How many MM PMs make 100M+ lifetime PnL?
Fair to say 100M+ lifetime PnL (across any # of platforms) is a top quartile outcome? Or more like top decile/percentile? Feels like a reasonable outcome even if it’s not easy or expected by any means, e.g. 5 ‘decent’ 3% years over an entire career on 1B GMV = 20M lifetime earnings assuming PMs take 2/3 of the bonus pool. That’s phenomenal vs almost any finance career let alone by 40-45 y/o, am I missing anything in this calculation?
Counting only up year btw since in down years you just make 0
I would be more interested in an analysis of how many MM PMs there are at any given time in the entire US tbh
You're saying PNL when you should be saying comp or bonus, which makes it very confusing.
PNL is the profits you make for your fund. Comp/bonus is what you take home.
But to answer your question, I'd guess probably top 5%, possibly top 2%.
Yes sorry to clarify I meant 100M+ in career PnL which I guess would translate into 13M+ in career earnings/comp/bonus assuming a 20% payout and 2/3 share of the bonus pool (rest to analysts/sub-PMs)
I mean then it would be a metric fuckton and not a differentiated outcome at all. Someone sticking with IB would get materially higher lifetime earnings than that
A big assumption. Most people don’t start making a 20% rake until they’ve cleared a lot as a sub PM or lower, those lower year you might clear 3-5%. So if it takes you 3 years to reach this point and you’ve been clearly $20m a year on average then that means you’ve only clearly $60m * 4% = $2.4m pre-taxes which is still good, but not exactly money that will completely change your life (yea nicer car, house, but you’re not set for life especially since you’re probably living in a VHCOL area).
A $2-3bn pod targets $50-150m of PnL a year…
There are PMs at citadel running $2-5bn and printing $75m+ of PnL in an average year / taking home almost $10m of that
Obviously PMs at the big funds have career earnings well in excess of $20m
Not an average outcome, but yes the average pod at a place like citadel is in the $2-5bn zip code. In that model, if we think about a good PM, over a 10 year span, maybe $20-30m for 2 years, $5-15m for 6 years, $0-3m for 2 years. That’s over $100m of earnings, which at that point you raise $1bn for your own fund. I know PMs worth in the hundreds
Again, citadel & millennium not tier 2 pods
Average pod at MLP is definitely not in the $2-5bn zip code…there’s teams slinging capital that size sure, but they’re not the mode.
Citadel, yes
MLP - how much is average senior equities PM running?
This is extremely inaccurate. It's more like 1 in 25 PMs at Citadel or Millennium have such outcomes.
No, as someone who's worked at one of the above, I wouldn't agree with that. Citadel books are very large - run the math on those outcomes...have definitely seen multiple folks with that outcome. Not 1/25. Millennium too but wider spread of outcomes. This is citadel, not exodus pt or AB...
I really can’t comment on some of the smaller podshops but at the larger ones, I’d think vast majority of the competent ones are in excess of 100. I mean I’m an senior analyst, have been in this kind of seat for 5 years, and my lifetime PnL is about $100 (payout on my sleeve is HSD, PM gets the rest)
My PMs lifetime PnL is like 600 or something crazy but he’s getting a little old. Ditto the above guy - with big allocation, 3% rtn = $50-100m of PnL in a single year
There was actually a first year PM last year who did $100 of PnL. Maybe I’m stuck in my large pod bubble
what's rtn?
return
At my current firm and sector (energy) I know 3/18 PMs who have achieved $100M in excess earnings. However, my firm is unusually good at trading energy. I'd estimate over the last 15 years, 90% of energy trading funds have shut down. So ballpark <5% of PMs can make $100M in their lifetime. Remember that raw profitability (return) and longevity (compounding) are correlated. So the wealthiest PMs are the ones who succeed year after year consistently and keep growing their book.
Common pitfalls. Many strategies don't scale well. There's also a huge number of PMs who just fail quite quickly and bounce around from firm to firm grinding out low digit millions. Anyone you hear about in the industry who has been trading in his current seat for longer than 3+ years has an above average career.
