Hey I am curious how do most hedge funds compensate there traders. I know most will get a base salary and then a bonus on the winnings. I am just wondering is there a set standard for the percentage of earnings paid out in bonuses?
Not usually. Different funds structure their compensation differently. Also, there might be an element of compensation leverage based on what the trader brings as a track record (e.g. normal payout might be around 10% of pnl, but a star trader works a deal to get paid 15%).
Hmm, I guess the amount traded is factored in. I couldn't imagine a trader at a hedge fend taking more then have the performance fee.
Every fund is structured differently. Some do profit splits with no base (preferred method for quality talent, IMO). Some do a small base and a smaller profit split. Some do a large base.
For those who have cited percentages above, are you referring to percentages of gross P&L or P&L net of expenses (technology expenses, research expenses, etc) or percentage of the incentive fee the hedge fund manager receives. So very simply is this X% OF P&L or X% of the typical 20% of incentive fee tied to the P&L i.e. x% of (.2 * P&L)?
If I recall correctly, the top hedge fund manager made nearly $4,000,000,000 (4 Billion Dollars) in 2009. A hedge fund is a private arrangement with some government regulator requirements. The deal the manager makes with the investors is as flexible and remunerative as his reputation warrants. Get a good rep and the money finds you. Rich people talk among themselves and flock to winners.