For hedge fund professionals
Your compensation can double in a good year and drop to zero in a bad one. A prenup should account for that reality.
Hedge fund compensation is fundamentally different from a salary, a tech RSU package, or even private equity carry. Performance allocations are mark-to-market, deferred comp can decline in value, and a high-water mark may mean years of zero performance fees after a drawdown. A prenup for someone in this world needs to address volatility and conditionality, not just timing.
Flat fee of $5,000 per couple. No payment to get started.
How hedge fund comp works
Four components, each with its own volatility profile
Understanding how each piece of your compensation behaves is the foundation for addressing it in a prenup.
Performance allocation (incentive fee)
Highly variableHedge funds typically charge a performance fee (often 20% of gains above a hurdle rate or high-water mark). Portfolio managers and senior analysts receive a share of this fee, allocated based on their contribution to fund performance.
Prenup angle
Performance allocations can swing dramatically year to year. A year of strong returns may generate millions, while a drawdown year may generate nothing. Your attorney can help you address how these variable allocations are treated, including the distinction between allocations earned but not yet distributed.
Deferred compensation and holdbacks
Variable (can decline)Many hedge funds defer a portion of performance compensation (often 30% to 50%) over 2 to 4 years. This deferred amount remains invested in the fund, subject to mark-to-market fluctuation. It can increase or decrease in value before it is paid out.
Prenup angle
Deferred compensation that remains invested in the fund is unlike a traditional vesting stock award: its value can go down. A prenup can address how compensation that was earned in one year but fluctuates in value over the deferral period is characterized.
Co-investment and fund interests
Illiquid and variableSenior professionals may invest personal capital alongside the fund (co-invest) or hold a direct interest in the fund management company. These positions are illiquid and tied to fund performance.
Prenup angle
Fund interests and co-investments are personal assets that behave like business interests: they generate variable returns, may be subject to lock-up periods, and can be difficult to value at any given moment. Your attorney can help you address these as a distinct category.
Guaranteed compensation and signing packages
Predictable (short term)When joining a new fund, portfolio managers often negotiate multi-year guaranteed compensation. These packages may include sign-on payments, guaranteed minimum bonuses for the first 1 to 3 years, and expense budgets.
Prenup angle
Guaranteed packages are straightforward in the short term but often transition into performance-based compensation after the guarantee period. A prenup can address both the guaranteed and performance phases if you marry during a transition.
Why hedge fund comp is different
Compared to private equity and investment banking
If you have looked at our pages for PE or VC professionals, you may wonder what makes hedge funds different. The answer is volatility and conditionality.
| Hedge fund | PE / VC | Investment banking | |
|---|---|---|---|
| Predictability | Comp is mark-to-market. A bad quarter can mean zero performance fees for the year. | Carry is event-driven: exits generate distributions over a decade. | Bonuses are discretionary but relatively stable year to year. |
| Downside risk | Deferred comp can decline in value. High-water marks mean you may not earn performance fees again until losses are recovered. | Carry may not produce distributions, but the underlying value does not decline (you simply do not get paid). | RSUs can decline in stock price but the shares still exist. |
| Liquidity | Some comp is liquid quarterly or annually; some is locked for years in side pockets or deferred vehicles. | Illiquid for 7 to 12 years per fund vintage. | RSUs vest on a fixed schedule and are liquid immediately upon vesting. |
How Neptune works
One flat fee, two independent attorneys, complex assets addressed
Walk through your assets
Neptune's guided intake covers performance allocations, deferred comp, fund interests, and co-investments in plain language.
Each partner gets their own attorney
Two separate, licensed attorneys who can explain how mark-to-market comp and deferred vehicles intersect with your state's rules.
Receive a tailored agreement
Your attorney drafts an agreement that addresses the volatility and conditionality of your specific compensation. Typically around 3 to 4 weeks.
Transparent pricing
$5,000
per couple, flat fee
$3,000 drafting attorney + $2,000 reviewing attorney. No payment to get started. Rush pricing applies when the wedding is within 45 days.
Questions from hedge fund professionals
How is performance allocation valued if it changes every quarter?
Performance allocations are marked to market, meaning their value fluctuates with fund performance. For prenup purposes, your attorney can help you address how the allocation is characterized as of specific dates (such as year-end or the date of a distribution), rather than trying to assign a fixed value to something that is inherently variable.
What about deferred comp that has declined in value since it was earned?
This is unique to hedge funds: compensation that was earned in one year and deferred may be worth less when it is eventually distributed. A prenup can acknowledge this risk and describe how the eventual distribution (whatever its amount) is treated based on when the underlying performance allocation was earned.
My fund uses a high-water mark. What does that mean for a prenup?
A high-water mark means you only earn performance fees when the fund exceeds its previous peak net asset value. If the fund has a drawdown, you may earn no performance compensation until losses are recovered. A prenup can address the scenario where your compensation is temporarily zero or substantially reduced due to market conditions, without that affecting the underlying framework.
How is this different from the private equity or venture capital page?
PE and VC carried interest is event-driven (exits produce distributions over a decade). Hedge fund compensation is mark-to-market and can fluctuate quarterly. The volatility profile, liquidity timeline, and downside risk are fundamentally different. The prenup analysis focuses on variable value rather than delayed distribution.
What does it cost and how long does it take?
Neptune charges a flat fee of $5,000 per couple, which covers two independent attorneys (one for each partner). There is no payment required to get started, and consultations are free. Turnaround is typically around 3 to 4 weeks when both partners use Neptune attorneys. Rush pricing applies when the wedding is within 45 days.