This is commodities though, not equities
Here’s how I’d think about it. Let’s say you become PM age 32. Let’s say before PM, you were an analyst on the buyside for ~8 years - here, it’s not unreasonable to build up a $3-4m net worth from after-tax bonuses (likely received a few as an analyst if you became a PM) and compounding. I’ve seen analysts worth way more than that
Then at 32, say you’re a PM with $1bn book, +3% average return, and you take 70% of the bonus pool (so you effectively get ~12.5% of PnL after costs and paying analysts). All in you’re making ~$4m a year ($4.3m if we consider base but let’s just assume you live on your base). Divide by 2 for taxes, take out $300k base to live on, and you have $1.9m of annual after tax income flowing thru to your PA. Let’s say you can compound at 12% (assuming you’re shrewd lol)
After 5 years (including the initial $3m from analyst years) that’s about $21m, by which point you’d be 37 years old. That doesn’t account for the fact that 1. if you consistently do +3%, your allocation will grow to $2bn and your payout will go up, turning the $4 into $8, and 2. If you have deferred comp and good performance, a competing podshop could guarantee 2-4x that amount.
It’s not an easy route but it’s not out of the blue. I’ve definitely seen this ($25-30m net worth before 40 from a pod PM). There’s also deferred comp and what not (but that all compounds at pod gross return which is higher than 12% anyway).
That’s how I’d think about it. Don’t think $25m by 40 is unreasonable. You can then retire on that and let it grow to $60-100m by 50.
Plenty of levers to the upside (you may have a few 7% years but also a few 0% years). It’s a wonderful career and I’m grateful for the opportunity to play this game everyday, but it is stressful
Helpful walkthrough. Would you consider this an average or significantly above average outcome for the average PM? Both in terms of age of promotion, savings during analyst years, and performance as PM?
This is an infinitely better outcome than being at a single manager or even private equity in my opinion
Especially if you can have just one +7-10% year out of the 5 or get a large guarantee / uplift to your deferred $ (that’d be an incremental $5-10m of after-tax cash before compounding)
this is NOT a common outcome by the way. most analysts churn out in a few years and never make it to PM. Most PMs get canned after two years after running 250mm at verition or bam and then bounce around before leaving the industry in a few years. You're talking about the outcome of someone who started as an analyst in mid 20s, killed it, worked for the right PM, got the right pnl and then made it to pm, did a good job.
so sure, your numbers are right and there are def people like that out there. but i'd say it's not the median outcome. trying to be transparent for everyone else reading this maybe thinking this is the typical outcome. it's def not
Well it’s the average (+/- a few million) for a motivated PM at a top podshop, not Verition or BAM. OP was talking about running $1bn+ of GMV so that already implies tier 1
Obviously doesn’t apply to anyone running sub $1bn of GMV
So you make like $5-7m of PNL a good year so therefore $500k payout in a good year?? Genuinely curious - how do you make that work as a PM? Seems ridiculously low man. Why not just do banking or something? If you’re in your 30s you’d clear more than double that…
For everyone reading…the good PM / analyst outcomes you read about podshops ($5-20m payout, $20-40m net worth before 40, $100+ net worth by 50 are all generally specific to the top 2-3 podshops. Below that, outcomes accelerate to the downside very quickly as your $ allocation base is very constrained, as shown by the above guy running $150m…
Folks your friendly warning to not work for tier 3 podshops 😁😁😁😁😁😁
Agree. It's the usual succession of 5 consecutive best-case outcomes under optimistic assumptions, all misrepresented to impressionable junior WSOers as base expectations. Hurts more than helps.
finally someone speaking sense. thank you.
Yes I’d say this could be the average smart citadel guy
Unfortunately even the average ‘smart’ Citadel guy lasts 3 years as an analyst before he gets fired.
Craziest assumption here is compounding savings at 12%. After tax that is insane (bonds and fund investments, you lose about half to taxes). Or you have to be willing to hold through 50%+ drawdowns with real risk of permanent capital loss (not shrewd) and you can't trade.
Try more like 6% and inflation eats 2-3% so a lot of that is not real return.
