Which Hedge Funds pay the best?
On the distressed side, heard Elliott and York guys would rake in 7 figures if good. What about other distressed hedge funds? Tiger cubs?
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Don't think York distressed is paying that now...
There's not going to be a consensus here. Everything is performance driven.
All performance driven as has been said. There is no one answer, if you are good and your fund performs you will make very solid money basically anywhere.
You have to decide on a few things when looking at the comp: 1) stability - larger funds will have more stable pay, they have a larger asset base and generate reasonable revenue off of management fees. The flip side is that the upside is usually less (from variability side) as they pay is more structured and a bit less “eat what you kill” (especially at single managers) 2) “skin in the game” - you have decide how much of your pay you want associated with yourself, your pod (if MM), the firm, etc. this will cause large variability in comp 3) ability to invest in fund - while this isn’t direct comp, your ability to invest in the fund (and having part of your comp as investment in the firm) is another thing to consider.
Generally smaller funds will have more variability, but all well respected places will have reasonable agreements. You won’t find many top notch places that will be cheap on top talent.
So I’ll take a slightly divergent view to this - not that they’re wrong just a different perspective.
1) pod shops have higher % payouts than non pod shops. But they provide less capital. I pay my mortgage in dollars not payout percent. So if I can invest 3x the capital at half the payout at a non-pod shop, I take it.
2) Stability is critical (especially as you get more senior). even if comp is the same or less , if i can put a higher multiple on that because I’m not at risk of getting blown out out quickly, I value thay.
3) on Co investing in your book or fund. I’m all for generating returns but I a) I want my personal wealth in uncorrelated assets. Last thing I want is blow up my portfolio and personal BS at the same time and 2) most of these funds are mediocre or worse on an after tax basis for taxable onshore investors. So you won’t actually generate that much AT return.
One thing to clarify from my last point is that there is ability to invest in your fund (which is what I said) and there is equity in the fund (which is what I mean to also add). Getting a % cut of the profits can be a relatively stable cash flow at a larger fund. I agree with having your wealth uncorrelated to your job, but noting that at some places that’ll be how you participate in the upside (and how they’ll compensate you).
All things considered, I would say distressed HFs have the lowest upside but highest stability compared to other HF strategies. This is strictly on the analyst level.
probably more stability vs a pod shop for sure but I’m not sure distressed HF necessarily beats other single managers. lots of clear examples of distressed HFs blowing up. Maybe if you look at the distressed drawdown funds with locked up capital then yeah more stability but the people with actual HF structures BlueMountain, Solus, York seem to have just as much risk. quarterly redemptions be a bitch
The large ones that are making out sized returns. Different every year of course.
Large well known distressed managers generally pay at the upper end on early analyst side of comp (the range for me and all my friends in the industry our first year was 300-450) and Elliott is well known to pay well above most other firms as a general rule.
The best paid non-partner jobs will always be at $10bn+ managers with significant mgmt fee baseline and are performance that actually meets / beats their hurdle rates (distressed doesn't do that therefore i assume most sr. analysts / non-partner MDs are making a +/- 750-2mm at most at most of the reputable distressed shops).
750-1.5 at the “MD” level is relatively low. $1mm is about the minimum at top places for that level. At the MD level at a fund of that size you start getting significant stakes in the fund. When counting in equity stakes the MD level people I know are more in the $2mm on the lower end.
yeah meant non-equity partners i.e. sr analysts who didn't get invited into the partners-club.
If you have an equity stake in the GP / not your typical 30 y.o. sr. analyst (ie have lived breathed the industry for 15-20+ yrs) you are probably clearing north of 1.5-2mm on low-end.
do you know how much Elliott pays their first years? I know a couple of people who went there after stints at MF PE/ Centerbridge, but not well enough to ask their comp haha. just curious because I know they pay well above street (like Apollo’s rep but with PE) too but have zero data points
Family friend who’s older there anecdotally took ~350 all-in first year. Are they on the activist equity side or distressed debt side because that makes a difference.
When you say first year you don’t mean first year out of college do you? How many years down the line from graduation is that salary?
Experienced (in most cases out of banking)
Elliott rarely hires out of banking. Typically after a couple years of buyside experience
what about for traders?
I work at a medium/large distressed fund at a relatively junior level, although I am fairly experienced on an absolute level. At my fund there are Associates (around 45% of employees), Principals (around 35%), MDs (around 15%), and Partners (around 5%). I have limited knowledge of the compensation of the higher levels (Principal/MD), and am wondering what to really expect as base/bonus/points at those levels. Any insight?
Not sure what you mean fairly experienced but distressed HFs don't tend to give a huge amount of credit to people who come in with non-relevant experience. if you meant say you came in from associate 2 RX banking to distressed HF, they usually reflect that in the base salary bump that tends to top out around 200-300 and rest of comp coming in discretionary.
A frame of reference (there's a huge amount of variability and the meritocratic nature of performance can quickly sift top performers outside of these ranges while non-performers or people who can't stomach industry tend to leave or start firm-hopping before they get 3-4 yrs impregnated with the same firm):
The easiest way to think about how they are paying the firm as a whole is just run a a best-estimate P&L of the firm, how much revenue do all their funds bring in per year (probably 1-1.2% blended mgmt on true flagship HF platform after accounting for share class/fee waivers/cuts), how much perf fees are they hitting (could be 20% of ~5-6% avr. 3-yr track records but what i've seen is most LPs starting to institute a min benchmark hurdle on credit side and certainly 6-8% hurdles on drawdown making it not as simple as "1% mgmt + 1.2% perf"...perf fee is much lower than you all simplistically think) and then take a guess at how charitable you think your founder is giving out equity as a comp tool. Good baseline is that 40-60% of GP revenues should flow back to partners (variable depending on lumpiness of perf fees). Operating leverage in asset management business is immense so a well-oiled machine and especially one where founder isn't totally selfish, should be running total expenses in the 40-60% range post bonus payouts. A decent size HF ($10-20bn) will likely be running in the 20-50mm range for non-comp expenses including all the back office, rent/utilities, research/other investment team tools, software/IT/quant stuff, legal/accounting etc.
I think to another poster's point earlier, at really successful equity funds it isn't totally uncommon for that equivalent 4-7th yr sr. analyst to be funneling in a lot more than the 500k-1mm (some getting as as high as partner level $) but as we know, active equities is also a dying field.
This is honestly one of the best posts I have read on HF comp on the entire forum, and consistent with my understanding. +1 Props to you sir.
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