Left clinical EM and realized it doesn't have to be this way

[UrbanEM2]

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The owner of a company can make a big difference in its value. A PE firm can often bring in expertise to increase profits in ways that the current owners can’t, for example by increasing reimbursement, optimizing revenue cycle, or reducing expenses. Often other companies in the firms portfolio help augment this. These methods are not artificially pumping up value - they actually make the company more profitable and therefore more valuable. Sometimes they can be exploitative - like air medical transport companies that have used surprise medical billing to pump up revenue. Sometimes they just take advantage of underlying trends, like acquiring a CMG in anticipation of physician oversupply reducing labor costs. There are some shady tactics that give PE a bad name but in at least some cases, they genuinely improve companies after acquisition.

You are absolutely correct. There are a few bad actors that are value destructive that create a bad name for the entire industry. Personally, I don't think there is much value in health service LBOs, ie Envision, TeamHealth, HCA. These are big companies and I'm not sure levering them up with debt is going to make clinical care any better. On the other end of the spectrum, there are many high quality single or multi specialty practices that benefit from operationalization and can grow and offer better clinical care as a more integrated organization. This is where earlier stage growth style PE is very useful.

I certainly wouldn't call any proper reputable PE funds or hedge funds I know ponzi schemes. That implies a specific model of disbursing money with inflows without generating any gains. Some funds aren't good investments and can lose money, but not ponzi schemes. Some other funds are ponzi schemes, but very few and far between.

The discussion of whether a capitalist economy can function without these players is a whole other discussion. Yes and no. In public markets, hedge funds inject significant liquidity to keep the wheels of equity markets nice and lubricated. Do they also sometimes have a negative impact? Absolutely. Too much nuance to really discuss here.

One area where hedge funds are critical is in drug development. A lot of middle and late stage drug development in biotech companies is financed by the equity markets in which hedge funds are some of the primary financiers. Without many of these biotech focused funds, much of drug development would slow significantly. At the same time, does this lead to a potential misprioritization of which drugs to develop? Absolutely. Is there a better way? I wish, but not readily available at the moment.

 

[doctalaughs]

You are absolutely correct. There are a few bad actors that are value destructive that create a bad name for the entire industry. Personally, I don't think there is much value in health service LBOs, ie Envision, TeamHealth, HCA. These are big companies and I'm not sure levering them up with debt is going to make clinical care any better. On the other end of the spectrum, there are many high quality single or multi specialty practices that benefit from operationalization and can grow and offer better clinical care as a more integrated organization. This is where earlier stage growth style PE is very useful.

I certainly wouldn't call any proper reputable PE funds or hedge funds I know ponzi schemes. That implies a specific model of disbursing money with inflows without generating any gains. Some funds aren't good investments and can lose money, but not ponzi schemes. Some other funds are ponzi schemes, but very few and far between.

The discussion of whether a capitalist economy can function without these players is a whole other discussion. Yes and no. In public markets, hedge funds inject significant liquidity to keep the wheels of equity markets nice and lubricated. Do they also sometimes have a negative impact? Absolutely. Too much nuance to really discuss here.

One area where hedge funds are critical is in drug development. A lot of middle and late stage drug development in biotech companies is financed by the equity markets in which hedge funds are some of the primary financiers. Without many of these biotech focused funds, much of drug development would slow significantly. At the same time, does this lead to a potential misprioritization of which drugs to develop? Absolutely. Is there a better way? I wish, but not readily available at the moment.

Interesting. Guess the only examples of these businesses I know well (in healthcare) seem to leech off of society— maybe creates a sampling bias.

Given how much they are paid, you would think companies could hire CEOs and management that are competent enough to run their operations — such that PE can’t swoop in and “increase” value so drastically. I do wonder what percentage of PE “value increases” are at the expense of the employees (or customers or taxpayers) vs actually taking market share from competitors.


On the hedge fund side I still don’t see why raising capital in the traditional ways wouldn’t work as well for companies.

But what do I know. Very little.

 

[UrbanEM2]

Interesting. Guess the only examples of these businesses I know well (in healthcare) seem to leech off of society— maybe creates a sampling bias.

Given how much they are paid, you would think companies could hire CEOs and management that are competent enough to run their operations — such that PE can’t swoop in and “increase” value so drastically. I do wonder what percentage of PE “value increases” are at the expense of the employees (or customers or taxpayers) vs actually taking market share from competitors.


On the hedge fund side I still don’t see why raising capital in the traditional ways wouldn’t work as well for companies.

