Hedge Funds and "Prestige"

Hi All,

I'm curious about the role of prestige and pedigree in hedge fund recruiting: how much does it matter when you're going from one HF to another? In other words, when HF X is looking for a junior-level analyst, do they care most about (a) the reputation of that last fund ("super short term oriented" or "pretty quanty"), (b) the selectivity of that analyst's last fund (i.e. how hard was it to get that job), (c) the specific style of that last fund, (d) whether they know the analyst himself via networking, etc, (e) something else entirely?

In my specific position, I'm deciding between a less well known fund and a more well known fund for a summer internship, and I'm trying to figure out the long term "reputation cost" of going for the less known fund for the internship if I like them more. Will it bite me in the ass when I recruit for a full time role?

Thanks guys,
Baburator

 

My 2c: This is a rare time I would advocate for form over function. If you're evaluating two SA offers from hedge funds, neither of which is likely to end in an FT offer, then you should really consider going with the bigger name. You'll learn some stuff at either place but I think most people tend to discount your junior analyst experience at AnonGreekGod capital if they haven't heard of it.

 

Fully agree with posters above. Also just think out loud assuming you're a year away from graduating, if you're looking to maximize your shot at a FT offer, the bigger fund can afford to give an offer as your cost to the firm will be relatively small. Even if the large HF isn't performing well around the time of your graduation, they can probably afford to pick you up, but the small firm cannot wait around a year as your skills will deteriorate a bit and they may not have the budget for extra payroll. Smaller fund probably has lower fee structure. For you to be worth hiring, you'd have add at least $2 million to the PnL, assuming a 10% performance fee.

 

Some context: both are large funds (~$4B and ~$9B), but one's just much less known (the $4B one). I expect that my odds of getting a job out of either internship are roughly even (~50%).

Slight complicating factor is that the better known once is well known but controversial ("those guys are super short term and just trade around quarters!"). Don't know if this negative perception will affect how I'm viewed in FT recruiting or the prestige will outweigh.

Also, in case I'm unclear, this isn't an undergrad internship but rather an MBA internship. To the extent it matters, prestige of prior employers was A- but not A+.

 
Best Response

I'd say prestige outweighs, but the fund also needs to have had good performance in recent years. Otherwise you get pigeonholed as "just another guy hired by a bloated, under-performing fund that earns money by collecting AUM that can hire anyone because they can afford to".

Also, $4B is not small at all and if they run a decent level of concentration and have good performance, I'm sure plenty of other HFs in their space will know them, even if their 'prestige' amongst non-HF folks isn't great.

More generally, style doesn't matter as much when you're junior (HFs will just train you to think their way). Selectivity and reputation are more important, but those two factors tend to be fairly correlated anyway so they go hand in hand.

 

This is because there are a surprising number of joke funds that are 2 guys with $10mm from one of their parents, a prime and 2 un/under-paid interns out there.

Thing 1 you should select for is strategy - long/short and quant and global macro are completely different jobs. The value of your experience is mostly that the next guy doesn't have to spend time and effort training you, which is only true if you are coming from a similar strategy (although some will run more net exposure, concentration etc.).

After that, I'd say ability to go back (or have the PM place you with his friend, this happens with shops that don't hire every year), is key.

Remember AUM and prestige aren't necessarily correlated, what you want is someone who others listen to/worry about betting against. That being said, bloated underperforming funds are fine at your level - Paulson still gives you a level of recognition.

 

It's sometimes helpful to have brand name experience, especially at your first job. It doesn't matter for Goldman vs. Citi, but it probably helps for DE Shaw vs. Peekskill Suburban Capital LP. It adds a little more credibility to your job search to have a well known firm or two somewhere on your résumé, but you are also going to get more opportunities to grow and develop ideas and strategies at a smaller shop.

But I still think it's a secondary or tertiary consideration. If there was a decision process I use for picking a firm it's something like this:

1.) How much money will I earn here over the next 3-5 years? 2.) Do I like the people here? How is the culture? 3.) (Tiebreaker) Prestige.

 

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