Typical HF Compensation Targets for post-"2+2" IB/PE hires?
Notwithstanding the fact that compensation could vary wild depending on performance and fund type...
What is considered a typical expected range or target for first year hedge fund compensation following a 2+2 stint in IB and PE? My understanding is that the elite single managers and Tiger Cubs typically offer the potential to earn more in your first year or two than what you are guided towards at the large multi-manager platforms. I would expect base comp to at least be competitive relative to average MF PE 2nd year associate base ($150-175), but am curious to see if people are able to share more informative data points.
Analyst 2 in IB-M&A, hey, look at the bright side, at least you didn't get a ton of monkey shit thrown at you...here is my best guess on threads that might be helpful:
More suggestions...
You're welcome.
Bump, would love to learn anything as I'm in similar boat
Seconding bump.
Bump
It just varies too much, it is going to be very hard to get you a good answer, especially if you are talking about “elite” single manager shops where there are very few openings. Size of fund, strategy, etc will all play a role in comp, and of course bonus is the real number that matters.
As for base, yes you should expect at least 150-175 for a good opportunity with 2+2 experience. At MMs the base mostly tops out around there or a bit higher. At other funds it can get quite a bit higher but again, that’s not the number that matters.
Conservatively I would say 175 + 100% bonus (floor would really be around 300), at top places I think closer to 400-500k all in. But again, varies a ton.
I think we used to pay 2+2 kids like 350-450 at my old firm (mid-tier single manager). As you get more senior you shift more to P&L
lol, those years are gone. 350-450 for fresh analyss to the buyside is... ambitious.
Thanks a lot guys, understand it's going to vary a lot by fund but those data points are very helpful and close to PE senior associate comp, which makes sense as a benchmark.
Analyst 3, what numbers would you think are market if these ranges seem too ambitious to you?
These figures are way too high. seen 120 base. 150-175 prob standard. Don't expect anything above 200. Bonus could be 0 could be 100%. Depends on performance. Obviously if you go to lone pine you are getting more but this is assuming you join a typical shop.
Just have to have a reference about what level of fund you are talking about.
For “good/top” funds (not necessarily high aum but the usual names that are competitive), $200k all in is very low for 2+2, the big names that take undergrads pay more than that straight out of school. So as you can imagine the top funds that take 2+2 have to be competitive with that and other opportunities.
MM is a different story due to PnL.
Edit: I see you may be discussing $200 base, which is on the higher range of some places but definitely not unheard of. $120 is very low.
What would you think of as a competitive range for 2+2 candidates?
Yes I was strictly talking about base. Bonus can be a lot, can be nothing. Depends on the person, the fund, performance, etc. Typically ~$300k all in is standard I'd say.
$400-500k+ total comp is a good range for first year HF comp post 2+2 MFPE. That range has been surprisingly consistent over the three funds I’ve worked at over the last 4 years ($10B+ single managers and internal HF at mega fund).
Is it reasonable to be making $1M total comp in a given year after 3+ years?
No
Not to side track the thread....but I'm curious to hear what your experiences have been like at some of the largest HFs in the world? Willing to share any insights?
So yes if you work at a $10bn+ SM you will make that kind of money, but don't expect that to be the standard for your typical 2+2 kids
Thanks Delphi! PM'd you
The numbers I see here are way too high.
Base: 150 - 180. 200 is upper bound (and usually for PM)
Bonus: 0-100 (1st), 0-150 (2nd)
after 2nd year, depends how generous your PM is.
This does not include highly selective SM funds- good luck getting into one. If you do, never let that seat go. You can clip your pay and just go skiing on the weekends.
I don't think this is right, or I may well have received a generous offer - all-in higher end of ranges discussed above and base on higher end of your range. Not sure if you know the PE market, but your ranges would be a substantial cut for any PE associates heading into senior associate / junior VP years at MF / UMM funds.
Sure. But the hedge fund market in general is in decline. The high payout is when you have risk and you make PnL.
Again, if you are at one of the top SM it is higher as I outlined in my last statement. The danger there is that L/S is in secular decline and there have been numerous closures in recent years.
Base on higher end of range is totally reasonable. I've also seen higher ~250k but that is the exception.
Bonus, I'm wiling to bet you are either at a megafund with pedigree or a well known sector specialist. Otherwise this is unlikely. Again, to emphasize, I'm not saying these numbers are false. They are very rarefied and unless you have the right network, pedigree, etc you won't find them. The real career risk at this point isn't getting the job, its whether you can keep it and how much earnings expansion you see without having to go out on your own. I've seen several former analysts from high end SM shops leave after 8-10 years to MM because their growth and earnings stall.
One easy question to ask, if the market is willing to pay 350-500k all-in for an employee who hasn't managed a portfolio sleeve or is able to contribute meaningfully to PnL with regular idea generation then why do analysts leave?
Not sure what MF/UMM funds are.
Based on these comp numbers why would 2+2 IB/PE associates move to the HF world? You could have stayed in banking and been 3rd yr associate going to 1st year VP at that point and make $500+ with 2 levels of employees below you and without the stresses of the market.
Aren’t VPs in PE making $1m+ including value of carry over 5-10 years? That should be the comparison/benchmark
I don't think VPs in PE making >$1m annually is as common as you make it out to be - yes may be true at MFs but a lot of it will also be coming from carry which is more back end weighted, and assuming you're still at the same fund. I do agree this particular range seems low, but you shouldn't be comparing to $1m as a benchmark either...
Your comment really makes me doubt if you actually work in the PE industry. If you do you know better than anyone else why 2+2 leaves PE to HF.
how's JT marlin?