But what do I know. Very little.

Many companies have CEOs and management that are very competent, but often it's a matter of having the balance sheet cash to invest in the business, buy equipment, facilities, acquire competitors, etc. Much of it comes down to financing, which PE provides. Also, many of these are successful businesses where the owners want to achieve some liquidity, in which case PE will purchase a minority or majority of the business and the owner(s) will get some cash. In other cases, we're talking medical practices or businesses which just don't have the know how to operationalize. For example, it's hard for a 10 physician GI practice to hire the kind of CEO, CFO, and management required to grow to a 400 doctor group. Even if they had the management, they likely don't have the kind of cash lying around to make the acquisitions to grow to such a scale.

In terms of biotech investment, equity markets have basically become traditional financing for these companies. They typically take private capital from VC for series A, B, C then turn to the public markets for subsequent fundraises. By the time they turn to equity markets, they're raising $200M+, which is hard to do from private investors. Also, the VCs in the the series A-C rounds have expectations in terms of returns, which floating some stock will help them accomplish. If they were to sell the company straight to a pharma company after a series C, chances are their returns would be much much lower. The way biotech stocks have behaved in the last decade, positive clinical trial read outs lead to sometimes several hundred percentage jumps in a matter of hours or days. The VCs aren't going to give up that sort of opportunity. And chances are many of them will take part in the public offering as well.

 

[UrbanEM2]

I should add, in the case of TeamHealth and their acquisition by Blackstone, there was a long prolonged saga with an activist investor that basically forced their hand to go private. Some googling leads to some great reading on this. Couple of powerful businessmen basically changing the trajectory of a company that employs tens of thousands. Had very little to do with clinical medicine or patient care.

Kind of like how wars are created by a few high ego people that run countries while most of the citizens of those countries are just fine people going about their lives.

 

[doctalaughs]

Many companies have CEOs and management that are very competent, but often it's a matter of having the balance sheet cash to invest in the business, buy equipment, facilities, acquire competitors, etc. Much of it comes down to financing, which PE provides. Also, many of these are successful businesses where the owners want to achieve some liquidity, in which case PE will purchase a minority or majority of the business and the owner(s) will get some cash. In other cases, we're talking medical practices or businesses which just don't have the know how to operationalize. For example, it's hard for a 10 physician GI practice to hire the kind of CEO, CFO, and management required to grow to a 400 doctor group. Even if they had the management, they likely don't have the kind of cash lying around to make the acquisitions to grow to such a scale.

In terms of biotech investment, equity markets have basically become traditional financing for these companies. They typically take private capital from VC for series A, B, C then turn to the public markets for subsequent fundraises. By the time they turn to equity markets, they're raising $200M+, which is hard to do from private investors. Also, the VCs in the the series A-C rounds have expectations in terms of returns, which floating some stock will help them accomplish. If they were to sell the company straight to a pharma company after a series C, chances are their returns would be much much lower. The way biotech stocks have behaved in the last decade, positive clinical trial read outs lead to sometimes several hundred percentage jumps in a matter of hours or days. The VCs aren't going to give up that sort of opportunity. And chances are many of them will take part in the public offering as well.

Given the supposed risk of PE and hedge funds, how many people actually fail and have to exit the business? Do the big deal failures typically cause an exit or do the same guys just shrug their shoulders and move on the the next deal (other people’s money).

Seems like everyone I know in these businesses either is
A) making a good amount of money (ie 2-3x what a higher end physician could hope)
Or
B) making ridiculous money- tens of millions per deal

Don’t hear too much about the failures and to some extent seems to be a “old boys club” networking secret-handshake sort of club! Guess it makes sense as in the #1 qualification/asset is probably having access to super-rich investors/buddies.

 

[UrbanEM2]

Given the supposed risk of PE and hedge funds, how many people actually fail and have to exit the business? Do the big deal failures typically cause an exit or do the same guys just shrug their shoulders and move on the the next deal (other people’s money).

Seems like everyone I know in these businesses either is
A) making a good amount of money (ie 2-3x what a higher end physician could hope)
Or
B) making ridiculous money- tens of millions per deal

Don’t hear too much about the failures and to some extent seems to be a “old boys club” networking secret-handshake sort of club! Guess it makes sense as in the #1 qualification/asset is probably having access to super-rich investors/buddies.