Completely disagree with this. I just the math and I've done ~20% for the past decade thru my PA (almost all l/o now, large cap, concentrated, focus on big trends and size up highest conviction ideas / trends -- put huge % of PA in META late 22', but I have some hedges on) and a small RE deal I did with some friends.
Don't see why I can't keep this going. I have a pretty big risk appetite but it's not like I'm buying shitcos... definitely nothing near a 50% DD. I actually flipped short 3Q21 but covered a bit too early (so thankfully missed that DD), and did similar trade at end of 18'. Went 100% long SW during COVID.
Have never had a down year and pretty steady.
I would say this happens to maybe like 1 out of 15-20 people at tier 1 funds and almost zero people at tier 2-3 shops.
In my experience, half of the associates (0-3 years experience) never make it to senior analyst. And about 80% of the analysts (4-10 years experience) never make it to PM. And then only about half of the PMs build and sustain a profitable business even at tier 1 funds.
So that’s what, about 5% of the people joining the industry accumulating $10m+ net worth by the time they are 35-40.
Last 2 years have been breakout years for some of the tier 1 shops so I would urge caution extrapolating the boom years.
Source: I worked at an MM for ~10 years.
Sounds about right. Interesting parallel with Principal in PE’s comment here on 95th pct outcome but I guess the 99pct outcome is not as good:
https://www.wallstreetoasis.com/forum/hedge-fund/successful-career-hf-p…
This is right. Incredibly hard to get to a risk taking seat. And incredibly hard to keep it once you're there. $100m lifetime PnL is not an extreme outlier but definitely an outlier when you consider the massive survivorship bias from looking at only the top PMs at the top firms (all the posts above claiming that every Citadel PM has made $100m in lifetime PnL).
the average podshop L/S PM is a struggling 35 year old at Exodus or Schonfeld or BAM… for even those guys, I’d think $100 of lifetime PnL is attainable ($20m for 5Y)
but for the average (not even tenured) PM at a tier 1 shop…yes… I’d assume they can do a lot more than $100…more like $300-800… but need $1-4bn of gmv to do that over a lifetime… not 500m of gmv
ive been doing this for almost 20Y and now senior pm. my peak pnl was 150… did around 90 last year… wouldnt say im average but i can point to several young pm’s that have already surpassed 100 (some of them are JR PMs under me…)
eat what you kill son…
I'm curious how many PM's are running books smaller than $1bn at MLP/Citadel if you have any color on it? I did an internship at P72 a while ago and mgmt made it sound like there weren't a boatload of books >1bn but I could be misinterpreting what they said...have an opportunity to do an internship for a pod running <500m at MLP/Cit for a new PM and curious how I should be evaluating AUM for an internship/job offer and what the process for it scaling at a pod is.
Probably should be evaluating the PM cause if they’re good, that AUM will scale.
Some strategies have a very high sharpe but are limited capacity wise. $1b for some strategies is too much capital.
NA
Maybe a better title that captures the spirit of my question is - is the crappy median outcome for PMs that bad?
The reason I ask about $100m PnL is that even with a really mediocre career - say where you make 3% for 2 years and get canned the third at your first shop and repeat this at another podshop - you're still netting $16m in bonuses within 6 years before the age of 40? 3% x $1b x 4 = $120m PnL x 20% payout x PM takes 2/3 of bonus pool = $16m bonuses.
This is basically the scenario PM in EquityHedge laid out above except it doesn't sound very optimistic at all once you allow for the fact that you can get canned once and exit the industry after that, but it's still a lot of money relative to most finance careers. So am I still missing something here? Is it very hard to get a $1b book (doesn't seem so at least at MLP/Cit)? Is 3% on $1b actually a very good year?
