Choosing HF over PE?

how can one confidently say equally difficult to become HF PM and PE PM?

if you really believe anything you're writing, then this is strictly a question on risk tolerance. and if this is how you break down risk, go with PE, as you're not cut for HF

I would disagree a bit with the above poster, it's a lot more than purely a question of risk tolerance. This is going to be a bit simplistic, but I think it'll catch the major points someone at your age/level should be thinking about.

• As a general rule, don't focus on the long tail outcomes you see/hear about PMs/partners having and use that as a basis for decision-making. Getting to either position takes a long time (less so for HFs if you're a true breakout talent, which is only becoming rarer). You will likely spend a decade+ before you're even scraping at the opportunity to get promoted to that level so what's more important now is figuring out which path is more optimal for you given your interests & competencies.  

• Early and mid career HF comp is far more tied to performance than PE and has considerably less job security. If you crush it at a big platform and are a top performer, you'll make multiples of the cash comp you would at the same level in PE. If you underperform, you'll either get shit out and have to find a new job or at best make less in cash comp + you won't have the long tale of carry. It's all about looking at short term performance OVER the long term vs taking the long term view from the get go because of how funds inherently work. If you're the former, you'll rise up and could opportunistically become a PM much earlier than you would a partner at most PEs. HF is the UFC with constant title fights vs PE's a marathon of compounding . If you make it to the final stretch you could have tens of millions in carry headed your way with the caveat you chose a good fund that makes performing investments and has capacity to scale. And that's not even getting into internal politics, carry economics (and the "golden handcuffs"), and the sheer difficulty of exiting an non-liquid asset vs for a HF you're generally dealing with much easier liquidity and profit realization. Contrast to the HF where you have magnitudes more ways to make (and lose) money and where you're more heavily rewarded (or canned) the faster you can get those dollars through the door. 

• The work itself at a HF is going to be more interesting in that you'll be spending more time on actual idea generation i.e. figuring out how to get said money through said door. This is why many folks find it the more intellectually stimulating job, because you're not the one managing the day-to-day of anything you're investing in (we're of course excluding the complex private deals some HFs get involved in or deeply involved activist investors, but those are more akin to PE anyway). It's the "purest" form of investing if your definition of investing is purely based around the exercise of security selection and structuring transactions. PE is a LOT of process work i.e. paper pushing. There's a reason it's considered banking 2.0. You'll be managing bankers, lawyers, and sometimes internal/external consultants or subject matter experts. You're overseeing portfolio company work i.e. helping management teams directly with 1-off asks or getting directly involved in canvassing the market for add-on opportunities, helping with things like recruiting, and making introductions to high value customer prospects depending on the value-prop your fund's LPs/network bring to the table. The bright side of PE, depending on how you look at it, is there's a much longer feedback cycle because of the nature of the asset class so you won't really know if you're "good" until a decade+ into your career vs HF is mark-to-market and you're being judged every quarter by LPs/every day by your PM.

• Where/who you work matters, more so for PE I'd argue because of the network and prestige effect vs a HF. HF if you're a performer with a track record that speaks for itself that was meaningfully value-add to your PM or have gotten to manage meaningful P&L (at least 8 moving up as high as 9 digits) then you'll be respected and can be competitive anywhere with a comparable strategy (excluding the big name SMs who tend to fall a bit more into the PE trope of requiring prestigious backgrounds in most cases to even get an interview). UMM/MF PE a lot more emphasis is put on background and who you worked under. You could be a junior that worked on some of the biggest 0s at the big name MFs but that won't tarnish you nearly in the same way a bad track record will in the HF world because you would still have a name like KKR on your resume - look what happened to Primedia, Sungard, RJR Nabisco, Envision, etc. - I know guys who were ASOs/Sr ASOs on some of those deals who still went on to have massive careers. Now granted, in a HF one could argue that the ultimate decision and risk management falls to the PM so it shouldn't matter (and you'll see plenty of junior folks whose funds/pods get blown out still get jobs afterward), but if your PM can't/won't vouch for your ability to provide good analysis & support you'll be a dead horse all the same.   

Hope this helps!

A very simple and short answer is what is your risk-tolerance and time horizon. Both are actually quite different in roles. HF is way more risk-taking. You can definitely earn more money early on if you are good but the flip side is you can be gone fast. I know people who went to top funds and lasted 6 months. Luckily they went to other funds and are doing well. HF is fast paced and you need to be sharp minded.

PE on the other hand is long term focused and more risk-averse. You are not just making quick trades and on to the next. You are going to be living and breathing your investments for a long time. Comp is long term as a result and you don’t start making real money until carry at most funds. The work is quite different too since you will be building more complex models and IC decks. Also due diligence will be significantly more extensive. Admin as well given all the portco work (I know people at funds where the majority of their work is boring portfolio mgmt work).

