LO with ~$500M AUM w/Strong Returns
This may be a dumb question, but I know that people here provide warnings for joining SM HFs with under $1B in AUM. Is there a similar kind of consensus for LO AMs?
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The rule is even more applicable. $500m means at best $5m of revenue, probably closer to $3m. After expenses (Bloomberg, research, back office) there’s really not much to go around. If you get outflows or market moved against you then it’s lights out. Subscale LO is not where you want to be.
My rule of thumb for whether an LO job is worth it is $500m per IP is not great but okay, $750m per IP is decent and $1bn per IP and up is where you want to be. Caveat all of that with the fact that I wouldn’t want to work somewhere that had less than $5bn total AUM. So $3bn with 3 IPs probably isn’t a great spot either (not very big and also likely spread thin).
In the AM space, $500mn is nothing. Assuming 1% of fees, that is $5mn for the fund a year to cover all expenses and salaries.
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At $500m, it is either more of a wealth management shop where the founder will be less inclined to pay research personnel or a sub-scale institutional manager that is running seed money for very low fees. If it is the former, you will always be looked at as a cost center and will never get paid well unless you bring in your own clients. I know this from personal experience. If it is the latter, you can get paid well if (a big if) the fund scales and you are the first analyst the PM has hired. Even with that, you are trusting the PM not to screw you in the end. It is a tough spot to be in either way.
On the other hand, if you are struggling to get to the buy side and the firm is actively picking stocks, this could be a good way to get your foot in the door to get some experience with the plan to bounce after a few years. You likely won't be paid well though.
This is true. In my case, it was an unfortunate combination of both.
What is considered standard pay for your average LO fund if you don't mind me asking. I know there are tons of threads on this, it's just hard to navigate which answers are a good baseline since I just recently moved from law into the finance industry
I will try to speak to average numbers as every firm outside of the 3-4 largest are wildly different. I welcome pushback on the following numbers. Post-MBA analyst is $250-350k total comp that can scale to $400-600k assuming you are at a larger firm. Generally, analyst total comp tops out at $1m (10+ yoe). I have no idea what associates get paid as I came in as an analyst.
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