Most arent ramping to $1b immediately thats the biggest discrepancy. Probably looks like this for most first time PMs
Year 1 Run Carve of $250M 2% return
Year 2 Run Carve of $400M 3% return
Year 1 PM $500M Allocation 0% Return (Spent the year ramping/slowly deploying)
Year 2 PM $700M 2% Return
Year 3 PM $1B -1% Return
Year 4 PM - Fired
Yup makes sense - the issue here is that reasonable differences in GMV ($700m vs $1b) and returns % (0% vs 2% vs 3%) can lead to enormous differences in compensation outcomes, hence why I framed the question in terms of lifetime PnL as MM PM vets would probably have a better idea of that distribution vs the specific career trajectories of their peers. Given the trading-like nature of the job probably better to think in PnL $s anyway I guess.
It’s difficult to think like this because there is a floor by getting to PM in the first place which is extremely uncommon. It’s like saying what’s the floor for your average MD at a IB or partner at a PE provided they don’t make any great investments.
Indeed but that's how most finance careers with top-heavy comp work no? As a junior of course my focus is on how to progress my career but the key determinant of EV is really how much senior professionals make, conditional on getting there.
This seems fair to me but again it’s going to be entirely dependent on which podshop
I’m an analyst on a bigger team. My sleeve is $500-700, which is probably more than PMs at some of the smaller shops.
When I’m a PM I’d expect to run at least $1-1.5bn from the start as I already have experience running a pretty large sleeve
$1bn is a tiny pod at citadel. Average is $2-5bn where PMs have analysts running sub-books below them / associates below those analysts. There are senior analysts there running $1bn+
But they aren’t paying the average PM 20% (more like 15-17%, 20% for senior PM), so effective PM % payout net of paying those under you is like ~10% of net PnL (gross PnL - data costs). On a $2bn book that’s a lot for base case comp…
Re: the performance point. In the example I laid out a few comments up, yeah it assumes you can hit +3% every year. Looking back that’s actually around my average which is why I used. It’s not an incredible year - that’s 7-10% (those will happen once maybe twice in your career statistically). 2-4% is a reasonable base case
Yeah I agree with all of this, seems like the biggest difference is the path of an average PM which had a couple good years running a carve and got his first chance at PM, which i laid out above and a top PM at Citadel which has had consistent strong performance over years. That is definitely the minority of PMs who first get called up, congrats on your success there
Coming from a non-equities side, does that mean that typical equities PMs run around 3% vol? So a 7-10% year is a 2-3+ Sharpe year? Typically most good L/S equities PMs run at around 1 Shrape?
the big funds like big teams…
citadel & millennium want proven guys in mkt neutral that have consistently put up 50m of pnl a year with no down years… they want guys that can build big teams and put up 100m pnl a year meaning you need to be able to have senior guys below you / can run $5bn of gross… +2% on $5bn is 100…
the only variable here is your perf… good seat with big book and payout will follow good perf… if you do +3-4% a year for 4 years on a big book they’ll give you equity in the firm…
you think seb barrack has equity in cit?
You were doing pretty well, but to say that a good PM that posts 4 good years gets equity in Cit or MLP is highly inaccurate.
Michael Gelband left MLP to found ExodusPt because Izzy refused to give him equity. But a 30yr old PM after 4 good years is going to get it? LOL
There is massive survivorship bias - obviously the people who are currently running big books at the major platforms have made 100m. But for each of the PMs who've even had the opportunity to make 100m you forgot about the 10-15 PMs who chopped around at 0 for 3-4 years and got fired
This is not fully related -- but is it worth it? From what I hear of MM PMs, they are never off even on vacations. Heard a story about a guy who went on a vacation with his dad (PE MD) where there was also a MM HF PM and an IB MD. Apparently the PE guy had to put in like 1hr of work a day, the IB guy maybe 2hrs per day, and the MM PM had to disappear every few hours for 1-2hr periods for work all vacation (maybe working like ~5hrs a day)
Is this really worth it to folks who are MM PMs? Curious how you'd think about this
This is the worst possible example. Maybe the MMHF guy was unwise to schedule his vacation during earnings season. But in the MMHF world you at least have good visibility on what the busy periods are. PE or IB you get a live deal or mandate with no warning and your entire vacation is canceled.
idk about that guy but PMs at my shop disappear to St Tropez/the Alps for 2-4 weeks a year and never log in except on mobile lol
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