All great questions. In the PE world, very few businesses fail in the traditional sense of going bankrupt. These tend to be existing stable cashflow businesses, usually with good growth potential. A "failure" would constitute delivering a 1-2x return to your limited partners, and in turn making 0x-1x your carry as a general partner. If you did that a few times, you would have a very difficult time raising a subsequent fund. If you as a deal professional had a few too many of these, good chance you're not going to be employed as an investor for much longer.

On the hedge fund side, it is much more possible for there to be a catastrophic failure and a portfolio can plummet. Again, you lose your limited partners' money and your returns as well. Can't raise another fund and chances are you're looking for another career pretty soon. Hedge funds are more volatile than PE firms with even good investors switching firms every few years. Sweet spot here is generating the street cred to raise your own fund and do a good job.

With regard to pay, the reason for this sort of compensation is simply the amount of money PE and hedge fund investors invest. The bigger the fund, the more the carried interest and returns that can be generated. As you say, most junior and mid-level deal professionals are likely earning 2-3x physician pay and the senior deal professionals are making in the $10M+ range if they are successful. Some make much less. That's just a product of fund sizes that are often in the 10 and 11 figure ranges.

 

[sloh]

Really interesting. Thank you for answering all these questions @UrbanEM2

 

[doctalaughs]

As you say, most junior and mid-level deal professionals are likely earning 2-3x physician pay and the senior deal professionals are making in the $10M+ range if they are successful. Some make much less. That's just a product of fund sizes that are often in the 10 and 11 figure ranges.

Sounds wonderful! Can you teach me the secret handshake though?

Just kidding. I would be terrible in those jobs because it seems like a big portion is sales (convincing the ultra rich you can triple their money in 3-5 years).

But how did you end up getting into it from medicine?

 

[Birdstrike]

But how did you end up getting into it from medicine?

That's what I'd also like to know, and at what age.

cc: @UrbanEM2

 

[Birdstrike]

When I lived in Manhattan briefly, near the financial district, I had a conversation with a banker who lived close by and who I became acquainted with. We discussed this exact thing. While he said the money could be good, in fact incredible at times for some, the potential reward came with big financial, legal and emotional risk. He described incredibly stressful, high stakes deals at times. He also described stress from the inevitable ups and downs of markets which are impossible to avoid, but all clients expect you to avoid for them. He also described it being somewhat commonplace for people to do illegal (insider trading), or potentially illegal things, knowing that the reward could mean millions or billions of dollars, and that some will knowingling risk (and expect others to risk) jail time to reap those rewards.

He shared a story about working for Lehman Brothers investment bank in 2008, when the financial crisis hit and it went under. "Everyone before us, and everyone after us got bailed out. But for reasons no one ever explained to me, we got f*#*ked. They let us die on the table. How'd you like to see your whole life savings evaporate in one phone call? And you think government regulating you is bad? The Feds are all over us cockroaches in heat with an extra dose of viagra."

His advice was, "You don't have it so bad. Stick with what you got."

 

[grt398]

For those interested and wanting a slightly different view from a very well educated individual in this area (she's a former Harvard -> HBS -> Goldman/McKinsey etc individual), I'd suggest the following:

Another Blow to Private Equity: "You Can Pick Winners" Again Shown To Be a Fool's Game | naked capitalism

More bad news about private equity returns.

www.nakedcapitalism.com

22 Year Study Finds Hedge Fund Managers Collect 64% of Investors' Gross Returns | naked capitalism

Hedge fund managers claw an awful lot in fees out of their investors but the reasons look to be different than for private equity.

www.nakedcapitalism.com

If you go to the "Topics" section on the right and select "Private Equity" you'll get a lot more.

 

[grt398]

When I lived in Manhattan briefly, near the financial district, I had a conversation with a banker who lived close by and who I became acquainted with. We discussed this exact thing. While he said the money could be good, in fact incredible at times for some, the potential reward came with big financial, legal and emotional risk. He described incredibly stressful, high stakes deals at times. He also described stress from the inevitable ups and downs of markets which are impossible to avoid, but all clients expect you to avoid for them. He also described it being somewhat commonplace for people to do illegal (insider trading), or potentially illegal things, knowing that the reward could mean millions or billions of dollars, and that some will knowingling risk (and expect others to risk) jail time to reap those rewards.

He shared a story about working for Lehman Brothers investment bank in 2008, when the financial crisis hit and it went under. "Everyone before us, and everyone after us got bailed out. But for reasons no one ever explained to me, we got f*#*ked. They let us die on the table. How'd you like to see your whole life savings evaporate in one phone call? And you think government regulating you is bad? The Feds are all over us cockroaches in heat with an extra dose of viagra."