Forgive me for being short and blunt with this post but I've been in the game for +7 years now on the sell side and buyside working in a hf for the latter five years. I caveat that I haven't worked with a MM but HF none the less.
1) Stop planning what money you can make - everything that exists is guidance based on performance that's already happened if you want a real bench-mark look at base and assume a measly bonus unless you really can add value.

2) Even if you can add value - there are people who have been in the waiting list for a payday longer than you so expect it to take a while and excuses to come in heavy.

3) Focus on what wakes you up and what you want to do and your speciality - PE / HF isn't just about what makes more cash with exit ops, it's about how much you actually care to keep grinding when your theoretical payday doesn't happen and you still have to grind on.

My advice is this - focus on what you want and what drives you and then think about what fits you best, because at the end of the day you're just a number and a severance package away from being without a job. 

Don’t. 

Since you're asking this question, don't go to a MM 

I've done both MF PE and MM L/S. Did a PE -> HF move so it will be biased. But offering my two cents on how to approach this assuming you have no preference (which in reality means you don't know enough about the jobs if you don't).

Let's break down the NPV of these career paths:
 

PE career = high Sharpe ratio, bond-like career.

• You can reasonably predict your earnings trajectory (co-invest/fund exposure, deployment, return bands) if you climb to partner level.
• Being a stellar investor helps, but it's not the be-all and end-all. Your personal asset selection prowess isn't necessarily the driver of your success.
• You operate well in high pressure / tight deadline team environments (fertile ground for interpersonal friction)
• What matters is being able to attach your name to the deals that drive fund returns (which may or may not be within your control or due to your deal-making finesse).
• The crucial factor is internal backing to avoid being marginalised by the relentless influx of fresh talent from IB and consulting (which in means dealing with people who ended up in in PE by "default" career choices).
• Success hinges on having the firm's power players in your corner (yes, office politics and favoritism play a role), grinding it out for 20+ years, and cultivating a network of allies (office heads, portfolio company C-suites, advisors - it's all about mutual back-scratching).
• Be selective with sharing your true opinions and know your place in the IC pecking order.

L/S career = high beta, equity-like career.

• The outcome distribution is wide, with the bell curve skewed towards the middle/slightly below average.
• You might earn like a typical professional services in a big city or make bank early on. Investment acumen is paramount - asset selection is everything!
• You work well individually
• You have more control to dictate your track  as you'll formulate and express investment views on day 1.
• It's nice if people like you, but not essential.
• Expressing your views is key, and articulating them well even more so. You need to be incredibly self aware of what you're good at and not, and act on what you know and what you know that you don't know.
• There's no real "off" switch. MM L/S investing isn't just a job; it's a lifestyle. You're mark-to-market as long as the markets are open, whether you're tying the knot with your better half or visiting a sick relative in the hospital. It's a grueling way to build wealth, and generational wealth is rare. Few make it to multi-billion dollar books at top MMs.

The commonalities?

• Staying power is key, but the skillset to achieve it varies wildly.
• PE is generally a safer bet, with a narrower bell curve as even mid-tier firms turn can provide good income.
• L/S is a more exhilarating ride, but it's tough to land on the right side of the tail.

So, why switch if PE is a safer career and better NPV on a risk adjusted basis?
I was willing to trade job security for job satisfaction. I knew the risks. I wanted to wake up every morning feeling like what I do matters and I can measure my impact and contribution. Either I'm proven right, or the market will keep me honest.

My success or failure will largely be dictated by myself based on how good I actually am, whereas in PE some of that will be me, but a healthy chunk by others perception of how good I am. When I was in PE, if I worked with someone I didn't respect or who made the wrong decision, I couldn't keep my mouth shut. But I have to endure working intimately w that person for the next 3-9 months closing a deal I know we won't win or get through IC.

Sounds cliche but picking careers for potential dollar earnings is dumb. If you focus on where you're best able to capitalise on what you're good at and minimise what you such at, the money will follow naturally. For some it's playing the game, and there's no better business school in corporate finance then PE. But I knew I wouldn't last. I couldn't keep my loud mouth shut or be diplomatic enough to express my view in a "soft" enough way to not imply to the below average senior guy that they were stupid for spending DD budget and firm resources on the wrong DD items or just brush off confirmation biases in IC. And that's without mentioning the greed on bps in MIPs and spending sunday nights with lawyers discussing EV-to-equity bridge mechanisms. 

For my mindset, L/S equity is perfect.

I'll either make it or break it due to my own abilities, but I can't fake it.

I would say HF if you really have a passion for public equities, and generally enjoy doing stock research, etc. If you don't have a genuine interest, however, you won't become that rockstar PM. 

Pick what you enjoy doing, and make sure that the ceiling of potential earning is high enough for your liking. I see that generally it's higher on average in PE, but of course there are exceptions. You can always try it out for a few years and boomerang back to PE if you hate it.

friend was at a really good quant HF shop. He noted that people tended to retire before 40.

Last I heard, making partner at 40 in PE is still considered young?