless true superstar, should be clearing USD 1m+ at a MM platform. Unless your analysts basically run the book for you / sub-PMs that have ownership of portion of overall book, then makes sense to give up more as you can chill more on autopilot.
For an analyst that just runs down ideas, some of the numbers thrown around here seem kind of high. I'm at a SM, so I'm not familiar with how things work at MM. We run $bn+, and we pay our junior/mid-level analysts $250-500k.
The only place that always gives senior analysts carve outs with pnl cuts is Citadel. The rest of the MMs do not systematically do that, and even at citadel there are a lot of wrinkles. Senior analysts at MMs can make 7 figs, but it’s not as common as people on this board seem to think. And typically that only comes with 5 years of experience or more. Unless you are hiring somebody with enough experience to run a (sub) sector independently, you don’t need to offer a pnl cut and you’d be dumb to do so. That being said, anybody who can consistently generate $5m plus for the comp pool needs to be in the 7 figure range or they will likely be out the door.
Anyways, in the scenario the OP talked about...if you’re making 10m of comp pool and value your team, they should be taking home 1.5-3m total in aggregate assuming 3-5 years experience, and if they aren’t you can expect they’ll leave...which may be fine. Just comes down to whether or not you want to keep training new people. Honestly to some degree it doesn’t matter bc if you actually generate 50 plus consistently they’ll always have recruiters knocking on their door so the only way to get the ones you really want to stay to do so is by offering consistent 7 figs and potential to make 2-3, which you just may not want to do.
To be clear all of the above only applies for equity long short, which has seen massive pay inflation in the past 5-10 years.
I know a few teams that have that kind of PnL with a couple of analyst underneath that have been around with the team for 4-5 years. They are nowhere close nor will be close to 2-3m. The comp just doesn’t scale that way at MMs. Hell, more than half the PMs at MMs dream to consistently clear 2-3m.
Someday when I’m a PM with few 30 year old, established guys running their surf-sufficient sector books under me, I hope that I’m able to convince them that 7 figure comp would be pipe dream - I just can’t tell what’s going on here - is it college kids? Is it analysts who don’t generate any value? Is it selfish but endearing PMs - why would you not expect well performing established analysts at the largest MMs to not clear 7figs in a good year? Why the hell would they work there if the that upside wasn’t fairly frequent in good years? When you see a 30 year old senior analyst with his own book and a wife and kids at a conference you assume he’s expecting to make $500k?
How many 30 year old analysts have a wife and kids and enough experience to get a PM or sub-PM gig? They are likely just starting on a sub-PM gig at that point or the next few years. If they are talented and mid-30s, but want to be an analyst and not take risk, they would be more in the 700k range I think. The majority of analysts are upper 20s and low 30 though.
What is their alternative and what would that pay? I think that is your answer
From what I've seen by early 30 years old most analysts who work at top teams at MMs have a bid for either a senior analyst w/ a carve at a place like Citadel, or for a starter PM seat at one of the other MMs. That's assuming about 4-7 years of experience. While the starter PM seats start at low allocations, there's usually a meaningful ability to get more capital quickly if performance is good.
So I personally haven't seen that many mid-30s analysts who have stayed with the same team at a MM for a long time unless they are pretty well-comped, mostly because I think every analyst thinks their downside is the same as running a PM seat (the idea that you're "protected" as an analyst is bunk - your PM can/will get blown out, and even if they don't there are too many stories of PMs who lose their temper and fire an analyst after several years). Most mid-30s analysts at MMs who are the poorly comped people seem to be people who haven't managed to hold a seat down for too long of a period of time and are looking for the next seat that will give them the asymmetric upside.
You’re still on about this book running thing. Nobody even mentioned on a sleeve you shouldn’t be getting 7-digits, you are for all intents and purposes a PM at that point and almost for sure pay expressed as a cut of PnL. But UNTIL then it almost never is and if you’re at a MM and an analyst not running a sleeve, you should not be pulling 7 figures 9 times out of 10 even in an amazing year unless you’re a career analyst at some big single manager. Once again, refer to OP.
I have worked at multiple of the large MMs (think Citadel, P72, MLP) and I think what most people dont grasp is that the majority of PMs have small books and do not make any money. This translates into many analysts not getting paid anything other than their base salaries - if the total book prints nothing or negative there is no bonus to be doled around.
That said if you are lucky enough to be in one of the high performing, consistent money making pods, you will probably make in the mid to high 6 figures as a senior analyst. However those seats are few and far between at the big platforms.