His advice was, "You don't have it so bad. Stick with what you got."

As someone who worked as an investment banking analyst during that period and sat in on meetings about the things he's superficially discussing, I'll just say that medical training has been harder for different reasons than my time in finance. Also, everyone I know from that time are still sitting in >$400k/yr jobs working way less than most physicians. And the people who are under more stress, are earning a LOT more than most physicians will ever see in their entire career so....

 

[RustedFox]

As someone who worked as an investment banking analyst during that period and sat in on meetings about the things he's superficially discussing, I'll just say that medical training has been harder for different reasons than my time in finance. Also, everyone I know from that time are still sitting in >$400k/yr jobs working way less than most physicians. And the people who are under more stress, are earning a LOT more than most physicians will ever see in their entire career so....

"earning"

What exactly is it that these moneyshufflers do to "earn" the money?
Sign papers?
Shuffle papers?
Sit at tables and talk?
Talk some more?

 

[Birdstrike]

As someone who worked as an investment banking analyst during that period and sat in on meetings about the things he's superficially discussing, I'll just say that medical training has been harder for different reasons than my time in finance. Also, everyone I know from that time are still sitting in >$400k/yr jobs working way less than most physicians. And the people who are under more stress, are earning a LOT more than most physicians will ever see in their entire career so....

You say it's easier than Medicine and earns more money for less work. But you chose, "Harder. For less money," and haven't changed back. Why?

 

[turkeyjerky]

You say it's easier than Medicine and earns more money for less work. But you chose, "Harder. For less money," and haven't changed back. Why?

Self-respect?

 

[Birdstrike]

Self-respect?

Self respect has value. But that might not be his reason.

 

[GeneralVeers]

I can't think of many jobs where I would work less hours and have more time off while still earning > 400K.

 

[UrbanEM2]

Ha! Let's not get judgy here. There are good people in finance, just as there are in medicine. After having spent considerable time in both worlds, I wouldn't say there's an appreciable difference in terms of the ethics and principles of people in either world. On the original topic of this thread, I'm certain I've come across more pathological megalomaniancs in medicine than in finance. The ones in finance just make much bigger waves.

I would say on the whole, the finance jobs are a lot more stressful than the ER. It's stress that never leaves you. I go to bed and wake up thinking about this stuff. Weekdays and weekends. Sometimes I wake up in the middle of night thinking about work. In some ways it's much more personal as well. I can spend a year or more on an investment so the level of personal involvement is high. It's the same or even worse for people on the other side of the investment. When we're in an activist position, this gets very personal for company management.

It's pointless to argue which job is better. Investing or emergency medicine. It's just personal preference. At least for me, it has nothing to do with money or compensation. I'd be just as happy making academic ER money as I am now. Beyond $200k/yr it's all just gravy. I'd agree few if any jobs work fewer hours than EM with less stress and make more than $400k/yr. I do what I do now because I find this job to be fun and suits my personality well. Even the stress is good stress. Every situation is unique and new and I'm always competing against others and more importantly myself.

 

[UrbanEM2]

That's what I'd also like to know, and at what age.

cc: @UrbanEM2

I was in my early 30s, few years out of residency. I networked constantly in the investing world when I was a resident and med student, often peddling investment theses to firms to see if any would bite. Eventually one did bite and offered to bring me on to execute on the investment and other strategies I had discussed with them. I figured if it didn't work out, I'd go back to the ER and be perfectly happy knowing I gave it a try.

 

[sloh]

Ha! Let's not get judgy here. There are good people in finance, just as there are in medicine. After having spent considerable time in both worlds, I wouldn't say there's an appreciable difference in terms of the ethics and principles of people in either world. On the original topic of this thread, I'm certain I've come across more pathological megalomaniancs in medicine than in finance. The ones in finance just make much bigger waves.

I would say on the whole, the finance jobs are a lot more stressful than the ER. It's stress that never leaves you. I go to bed and wake up thinking about this stuff. Weekdays and weekends. Sometimes I wake up in the middle of night thinking about work. In some ways it's much more personal as well. I can spend a year or more on an investment so the level of personal involvement is high. It's the same or even worse for people on the other side of the investment. When we're in an activist position, this gets very personal for company management.

It's pointless to argue which job is better. Investing or emergency medicine. It's just personal preference. At least for me, it has nothing to do with money or compensation. I'd be just as happy making academic ER money as I am now. Beyond $200k/yr it's all just gravy. I'd agree few if any jobs work fewer hours than EM with less stress and make more than $400k/yr. I do what I do now because I find this job to be fun and suits my personality well. Even the stress is good stress. Every situation is unique and new and I'm always competing against others and more importantly myself.

