Key Takeaways
- • Citadel reportedly requires employees who invest in its funds to pay the same full performance fees (about 20% of gains) as external investors, according to eFinancialCareers, which cites an understanding rather than a confirmed policy.
- • Citadel employees have collectively invested $9bn in the $45bn Wellington Fund, and are obliged to leave half of their incentive awards in the fund for three and a half years, per Bloomberg's prior reporting.
- • Qube Research and Technologies (QRT) employees are reportedly being charged performance fees of 25% to 35% of fund profits, per Bloomberg, after already facing bonus lock-ups of up to 75% over three years.
- • The Wellington Fund returned 15.1% last year, meaning a Citadel portfolio manager with a $1m bonus invested would have netted an estimated $180k extra after fees.
Summary
Citadel reportedly charges its employees full performance fees to invest in its funds, a practice eFinancialCareers says is understood to mirror the terms applied to external investors. The report notes that hedge fund bonuses are increasingly deferred over multiple years, and firms often give employees the option to reinvest those deferred amounts in their own funds.
According to Bloomberg's earlier reporting, Citadel employees have collectively invested $9bn into the firm's $45bn Wellington Fund. Employees are obliged to leave half of their incentive awards in the fund for three and a half years. Citadel is thought to charge both investors and employees a fee equivalent to 20% of the fund's gains. The Wellington Fund was up 15.1% last year, which eFinancialCareers calculates would have added about $180k after fees for a portfolio manager with a $1m bonus invested in it.
eFinancialCareers also cites a Bloomberg report that employees at Qube Research and Technologies, who invest in QRT's own funds, face fees of 25% to 35% of fund profits. Qube did not respond to a request for comment. Those employees already faced having up to 75% of bonuses locked into internal funds over three years, and the new fees bring them in line with external investors. The publication notes that Qube did not comment on the change.
The article adds that the ability to invest in an employer's funds is a key factor for portfolio managers choosing a firm, and that fee treatment strongly affects how attractive that perk is. Renaissance Technologies' Medallion Fund, which closed to outside investors in 2005 and reportedly returned an annualised 39% after fees between 1988 and 2021, is cited as a leading example of an employee-focused fund. An unnamed headhunter, speaking off the record, said most portfolio managers are also offered Treasury Bills as an alternative to concentrating their money in one fund. The article cautions that employee fund investment can backfire, citing the experience of former Long Term Capital Management employees.
According to Bloomberg's earlier reporting, Citadel employees have collectively invested $9bn into the firm's $45bn Wellington Fund. Employees are obliged to leave half of their incentive awards in the fund for three and a half years. Citadel is thought to charge both investors and employees a fee equivalent to 20% of the fund's gains. The Wellington Fund was up 15.1% last year, which eFinancialCareers calculates would have added about $180k after fees for a portfolio manager with a $1m bonus invested in it.
eFinancialCareers also cites a Bloomberg report that employees at Qube Research and Technologies, who invest in QRT's own funds, face fees of 25% to 35% of fund profits. Qube did not respond to a request for comment. Those employees already faced having up to 75% of bonuses locked into internal funds over three years, and the new fees bring them in line with external investors. The publication notes that Qube did not comment on the change.
The article adds that the ability to invest in an employer's funds is a key factor for portfolio managers choosing a firm, and that fee treatment strongly affects how attractive that perk is. Renaissance Technologies' Medallion Fund, which closed to outside investors in 2005 and reportedly returned an annualised 39% after fees between 1988 and 2021, is cited as a leading example of an employee-focused fund. An unnamed headhunter, speaking off the record, said most portfolio managers are also offered Treasury Bills as an alternative to concentrating their money in one fund. The article cautions that employee fund investment can backfire, citing the experience of former Long Term Capital Management employees.
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