Negociation for comp

Hey guys,

Earlier this year the hedge fund I worked for closed due to many redemptions. I managed to find a position in a bigger hedge fund. It is a Single Manager shop but in practice I am running my own strategy.

Not helped by my previous situation (no job + previous HF that was shut down) I did not manage to negociate my comp, meaning I did not get a lot of info about bonus policy, and did not ask for a % of PNL guaranted.

As year end approaches, I realize I have no idea about what to expect as a bonus.
Do you think it is obvious that it will be linked to my strategy's PnL or should I clarify that with the PM?


Comments (3)

Most Helpful
Dec 4, 2021 - 11:41am

My role was like this not long ago: 

"in practice I am running my own strategy" and "did not ask for a % of P&L guaranteed" 

You want to be in this position for as little time as possible.

You have probably already learned that as soon as P&L is tied to your name you will bear all of the responsibility for anything that goes wrong / drawdowns, and are taking the risk that comes with that (no bonus, getting fired), so you want to make sure you are getting your fair share of the upside when things go well. In your boss' mind, if you make money, it will be because of the resources / guidance they gave you, if you lose money, it will be because you messed up. It might not seem like this right now, but it is probably more like this than you think (everyone wants to be the parent of success, failure is an orphan). 

You need to: 

1. Talk to others on your team who may be in similar roles (does everyone run their own strategy? or are you a one-off silo?) and get a sense for how compensation in your firm is structured, and what kind of payout structures your boss might be amenable to.  

2. Ask to tie your bonus to P&L, and get it in your contract. If this feels risky to you, you are probably already taking the downside of that risk without realizing it.

Of course the best time to ask is when you are up a lot and don't plan to have a lot of risk on in the near future (hopefully that is December for you?). 

Dec 6, 2021 - 7:51am

Thanks a lot for your thoughts, I fully agree and this is what I am afraid of. This being said it seems they are not the kind of bosses to fire after 6 month of underperformance, so I guess this relative security implies a lesser % of PnL than other funds, but still I want it to be linked somehow

  1. I don't really have someone to talk to, pretty siloed and either senior partners or juniors not running their strategies yet, from what I know yet I am the only somehow in the middle
  1. Yes I guess I will have to do this. I will probably wait for the annual review early next year, and clearly tell my expectations for the future

Thanks a lot for your insights !

  • Intern in HF - EquityHedge
Dec 11, 2021 - 12:31pm

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