Point72 had been paying its stock pickers a fixed 20% bonus on investment returns regardless of how they performed against broader benchmarks. That meant they could be paid handsomely just for matching a rising market.
Under the new bonus system, Point72 will boost those payouts to as much as 25%, but it will only pay the top bonuses on so-called alpha, industry parlance that roughly translates to investment performance above a market benchmark.
By doing this, he hopes to attract better pickers to his firm (adverse selection). Note that he is measuring excess returns adjusted for the riskiness of the portfolio, i.e., alpha.
Note the link to yesterday's post about how best to tie pay to performance. By using alpha (risk adjusted return), instead of raw return, Cohen is practicing the "informativeness principle," measuring performance using all information about productivity, including information about risk.