What are your work hours like? Hours per day? Days per week? Do you need to answer calls or respond to emails in the middle of the night? Weekends? Holidays?

 

[UrbanEM2]

What are your work hours like? Hours per day? Days per week? Do you need to answer calls or respond to emails in the middle of the night? Weekends? Holidays?

Hard to measure exact work hours. I'm always theoretically on the hook for anything that can happen. I would say I probably spend ballpark 60-70 or so working most weeks. This includes emails, calls, lunches, dinners, other stuff that's fun or work related. When a situation is intense it can be 100+ hours a week easily with any free time spent sleeping or eating meals with family. Before COVID about 70% of this working time was in the office. Now it's at home, which makes the work-life balance much easier to navigate.

Calls and emails happen any time of day any day of the week any week of the year. I can step away from some day to day when on vacations, but still completely on the hook for anything that may develop during a vacation. I've made it a point to never cut a vacation with family short but have had to work continuously during some vacations. I find being completely unplugged to be nerve wrecking and often leads to more work when I plug back in. As a result, I still read all my emails in real time, even if I don't respond, no matter where I am or what I'm doing.

This isn't for everyone, but if you enjoy this stuff, it really doesn't feel like work at all.

 

[WilcoWorld]

Let's not get judgy here.

You're new here, aint ya?

😉

 

[grt398]

You say it's easier than Medicine and earns more money for less work. But you chose, "Harder. For less money," and haven't changed back. Why?

So let me address this in a few points because it's multi-faceted:

1. Why did I choose medicine - I chose medicine >10 years ago because I wanted something that was more personally/tangibly meaningful to me, and I had several other reasons at the time that no longer exist. The field as I saw it when I made the decision and my expectations for how certain things would turn out were very different than the field as it exists today, and those expectations were wrong to a significant degree, despite getting advice from very well intentioned physicians at prestigious institutions. I still love working with patients but so much of the physician/patient relationship we all learn about as pre-meds has been dramatically altered by the current healthcare landscape, and not in a positive way.

2. Why am I saying finance can be easier? It depends on what drives you and what you find stressful. Finance focused a lot more, for better or worse, on what your results were (assuming you are in a front office type job), and less on whether you make some administrator or random attending happy (aka, do they like your personality or not). Since being in medicine, I've watched attendings scolded by administrators for taking too long to chart review patients and admonish them that they were spending 10 minutes on it per patient vs <5 compared to their colleagues (yes it was being tracked at this institution).

Private practice medicine was described to me once in med school as being "the three A's - available, affable, and able, in that order." I thrive on pressure to perform in my field; I don't thrive on office politics and that seems to be a bigger and bigger part of PP medicine as it becomes more consolidated/corporatized. It was always part of academia, which is why I always planned to go PP.

3. Random other stuff - Finance of the type I did is not at all easier to get into than medicine for anyone reading this; you need the right pedigree or connections. When I was reviewing summer intern apps as a first pass before my boss looked over it, we basically only took from Ivy League type schools unless you had a personal connection of some sort. There were literally hundreds of resumes from those schools with 3.9+ GPAs and extra-curriculars most pre-meds would salivate over. There's no real way into a front office job at a bulge bracket firm without that pedigree or connections. So kudos to UrbanEM2 for making his way in.

And UrbanEM2 is 100% right about always being "on call" if you're looking to move up at various firms. The people at my former firm who ultimately made partner cancelled family vacations/honeymoons/apartment showings if a deal needed something urgent. The job was the primary thing in their life. The difference b/w those people and physicians is that their comp was in the seven-to-eight figure range. That said, there are quite a variety of jobs you can take in finance where you can find a better balance. I watched several people leave to become CFOs at various mid sized companies and while their base pay might have been <$400k, their equity component was worth substantially more.

 

[UrbanEM2]

So let me address this in a few points because it's multi-faceted:

1. Why did I choose medicine - I chose medicine >10 years ago because I wanted something that was more personally/tangibly meaningful to me, and I had several other reasons at the time that no longer exist. The field as I saw it when I made the decision and my expectations for how certain things would turn out were very different than the field as it exists today, and those expectations were wrong to a significant degree, despite getting advice from very well intentioned physicians at prestigious institutions. I still love working with patients but so much of the physician/patient relationship we all learn about as pre-meds has been dramatically altered by the current healthcare landscape, and not in a positive way.

