I guess you don't have to worry about morale in a place like GS, where 5% of the workforce is laid off every year. Everyone there has bought into the dog-eat-dog workplace before starting.
E.g. at BlueCrest, each trader used to start a year with clean track record and some allocated capital. If you lose 2%, your allocation is halved. If you lose another 2%, you are out. However, if you won 5%, you can risk it, only the initial allocation matters.
For me, this policy is strange, as it clearly incentivizes people to take more risks at the end of the year (and risks are the currency here, you don't want to be predictable), so I assume the policy is different now. But it is always explicit.
is there an upside? explicit bonus/P&L part of it?
As this policy were made public at some point, and you usually don't disclose your working risk management profile to the outside world (as it can and will be analyzed and exploited), I can assume that BlueCrest now uses a different approach internally.
At the same time, some traders hit a profit number during the year they are happy with and then try to lock it in, choose to go risk off and just coast till the end of the year.
Especially if a trader feels they don't get paid for risk towards year end - this option is even more attractive.
Assuming the goal is to make profit and not just don't get kicked out. Traders who got lucky mid year not taking enough Q4 risk happens. Some firms step in if they see too little risk from a desk.
Very few funds are able to keep risk management info private for very long. People move. People talk. Some trading rules can be reverse engineered in data but this is easily spoofed.
BlueCrest closed last year and returned outside capital, so I agree things probably look very different there now.
Also there is no go big or go home as you approach these thresholds, VaR scales back and trades are stop lossed to prevent exactly what you describe.
Some traders would just bet it all the first day and go home in January if they lost. Why wait till the end of the year? Do it now! Coin flips are coin flips. The finance industry has attracted people with gambling issues.
Risk Management rules are in place to prevent that kind of risk taking. But obviously some traders slip through risk procedures and lose huge amounts of money on bad trades, they also go to jail for it.
[1] http://www.bloomberg.com/news/articles/2014-01-16/goldman-sa...
15% below average is not on par imo.
For many people on HN or at GS, that is basically the tco for their a car every year (at a minimum).
('sa joke.)