Yup, completely agree. I think another guy posted similar numbers and was downvoted. People just have an unrealistic view of pay. I think a lot of the people posting high numbers are in their late 30s/early 40s or a senior position. The industry is no longer like it was 5-10 years ago. Comps on the junior level have come down quite a bit. No one is paying 2+2 500k without blinking an eye anymore unless the firm killed it that year AND you contributed directly to that PnL in some significant way. People are talking about $10bn+ SMs, and yea, sure, if you go to Lone Pine you will get a lot of money, no one is arguing against that. But if a young analyst is going to use that figure as their base case benchmark, he/she is in for a rough one.
Don't think anybody agreeing with you has been downvoted, the only downvotes have actually been on above poster with higher range and my post contributing an actual data point of recent 2+2 offer which actually matches his range... Again I'll repeat I may have gotten a generous offer at a selective fund, but that is my actual anecdotal experience.
You can say it's an unrealistic view, but you can't deny the fact that PE comp has risen over the years and it's quite common for PE senior associates in the 400+ zone, and you need to be competitive with that in order to attract these candidates. Everybody gets that you leave PE for HF for the upside, but nobody is offering juniors meaningful P&L upside, which means that the cash comp in early years does realistically need to match the candidate's alternative.
Salaries way too high. Try half that for most hfs and multi managers and that's from a few years ago. Things are worse today for most hedge funds except MMs and those are pretty commoditized seats. There's no reason to pay some newbie $400-$500k.
I think it is useful to make sure we are talking about the same places, for top funds (not MM) the numbers are right.
Remember, top funds (citadel, DE Shaw, etc) pay $250-350k for new hires out of school (counting signing bonus, some even higher than that). Now, those tend to be more on the quant side, but the funds with stable AUM and the top places do pay that high. The reason is that top talent has other places to go, so you aren’t just competing against the “declining” HF world, but other opportunities.
I do not want to get anyone’s hopes up though, these seats are extremely limited and competitive. When talking about averages then you need to lower the numbers (which is why it seems like people have pretty different views here). Additionally, most people don’t succeed at HFs, so risk adjusted it isn’t great.
ah yes let's just throw in some more crazy data points. I heard a friend of a friend out of Wharton made $500k out of school because he went to a "top fund". I think all top funds should be paying that!
250k is reasonable. 350-400k+ is for new hires and includes their front-loaded 1st yr guarantee and signing. In year 2 you get your base of 150-180 and whatever your PM feels like on bonus day. Which can be 0 to minimum necessary to prevent you taking your gardening leave and going somewhere else.
Also, if you join mid-year the bonus and signing are prorated so you don't get the full 400k. Btw, most of these positions are actually in tech and so there actually are alternatives from FAANG that are willing to bid up the comp. This is not true for L/S analysts.
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I would encourage everyone to use H1B databases - they give a very clear picture of what the base compensation is at a variety of funds.
Bonuses are of course variable and not reflected.
Lmao kids giving you MS because they won't accept that 2+2 makes 150k base at most of your avg SM shops
HFs have been too mystified. The default expectation people have is if you're a HF analyst you're making 250 + 250 base/bonus to start and then 1m + 1m 3 years down the line.
And then you have quant funds giving "400k" offers to kids out of undergrad to be competitive with FAANG, and people assume that's annualized + increasing, when in reality it looks more like 150 base + 150 first year bonus + 100 signing bonus, which immediately falls down to 150 base + no guarantees after your first year.
This is the OP here. Thank you to everyone for getting the conversation going and sharing data points. I'll go ahead and give you one that I received while in conversations with a recruiter who had passed along an opportunity with a Tiger Cub (one of the ones that has generally underperformed over the last 2-3 years, which is also why I decided not to proceed with the process). For everyone's benefit, I was about a third of the way into my 2nd year of PE at the time. Essentially was told to expect $165k base and a bonus of 100% in my first year (on average... though still subject to overall fund performance) with "some sort of signing bonus" (the magnitude of which I can't comment on as I never went that far in the process, my guess is $25-$50k). This was for an office in a Tier II city (non-NYC/SF).
Looks like a decent gig if the city is Boston. Less so if its Dallas
Most of my peers from PE (including myself) now work at large SM or MM shops and I can tell you first hand that average comp is lower than you'd expect but the upside is substantially higher. Have multiple friends hit 7 figure payouts in at least one of the last three years. This is why people leave PE, it's not about 1st year comp.
this still doesn't make sense to someone who has never done PE. Are there hidden risks lurking to staying on the PE track, it seems risk-adjusted pay at PE is still much better. There are 7 figure pay days but they are rare and getting rarer. At SM that outperform by being long beta and factors last couple of years this was possible but represents huge risk. I still think that staying in PE and climbing to principal provides higher expected earnings than prestige SM.
I’d think people want to avoid the continuation of mind numbing process work for consistent >80 hour weeks and view a HF role as a way to “bet on themselves” given the potential upside. Sure, being a career track VP+ in PE with carry is great comp, but unrealized carry doesn’t pay the bills and realistically you’re not going to see anything from it for 5+ years whereas you might be able to hit a big year at a HF in the near term
Double posted
Adding a question to the great discussions here -
For those who posted data points, is the bonus part typically agreed upon before you joined the firm? Is it standard to have it in writing? How many years of guidance/visibility is typical?
And have people gotten higher actual bonuses than what's guided?
Same as Delphi. When I was more junior I was given the range of what to expect based on fund performance, while not a specific floor, it was mostly a “as long as shit doesn’t hit the fan”.
As I was more senior when I looked at other opportunities I was offered guaranteed bonus (I.e. minimum of X) with the opportunity to outperform.
When I was junior the forward expectation was 2-3 years out. And to be honest after that the ranges can get wide so not as useful.
As for outperforming, yes absolutely, I’ve seen 2.5-3X of what was expected.
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