2. Why am I say finance can be easier? It depends on what drives you and what you find stressful. Finance focused a lot more, for better or worse, on what your results were (assuming you are in a front office type job), and less on whether you make some administrator or random attending happy (aka, do they like your personality or not). Since being in medicine, I've watched attendings scolded by administrators for taking too long to chart review patients and admonish them that they were spending 10 minutes on it per patient vs <5 compared to their colleagues (yes it was being tracked at this institution).

Private practice medicine was described to me once in med school as being "the three A's - available, affable, and able, in that order." I thrive on pressure to perform in my field; I don't thrive on office politics and that seems to be a bigger and bigger part of PP medicine as it becomes more consolidated/corporatized. It was always part of academia, which is why I always planned to go PP.

3. Random other stuff - Finance of the type I did is not at all easier to get into than medicine for anyone reading this; you need the right pedigree or connections. When I was reviewing summer intern apps as a first pass before my boss looked over it, we basically only took from Ivy League schools unless you had a personal connection of some sort. There were literally hundreds of resumes from those schools with 3.9+ GPAs and extra-curriculars most pre-meds would salivate over. There's no real way into a front office job at a bulge bracket firm without that pedigree or connections. So kudos to UrbanEM2 for making his way in.

And UrbanEM2 is 100% right about always being "on call" if you're looking to move up at various firms. The people at my former firm who ultimately made partner cancelled family vacations/honeymoons/apartment showings if a deal needed something urgent. The job was the primary thing in their life. The difference b/w those people and physicians is that their comp was in the seven-to-eight figure range. That said, there are quite a variety of jobs you can take in finance where you can find a better balance. I watched several people leave to become CFOs at various mid sized companies and while their base pay might have been <$400k, their equity component was worth substantially more.

This is a fantastic post and great read. I'm glad you made the transition to medicine, which sounds like is a better fit than finance. I actually had a good few med school classmates who made the similar transition after 2-3 years of investment banking and hating it. None of them regret the decision now.

 

[deleted547339]

All great questions. In the PE world, very few businesses fail in the traditional sense of going bankrupt. These tend to be existing stable cashflow businesses, usually with good growth potential. A "failure" would constitute delivering a 1-2x return to your limited partners, and in turn making 0x-1x your carry as a general partner. If you did that a few times, you would have a very difficult time raising a subsequent fund. If you as a deal professional had a few too many of these, good chance you're not going to be employed as an investor for much longer.

On the hedge fund side, it is much more possible for there to be a catastrophic failure and a portfolio can plummet. Again, you lose your limited partners' money and your returns as well. Can't raise another fund and chances are you're looking for another career pretty soon. Hedge funds are more volatile than PE firms with even good investors switching firms every few years. Sweet spot here is generating the street cred to raise your own fund and do a good job.

With regard to pay, the reason for this sort of compensation is simply the amount of money PE and hedge fund investors invest. The bigger the fund, the more the carried interest and returns that can be generated. As you say, most junior and mid-level deal professionals are likely earning 2-3x physician pay and the senior deal professionals are making in the $10M+ range if they are successful. Some make much less. That's just a product of fund sizes that are often in the 10 and 11 figure ranges.

uhhhh, yea, when you charge people 2% AUM and 20% of profits, it doesn’t take that much to make a big check.

 

[UrbanEM2]

uhhhh, yea, when you charge people 2% AUM and 20% of profits, it doesn’t take that much to make a big check.

That's precisely what I said. The high compensation is due to the large amounts of money being managed.

 

[deleted547339]

That's precisely what I said. The high compensation is due to the large amounts of money being managed.

I’m saying the exact opposite. It doesn’t take much money to make a lot when you are committing highway robbery. 2 and 20??? That’s nuts.

 

[UrbanEM2]

I’m saying the exact opposite. It doesn’t take much money to make a lot when you are committing highway robbery. 2 and 20??? That’s nuts.

Ha! I don't know why you keep insisting we're disagreeing. We've agreed on most things so far. We're saying the same thing here too. Compensation is dependent on how much money is being managed. More under management generally means greater compensation.

As you say, even partners at "smaller" funds make quite a living. Maybe less than partners at "larger" funds, but still a very good living.

Now, highway robbery you say?? That's debatable depending on the returns being generated by the specific fund. Some are worth it. Many aren't. I would note that the pure 2/20 model is less common these days with significant downward pressure on those figures.