HF is so opaque interested in what you think is higher. Would prefer to do McK but have a hunch the comp isn’t as good. Got an offer, same guy asking in a recent post about whether you’d join one of the levered long techs that’s down this year. Even just some insight into career comp for SM career would be helpful since I never thought until recently I’d be in HF land. Thanks.
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If you're just starting your career - Mckinsey. Later career, HFs.
Risk/reward - potential is unlimited at a good hedge fund.
2nd inning of career, have already done consulting and finance
Looking at highest peak potential, a HF. HFs are fundamentally risky and if the shop closes due to bad investments, your compensation goes to 0 real fast. You'll hit higher compensation faster in an HF vs. an MBB. Given your AS2 role in PE, I assume you have 3-5 years experience. You could hit millions at an HF in 3-5 years vs. 10-15 at an MBB (likely time to Partner). Having said that, Partner compensation at an MBB is enough to give you an objectively good QoL. Bad Partners with shitty sales skills still pull in $0.5-1M per year. If you're average you can get to $1-2M fairly easily. Good ones make around $3M and rainmakers can surpass the $5M. MBB compensation is more stable; you still need to sell but the firm sets you up over the course of years to help you succeed.
It comes down to 1) do you want to have unlimited potential or enough to have a very good life and 2) how quickly do you want to get there.
Both paths can lead to being a millionaire in a relatively short amount of time. Pick your poison also based on what you like and can see yourself doing long-term.
In an ideal world I'd work at an HF to hit a base of 2-3mm for the next 5-6 years and then parlay that into an MBB partner... loved consulting and HF is fine but just want to frontload earnings.
Unrealistic scenarios aside, this is helpful. Thank you.
MBB isn’t going to hire you as a partner just because of comp. You can make $2-3mm a year at a HF but not have anything all that valuable to bring to a consulting firm. A partner vs a PM or analyst is a completely different career and requires different skills.
Both are high-earning careers. Most people that do well in a particular career do so because they are motivated and engaged, which makes them good at what they do.
If you pursue something that doesn't excite you, chances are you'll be mediocre and don't really get paid. Most people don't get paid just for "being there" - maybe some mega SM the exception.
Go to what interests you, you'll be happy and you will do well over time. It's a no brainer to me.
Absolutely great advice. Chase jobs that motivate you.
The most reliable way to become an outlier in terms of comp is to really enjoy what you’re doing. If you are solely chasing comp - your odds of success are low. $ by itself is not a good long term motivator. Especially when you are up against people who are motivated by $ AND love what they do.
These threads getting next level...
The amount of times people on here have posted being on "partner track at MBB" or "partner track at UMM/MF PE firm" and then suddenly out of no where a year later wondering it they should lateral right away or just wait to quit/exit and re-asses.
HF leadership is not way more ruthless than all these other professions they just make decisions based on performance much so than other careers.
Worked at MBB and am currently at a similar sized fund so can at least give a datapoint and my thoughts. I very quickly knew that I could not have long career at MBB as I don't think I was well suited to roles past the manager level, and have been pretty successful at my fund for ~10 years.
Really going to depend on if your performance at either job and some things out of your control: does the fund do well for long enough for you to accrue meaningful economics? Is there growth/space for a partner in the sector/function where you choose to focus as a manager/associate partner?
The difference has been significant but not astronomical. In my case, I was paid slightly (maybe 15-25% on average ) more than MBB for ~5 years at the equivalent level (1-5 years post mba). However as I became more responsible for pnl my compensation reached closer to partner/senior partner level (1-2M+ in good years). But again, the range of outcomes can be huge - have heard of post-mba HF analysts making 8 figures in year 5 at similar funds, but probably 85% (really rough estimate) of HF analysts not getting to real pnl responsibility.
Short answer: you are going to make more money where you are a better employee. A top 10% MBB consultant will make more than an average HF analyst.
This is helpful. That’s the thing I loved consulting. I have a sales bent and think I’d be a great partner. My old partner offered me an AP role last year which was hard to look away from. But I think I’d be a *fine* HF analyst and the lifestyle is better as market stress is not a big deal for me but hours are. It’s the decision of taking a less painful more interesting job now (vs being an AP which would suck hard) vs being senior in consulting which I think is my best fit job. And my specialty is a massive and growthy sector which I’m already connected in and hit up for 1 man projects fairly frequently so I know there’s good long term potential. I appreciate your comment being a good insight and not dismissive so thank you again for your time and thoughts - cheers.
I think that does suggest your answer. The skillset of a good HF analyst and a MBB partner are pretty different. If you were offered an AP role and can make partner in 2-3 years, that seems to suggest you were an outlier at that job. I was an average consultant and knew that I didn't have the ability to be successful past the EM level. I found the analysis portion of the job simple/superficial and the social aspects fun, but draining. I'm a much better fit as investment researcher, and I would say that was not the case for 95% of the MBB cohort.
I'm at the point where my MBB cohort has made partner in the last 3-4 years. And while my career earnings thus far are probably a bit higher they also have a lot more transferable skills and future opportunities. While I am certainly pigeonholed into this more uncertain career - which don't get me wrong, I absolutely love. I'd say that they even live a more luxurious lifestyle than me (more luxury travel, etc), while I primarily reinvest my earnings in case my career doesn't continue as well as it has (I don't know many 50 year old hedge fund analysts or even PMs).
The hours/market stress - my first ~5 years at my fund, I averaged at least as many hours as MBB (worked 8-9pm on average weekdays and another ~10 hours on weekends). But much of it was self imposed - I do think if I didn't put that time in, I wouldn't have succeeded. Now that I have some junior analysts to work with and better understanding of the investment process, I work closer to 50-60 hours per week. There are infinite things to learn and do.
8 figures at 2-5 bn funds? Thought that was only possible at 10 bn+ tiger and pershing type funds
I’ve never worked on the HF or the consulting side, and right now I doubt I’ll leave PE, but I think you need to think about this from a high level.
These are deeply different jobs where you will be spending your time in completely different ways. It’s like asking do you want to be a lawyer or a doctor - would not be wise to make that decision based on comp.
Also you absolutely can get to the top level at an HF or to be a partner at McKinsey. But doing so means you need to love it, and spend a lot more time than anyone asks you to on honing your craft, just because you’d rather do that than anything else (more so for the HF role, McK you could probably just treat like a demanding but corporate job. Buy side can be more intense.)
I imagine there are very few people who would be comparably amenable to that level of dedication along the HF path over 10-20+ years as they would be to following the also demanding McKinsey path. They’re totally and completely different jobs.
If you want to invest more than you want to do anything else, go HF.
If you don’t know what you want to do or want to advise large companies and sponsors on strategy, analysis and knowledge then go McKinsey.
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