$650M AUM HF
I'm looking at a hedge fund with a $650M AUM and 3 guys in the office. How would one view the size of this shop?
Is it considered big because of it's AUM vs people in the office or is just a medium/small sized? Just interested. Thank you.
Do you think you'll ever manage 650m in your life?
Nope. Just asking about this specific fund. Not sure what your point is?
My point is if you don't think you could ever manage that amount of money, then it's big enough for you. If you think you will, then it's small.
By AUM and headcount it seems small. There's nothing inherently wrong with that, not everyone wants to manage a fund with billions (many certainly do though).
yes it's small, but if they only have one strategy, it could very well be a fun place to work. some people don't want to run big shops, they're fine running money for family & friends and keeping a low profile. think mohnish pabrai, guy spier, people like that.
AUM is mid-sized but I'd be very concerned about having only 3 people at that size. That is way too few for a sustainable investment firm (I almost doubt you're not trolling it's so off market). At the very least the fund should have 2-3 investment people, 1-2 operations people, 1 accounting/CFO type of person, usually a business development person as well. I'd guess the ratio is about 1 staff per 50-100 million of AUM (the ratio changes as the fund grows, even $100mm AUM fund should have 3-4 people) of AUM, so the average one billion hedge fund has 10-20 employees.
Well I'm not trolling. Firm is a real place lol. It has 4 people total (3 PMs and a CCO). Not sure the exact specifics of it.
Second this - it definitely is on the lower side. But if it works for them, they are a pretty damn efficiently run shop.
$650mm shop has 2 & 20 fee structure --> $650mm shop has a 15% return one year --> $650mn shop enjoys $32.5mm between the mgmt & performance fee in one year --> $650mm shop shares that $32.5mm amongst 4 people (the 3 guys, plus you when you join)...
That seems like an amazing setup to me! If you don't take it could you refer me?
really lean team... i haven't seen someone running that lean at that size.
It's a mid size hedge fund. I look at it this way. If it has 3 to 4 people and they are managing $650M, it's a great opportunity for you to learn and have more exposure than going to a big fund where you would just be analyzing and that's it.
What interests me more than the small # of employees is the relatively large amount of PMs...What strategy does this l/s apply where there are no analysts? My bet is that this is a quarterly shop and the PMs also act as analysts? What would your role be at this firm? If you were the only analyst, I think it'd be a great experience.
It can work, OP hasnt mentioned any sort of strategy. But a lot of the back office can be outsourced
This. No need to spend a bunch on infrastructure and back office staff when you can get a 3rd party to do it on the cheap.
At 2/20, that's $13M in base salary alone. Return 10% in a year, that another $13M. Do they run a concentrated portfolio?
Depending on strategy this sounds like a great opp to me. Not sure what your concerns are. If you don't like the people, obviously don't accept or you won't make it to 6 months mark.
Everyone who is replying that having only 3 people and that much AUM is actually a good thing (ie WOW! FEES/EMPLOYEES) is just naive. Can anyone here name a single other $500 million hedge fund with just 3 employees? How about just 5? Maybe it's fine (it could certainly be) but there is a lot of risk when you are grossly understaffed. Make sure you ask the right questions.
This. Might be good experience at entry level but high level of career risk. I know $250MM funds with >10 employees.
To me it sounds like you have 3 PMs that all want to be paid like the head of a HF so they haven't hired other people so they all can make a big pay day. I'd do a lot of research into their backgrounds and plans for the firm. Everyone saying aum/person is great but they'll pay you the same analyst pay you'd get a firm with a worse ratio, I promise.
Yes it is more akin to joining a start up than a graduate program at a bank in terms of the risk/reward scale, but thats the point, its risk and reward.
People using AUM per person metrics dont understand how easily it scales. Managing 200m is the same as managing 650m, which is the same as managing 1b, the key factors that determine headcount needed is market depth/liquidity/strategy type, everything else is just a matter of scaling.
Also most large multi strat hedge funds will have teams of 1-3 running a couple hundred million of capital each. Obviously this doesnt factor in back office/legal/compliance, but that can always be outsourced.
The beauty of a lean firm is that there is a lot for you to get your hands on and add value in. Trust me, in a good year you will get much more than a generic analyst in a 30bln fund with 300 FO employees unless the PMs think of you as just a pure cost and therefore will pay you as little as they can get away with. But if its a situation where you can come in and be considered part of the team and its fairly collegiate (which in a small team rarely doesnt happen), then the upside is much larger.
End of the day, this is a question of risk and reward, theres risk, but the upside is there, and the OP needs to make that judgement based on a) his confidence in the firm and b) his confidence in himself.
Sometimes the risk averseness on this forum shocks me. Swing the bat kids, life is a lot more fun if you do.
As people said, just run the numbers, 2% fee is 13m then if you make 10%, thats 65m and you get 20% of that which is another 13m, so 26m that is for running costs and comp. Obviously if you dont have an equity stake then you definitely wont have a big slice, but at least theres a lot to go around with not that many mouths to feed.
You also have massive upside as being one of the early people in the door if the thing properly takes off.
If you want to hit it big, this is one of the ways to do it. If you look at a lot of the big funds, even people who were in IR did extremely well if they were in the door very early.
I don't understand the skepticism. I know of plenty of funds that run very lean structures with sizable AUM's. Although, they're all value shops that have concentrated positions w/ very little turnover.
OT: Great opportunity, take it. As others have pointed out, there's a good chance your compensation will be lucrative.
This is all public information (search the SEC investment advisor page). Abrams Capital has 40 employees. 9 on the investment side. Still pretty lean but come on. And people mention risk averseness? How about when something seems too good to be true, it probably is....
My bad, I've removed it. I'm based in Australia, so not familiar. Also, I read the article quite a long time ago.
Yeah same here. Sounds like a lot of non industry posters ranting about headcount. Ask any PM at a multi manager platform and see if they have a huge team to manage .5bn. 3-4 max if that... You can outsource everything and I presume group is running a single strat so very easy to manage among a small group.
Leaner the better for so many reasons. OP, disregard the nonsense from the college students.
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