Are SM's worth pursuing anymore?
I'm a sophomore at a HYPSM school. I've worked at a top SM in the past and am looking to sort out my summer 2024 internship and generally what I want to do long-term. Not interested in IB or PE. I'm wondering, should I be pursuing an SM role out of undergrad/for my 2024 internship? Given how poorly these funds have done, one part of me says I should just drop the subject and recruit for MM's and multistrats (P72, Farallon, etc). Another part of me says that the opportunistic play is to try and join an SM now at the bottom and ride the next tech boom up. Thoughts?
I think it's hard to give blanket advice on this one. Personally, I'd think the same rules (buyside out of school) apply e.g.,
, plus a premium for how much risk you can stomach. Standard advice is the reference rate, your individual risk aversion is the spread. Risk-taking: SM, Risk-averse: MM (feel like a fucking jackass here saying that MM HF is a risk-averse option LMFAO).Would also boil down to idiosyncratic factors like whether you have a sector, how's your sector expertise (yeah, braindead as shit to suggest that an undergrad has sector expertise, but still putting this one out there), network and connections.
Could also weigh out the asymmetry of your options here:
SM worst case: Your SM fund blows up 1 year in and you find yourself without a job and a resume that barely speaks for itself; best case: You make bank and ride the next tech boom up
MM worst case: You get passed over by the naturally high turnover in MM; best case: You work your way up in MM and make senior analyst/ PM?
Think of these decisions as positions in your book and that makes analysis easier I think
End of the day you know yourself best
Makes sense. I'd say I'm generally pretty risk forward because my undergrad degree is in computer science and a lot of my network is going down the tech route, so I'm confident I'll be able to find a job in tech if things don't work out. I don't really have an interest in finance outside of the hedge fund space, so my thought is to try and get there as fast as I can and if it works it works, if not, I'll pivot to tech.
Nice. Unique situation there. You know what you gotta do now
Saying that MM is risk averse is actually a jackass thing to say lmao. You literally have zero job security and it's entirely dependent on who you work with. At least at an SM that has decent AUM you'll be able to spend a couple of years there and learn the ropes of investing to some degree, and if it doesn't work out you can do LO, another SM, or just go to MM. MM is a move if that's what you want to do, otherwise it's not a risk averse pathway at all.
100%. But was also thinking along the lines of getting booted 1 year out, from established MM vs no-name SM
The most important is to figure out the investment style that best fits your personality so that you can thrive in that environment. Given that you have already interned at a SM, then you should try to get an internship at a MM. Use the summer to compare experiences so that you can make a better decision when it comes to full-time options.
Do you think the fact that I interned/worked at a MM would stop me from working at a SM? I know in the past there was some stigma about MM people trying to move to SM's not sure if that's there any more.
There's a structural shift going on in the hedge fund industry. I'd bet my left nut that the SMs that are still around in 5-10 years are going to look a lot like MMs today. Problem is that the MMs have a 30 year head start.
Makes sense--I'll pitch you a hypothetical. If you were picking between P72/Citadel or a currently downtrodden tech L/S fund (think whale rock or altimeter), where would you go?
Downtrodden funds like that aren't hiring so it's a stupid hypothetical
It would be insane to claim that a SM HF offer ( I assume we are talking about reputable firms here with $B AUM) would somehow be the riskier choice over MM as a first job out of undergrad. From a job security perspective, MMs pod structure, their drawdown limits, and time horizon mean that analysts can churn fast, oftentimes for reasons outside their control. If anything, as a whole SMs are more likely to focus on culture and retention and not fire you in a down year.
I have buddies who joined public equities buyside straight out of HYPSM (think MSD-HSD $B AUM, 10-15 IPs type firms) and were self-admittedly bad at their jobs for their first couple of years before turning it around. MMs would have fired you long ago, you are kidding if you think they'll pay you 200-300k a year (around what they got paid) to "figure things out." Most SMs will not be this generous either, but as a whole MMs are quicker to cut (and quicker to hire). And yes there are individual SMs who are known to have higher turnover like Coatue (who don’t even recruit undergrads)
To preface any arguments, obviously this does not apply to some $100m hedge fund. There you would actually have to think about the risk of the firm ceasing operations if LPs redeem. Those funds would only make sense for an undergrad with your options if there's some sort of equity on the table. And even then, highly dependent on your individual assessment of the founder.
Wow! Thank you very much for detailed answer!
WSO 2 year ago: tiger/lone pine is a better job than playing in NFL, yes or no?
WSO today: is working at an SM better than going to jail?
There is definitely SM in jail.
Really put things into perspective there. WSO be like yolo WSB momentum trend-following degenerates. These monkeys need to look into contrarian deep value investing
Dude why would a multi manager be any less risky than a single manager? Unless you're looking purely for the safety net of a graduate scheme, which is not what you should be gunning for. A multi manager is less risky for an investor, yes. However you are not an investor - if your PM blows up then you're probably going to be packing your shit as well.
Once you’re at risk taking level, MM is higher risk / higher reward (a bet on yourself and pure accountability to alpha) vs. in most cases less attribution and more limited attribution and longer path to real ownership of results at SM.
Generally SM is lower risk career wise assuming respectable AUM.
caveats though, as a junior getting fired from a pod blowup isn’t really treated as a resume black eye. The junior guy leaving a great SM has some questions to answer.
That's what I was sayin'. Pod-shop pushouts are common. SM blowups draw questions
the HF insecurity here is crazy
It might sound crazy as you seems all agree to say that job security at MM is low, but 1 year after the beginning of my role at a MMHF in London, I actually never saw a guy getting fired.
Most of the departures are just coming from a better offer at a competitor fund (better compensation or PM promotion).
trust me less than 1% of the people who view this forum here actually work in the industry (including me). its an echo chamber
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