what % of my PnL should I get?

BobbybananamA's picture
Rank: King Kong | 1,202

if i make for sake of argument $10mm for a fund that has a 2/20 fee structure how much of that should I get paid if i am a junior analyst that works under a senior analyst (e.g., there are 3 tiers in hierarchy)? suppose this a single manager fund.

how do the following factors affect the answer?
a) whether i earned return in 1 month vs. 12? (e.g., impact of annualized returns and not just $ returns)
b) whether i earned through taking more or less systematic risk (e.g., impact of whether i am net long or short etc.)

for sake of argument suppose you made $10mm in 1 month with only short positions and I owned all the ideas from start to finish and generally ran the position... what is "fair"? the way i think about it is 20% of $10mm is $2mm and if it actually is a high value position (e.g., took up no portfolio $, actually reduced systematic risk and was clearly skill because these are shorts) then you deserve a high % share relative to the PM. So in this case, I would assume the junior analyst should get at least 20% of the $2mm that in a very worst case (e.g., $400K bonus).

also i get it's up to the PM, but my question what is a "fair" amount? by "fair", I mean the number under which I should consider leaving because I am getting fckd.

Comments (6)

Most Helpful
Dec 6, 2018

You're an analyst..so whatever your PM feels like paying you.

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Dec 6, 2018

1%...as an analyst and not the risk taker...you should only get 1%. if the idea lost money...would you give back some of your base salary?

just google it...you're welcome

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Dec 11, 2018

you seem to misunderstand the economics of investing in a fund and a PM.

first, if you caught the market selloff and your short ideas played out...that's nice, but doesn't prove that you will be able to consistently perform....that takes time and experience. This is why investors generally want to see 2-3 YEARS of performance before they will invest into a fund.

second, there are many mouths to feed....and the biggest mouth is the PM.
Lets imagine that the entire PnL for the year is 10mm, which leaves 2mm for comp.
The PM will take ~75% (1.5mm) of comp for themselves.
That leaves 500k to pay out among 2 people (your senior analyst, and you)
The Senior analyst is going to get more that you...that's just the way it goes. At a max, if you get equal comp, thats 250k...but i've never heard of it happening this way from a single event.

You were hired as a junior analyst to bring ideas to your PM. If you want the big bucks, then you must become a PM yourself. Nobody will give you money to raise a fund just because you caught the market selloff one time, one month...it takes consistency and a repeatable process. Congrats on your first big win. Now go do it again, 10 more times...then you can talk about deserving a larger share of the profits.

The reason the PM gets the bigger share? Because he controls the $$. There are hundreds of one-hit-wonder analysts...its rare for them to get investor backing without a longer track record.

just google it...you're welcome

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Dec 11, 2018

not sure if you understood my question. i actually just wanted to figure out two sets of assumptions.

the assumptions I am looking to figure out are (a) what % does PM take of your PnL (which you are saying is ~75%) and (b) what % will a senior analyst take? Generally, I was looking for a range of outcomes, not a re-affirmation that I deserve big bucks. I am generally assuming that the LP takes 85% then the PM takes 70-80% of the remainder, then the senior analyst takes 70-90% of the remainder from that. in my case, the actual PnL was $40mm, so I am assuming the actual number is something like $200-500K. i am assuming where i sit in the range is driven by (a) overall fund performance, (b) perception of my marketability and ability to leave and (c) tenure (perhaps because it gives an indication of how "real" my performance is) and (d) generally how much they like me. in this case, most funds did poorly this year and I am young, which basically means I have to sit on the lower half of the range (because factors A and B are very negative). $200K would be too low though based on how most similar employees get paid in finance in new york, but they also need to show some leg because I did well, so my guess is I'd actually only get like $300-350K inclusive of base.

    • 1
Dec 12, 2018

this all really depends on the PM...since they decide on a whim, and there are no set rules. i will say tho, that catching a market selloff with short ideas is not indicative of long term success...because equity markets spend the majority of their time in bull markets. The avg bear market lasts 1-2 years. the avg bull market lasts ~ 8 years. This is why (among other reasons) investors want 2-3 years of performance before they will be willing to invest with a new manager.

just google it...you're welcome

Dec 12, 2018
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