Best HFs to get into H/S/W?

Common knowledge that a handful of MFs and Upper MMs send a lot of kids to H/S/W MBA programs in the PE world. Was wondering if there was a similar comparison for HFs? Are there HFs that will take pre-MBA associates and send them off consistently to top MBA programs?

 

The math gets hard to justify b-school once your at a top hedge fund. Assume two years of wages after taxes are $500k, plus another $100k of tuition. $600k compounded at 12% is $18mm in thirty years. Will b-school increase your lifetime earnings by $18mm? For 99% of people definitely not. It may make sense if you want the prestige/branding but that is a lot of value to bet on an intangible asset, particularly when being a top fund already goes a long way in terms of branding.

 

Mean/median pay at the large AUM value, L/S, activist and distressed funds with small headcount is more than that. Just think about the economics for a fund like SPO running ~$11B with ~10 investment professionals on a 2/20 structure returning even just SPY. Half a mil payout to each of your 5 or 6 analysts is a rounding error.

 

I agree that from a pure mathematical standpoint, it is very hard to justify. The top HF guys who do go seem to justify it by saying that they want to explore what else is out there beyond finance, make new global connections, and take a much needed break to enjoy new life experiences. Of course, someone who leaves the likes of baupost/greenlight/york/perry/viking to go to b-school is only doing it for HBS/Stanford.

 

hedge fund pay is highly variable but 350k at age 28 is not absurdly high...maybe a touch on the high side but not out of the question. At 28 you are likely some sort of analyst or execution guy and have been doing it for a few years...somewhere in the 250k-300k range is probably about normal at that stage. If you are a "fast-riser" and have gotten a few lucky breaks and are either a strategist-type tied to a successful PM or are a young PM yourself the pay can also go signifigantly higher then that.

 
Best Response
alman:

If I was going to flip it...would it make sense to go to b-school if you're at a long-only value fund (>$10B size - fee structure is definitely not 2/20) and want to use an MBA to get into a L/S fund. In a way it seems like it can be a hard sell.

Why leave? Are the people there talented? Is the work rewarding? There are lots of long only funds that are full of talented people and lots of L/S funds that are full of morons.

Read the Sequoia transcript. Somebody asked about talent retention. Poppe straight out said "everybody but me is massively overpaid". He qualified it with the culture, rewarding process, etc (which is all very true) but long only can be a good thing.

Shorting stocks is really freaking hard and probably best done in a diversified manner. A lot of high profile HF shorts looked great in 2007/2008 and looked really stupid in 2009-2014. Shorting is incredibly tax inefficient, has a capped upside, and limited downside. L/S is so popular because institutions like it, not necessarily because it is the best way to run money over time.

Sorry for the rant, several L/S funds recruit at Columbia/Harvard/Wharton and I'm sure Stanford (no real West Coast experience). Good long only experience is probably viewed as favorably as banking once you are coming out of business school.

 

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