Fund size and the learning experience
Hello WSO - long time lurker, first time poster. Currently in the process of recruiting for HF from a target school + MBB background, so I am not looking for hardcore PE/HF hybrid shops or credit shops - mostly looking at L/S equity. I have two questions that I have not been able to find answers for:
1) As far as learning experience goes, is there a sweet spot for fund size that balances exposure and immersion with stability? Clearly you would get more exposure at a smaller $200M 3 person shop, but you are also exposed to blowup risk very early in your career and likely expected to generate ideas day 1, which I am not ready to do.
2) If one were to join a boutique mutual fund out of the MBB program (The one I am thinking of has ~30B AUM, 9 analysts and 1PM, hybrid fee structure that scales performance incentive past certain benchmarks), would that be a good launch platform for an eventual transition to the HF world? I understand that as a long-only asset manager you are missing on the "S" piece of the L/S education, but at the end of the day your early years are about learning how to analyze companies and industries. People on these boards largely ignore non-HF/PE asset managers, and I wanted to understand how a candidate would be perceived by HFs in 2-4 years coming from a place like this. I recall a response in another forum stating 'over time, funds are very selective in what they look for in a candidate, and you will be very selective in what you look for in a fund' and didn't know if the category of Asset Management you came from was a big factor or not
Thanks for your responses!
1) No. 2) Yes.
bump
How small is $1BN AUM for AM? (Originally Posted: 08/21/2011)
Hi fellow monkeys, I have an offer for an entry analyst position from a boutique investment management firm that has about1bn AUM. The offer's solid, and coming from a Big 4, the experience with be more valuable than anything else.
Now, I would like your feedback on how small you think the scale of a 1bn firm is in this industry? Would there be room for growth should the AUM stay relatively constant within the next few yrs? What are potential concerns that'd come to mind?
I have plans for MBA down the line, and am considering alternative Asset Management as my end game.
Thanks all.
$1B is not tiny but it is a small firm. Probably between 10 and 15 people working there? You will have more responsibility but from an MBA standpoint you will have to work hard to show them that you progressed in this small company. If you could do like ibanking or ER with a large company it would be better even though its not buyside.
That said you will get buy side experience and doors will open up, plus you will actually know what the f you are talking about re the markets. most of these newbs in finance have not a fuken clue.
You can probably grow even if AUM doesnt and honestly over the next few years I would not expect AUM to grow unless you are a fixed income fund (Im guessing by the AUM you only do equities and some private wealth management).
If it's more money than your current job - take it. Get your CFA put in a few years, do your MBA and then get into a bigger shop. Stick to the script and it's easy. The fact that the firm is small and unknown makes you have to stand out in other parts of the MBA application.
Hi 1337, thanks a lot for your inputs. I appreciate it.
Why do you think AUM is more likely to grow for fixed income funds? The firm is all equities and mostly concentrated in the one sector that they specialize in. I am working on the CFA, though I won't have the charter until I have 4 yrs of experience under my belt.
How transferrable is the skillset if I wanted to transition few yrs down the line from AM to equity hedge funds, or even PE, should I find myself more of a deal person?
Thanks a lot.
Serious Discussion on Choosing the Appropriate Fund Size to Join (Originally Posted: 04/22/2010)
I wanted to get some thoughts from people both currently in PE and those looking at PE as a next step. Specifically, I wanted insight on fund sizes and choosing the right sized fund. I know there is always a lot of hype over the mega funds, and with good reason, I imagine.
However, perhaps I'm off-base, but I've always thought of the mega funds and similarly large funds as being relatively cookie cutter (i.e. BB IBD --> Mega fund --> BSchool --> Mega Fund again --> hopefully make partner). In other words, to go to a mega fund seems as though you'd be setting yourself up for a career track in either PE or finance more generally.
For full disclosure, I'm leaving my bank to join a lower-middle market fund this summer. I personally don't think this is a long-term career path for me, and ideally would like to start my own business down the line. It would seem to me that the types of portfolio companies my firm will be investing in (lots of entrepreneurial businesses) versus the ones the larger funds invest in would be a solid way to learn more about the operations of a smaller business (we tend to take a pretty hands-on approach to things.)
I suppose this is somewhat of a rant, but I think my point is, for those monkeys out there thinking about PE, to really think over what you are looking for in the long run. Granted, the mega funds will pay the most coin right off the bat, but it's definitely key to think a bit deeper about what you're looking for out of life and what sort of career path you are really looking for.
Interested to hear other's thoughts about their decision making process and their thought process going forward.
I have a similar mindset. That cookie-cutter roadmap isn't really the lifestyle I want to follow. I am attracted to the idea of moving to VC or MM PE (growth capital) after my analyst stint, as a precursor to going the entrepreneur track. I don't know, I have a lot of time to figure this out, but I just don't want to work for corporate america my whole career. I value individuality and creativity, which is why starting a business or VC is attractive in a lot of ways.
I've worked previously at an mid market fund which tried to make the step up to the big leagues and ended up with quite a few write-downs. From speaking to guys who are still there (they are now raising a new fund ~25% of the previous) a recurring sentiment is that they feel they are back doing what they know best. Apologies if this seems off on a tangent but to me it shows that bigger isn't necessarily better - smaller companies are often more interesting, from my experience often have better management (still owned by founders in many cases) and most importantly from my point of view, the deals are genuinely driven by belief in the potential of the business (albeit with some leverage to boost returns!) rather than belief in the ability of cash flows and non-core assets to support 5.5x senior.
FWIW I would love to return to PE in the near future but am definitely leaning towards mid market, distressed opportunites or a combination thereof.
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