My hedge fund has this practice, is it normal?

Subscribe

I just joined a hedge fund and we have this investment challenge game within our team. The game is to play a virtual investment game with hypothetical money. But the payoff, which is determined by our over/under-performance against a particular index (say MSCI APAC ex Japan), instead of the actual returns of our holdings, is real. So for example if my virtual holdings for the month returned 5% while the index returned 3%, I would receive 2% x USD 100 = USD 200 from my boss. I am just wondering if this is a normal or legitimate practice within a fund house. My boss said he got the idea from a retired Goldman Sachs fund manager who used to do this with his team. Thank you.

Comments (18)

 
Mar 26, 2013 - 10:23pm

zeropower:
Never heard of something like this, but if it's risk-free money (i.e even if you under-perform, you don't have to pay your boss), then why complain? I'd go balls deep in OTM options and hope for a major (extra) payday.

no...the exact opposite is true if I under-perform the index, i.e. I have to pay my boss the difference...

my boss said that the GS fund manager team lost almost 2 months worth of salary in the first few weeks of the game, not sure if it's true or not but probably tells you why analysts are not usually good at investing IMO...

 
Mar 26, 2013 - 9:02am

Doesn't really sound like that big of a deal. So I don't think it's "normal", but it's also not exceptionally weird.

It's similar to the European quant team at SAC getting together and doing PF Chang's every Saturday night - is that "normal"? No. It's also not really weird. Or a big deal. Or that interesting. Kind of a like this.

 
Mar 26, 2013 - 9:15am

STIBOR:
Doesn't really sound like that big of a deal. So I don't think it's "normal", but it's also not exceptionally weird.

It's similar to the European quant team at SAC getting together and doing PF Chang's every Saturday night - is that "normal"? No. It's also not really weird. Or a big deal. Or that interesting. Kind of a like this.

Wow. PF Chang's every Saturday? I wouldn't last 3 weeks...

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 
Mar 26, 2013 - 9:49am

Not weird, but also kind of retarded since you should probably be pushing any good money-making ideas into the fund...

I hate victims who respect their executioners
 
Mar 29, 2013 - 1:40pm

BlackHat:
Not weird, but also kind of retarded since you should probably be pushing any good money-making ideas into the fund...

^^^ this ^^^

Seems like the game is a waste of "intellectual" resources. Instead of looking for safe ideas for the fund 24/7/365 (that's why we get paid 2/20 or 1.5/15), analysts have incentive of spending some of their time looking for riskier (but more profitable) ideas for their virtual portfolios.

 
Mar 26, 2013 - 1:21pm

SirTradesaLot:
GBB_19NHS:
damn every saturday pf changs, so you can never do something on saturday but go eat pf changs?

that just sucks


Seriously...just pull my fingernails off with pliers instead and get it over with.

You mean you don't enjoy over-priced faux chinese food in a completely Americanized environment?

[quote=patternfinder]

Of course, I would just buy in scales.

[/quote]

See my WSO Blog | my AMA

 
Mar 26, 2013 - 11:17am

Doesn't Dalio do that at BW on a pretty big scale (although I think its macro allocations there, in line with fund strategy).

 
Mar 26, 2013 - 10:27pm

This is just a more practical, less macho form of liar's poker. I guess you could say this is your office's "liar's poker."

"They are all former investment bankers that were laid off in the economic collapse that Nancy Pelosi caused. They have no marketable skills, but by God they work hard."
 
Mar 27, 2013 - 9:32pm

Similar. I had a setup with a paper portfolio, bonus was based off performance of work & other 50% off performance of paper portfolio. this was to prevent a quite often complaint at HFs that the PMs didn't listen to analyst investment pitches and were the reason for a fund suffering/stifling progression etc.

 
Mar 28, 2013 - 2:36am

I had heard that a top quant fund (think: D.E Shaw, World Quant, Two Sigma, AQR) would day-trade via a virtual simulator on a discretionary basis during the lunch hours/ down time and see who generates the most profit over the period. It seemed to be a game, and I'm certain that their monopoly money daytrading performance had no bearing on comp.

Start Discussion

Total Avg Compensation

September 2020 Hedge Fund

  • Vice President (18) $520
  • Director/MD (10) $359
  • Portfolio Manager (7) $297
  • 3rd+ Year Associate (18) $269
  • 2nd Year Associate (25) $242
  • Engineer/Quant (45) $238
  • 1st Year Associate (58) $189
  • Analysts (175) $167
  • Intern/Summer Associate (12) $134
  • Junior Trader (5) $102
  • Intern/Summer Analyst (183) $80

Leaderboard See all

1
Jamoldo's picture
Jamoldo
98.3
2
LonLonMilk's picture
LonLonMilk
98.3
3
Secyh62's picture
Secyh62
98.2
4
CompBanker's picture
CompBanker
97.8
5
Addinator's picture
Addinator
97.6
6
Edifice's picture
Edifice
97.6
7
redever's picture
redever
97.6
8
frgna's picture
frgna
97.5
9
NuckFuts's picture
NuckFuts
97.5
10
bolo up's picture
bolo up
97.4