Crazy to take MM offer if lead analyst in ER?
I’m currently a lead analyst in ER and in my young 30s. I got an offer for one of the well known MM HFs with a PM that is just starting and I would be his first analyst. Major cut to the base salary going to $150k and probably a cut to total comp for a couple of years until I get my own sleeve which is certainly not a guarantee. PM has suggested that I would have autonomy for my coverage and could get a sleeve within a year depending on performance but who really knows…
Made $385k all in last year and expecting $425k this year. Probably will cap out at $500k given my sector unless I get a bid elsewhere. Job is fairly easy outside of the grind of earnings. Though I don’t enjoy the sales/promotional part of the job and would much rather be actually researching companies and industry trends rather than talking to clients/investors and saying the same thing that I’ve already told 5-10 other clients. Don’t enjoy the marketing aspect of ER.
Have wanted to make the switch to buyside and have that reward potential based on performance and actually get paid for my research/calls. But had decent upward mobility at current firm and never was proactive about making the switch. Would I be crazy to take the offer now and make the switch from the cushy ER lead analyst spot for a risky analyst role at a MM?
Senior seats on the sellside are rare and can be incredibly lucrative even at non-bulges -- I know for a fact that there are senior analysts at the likes of Raymond James, Jefferies, and Stifel who are pulling in seven-figures.
Buyside seats, especially at MM HFs, are remarkably plentiful, and this doesn't sound like an especially good one -- you have a new PM (always an incredibly high risk prospect) who wants you to take responsibility for a good amount of gross while he focuses on learning the ropes of managing risk. In addition, that base salary for a sr analyst at a MM indicates this probably isn't MLP or Citadel -- while places like Cinctive or Exoduspoint are perfectly good places to work, you are looking out from a top sellside seat and that opportunity cost is hard to look past especially in this environment for L/S.
In order for an analyst to make career-justifiying money, your ideas have to generate PnL, your sector has to be incrementally investable, and your team has to make money. Here are a number of ways this could go wrong in the near-term w/o fully blowing up:
1) Your PM runs the book smart. However, you have a difficult time parlaying buy ratings and top 3 ideas into a multi-manager set-up. Your smart friends all seem to pitch the same ideas and you tend to agree with them. But in late November, one of your top positions blows up and you find yourself spending your year-end review how the print met the bar, coincidentally the Street consensus number. You walk out of the year-end w/ a $50k check and ask a former competitor for the number of the DoR at Seaport Global.
2) Your PM runs the book smart. You guys largely avoid the crowding factor and show high idio, but non-fundamental issues drown out any idiosyncratic stories in your sector (regulatory issues, macro concerns, take your pick). You walk out of the year-end w/ a $100k bonus and the PM agree that next year that the book will come out swinging. Maybe even bet on a factor.
3) Your PM comes out swinging, and bets on a factor. Things go great at first, but in September he gets caught on the wrong side of a rotation and the book draws 350bps and you lose the entire YTD of PnL and some. Eyebrows singed, he spends the rest of the year running so tight and not sizing your conviction names. Maybe he blames you, maybe he doesn't. You walk out of the year-end w/ a $50k check and ask a former competitor for the number of the DoR at Seaport Global.
I've seen plenty of perfectly good buyside colleagues trade risk-taking seats to be junior sellside analysts -- your seat sounds like perfectly good sellside seat from which to build a business. I think another question you should ask yourself here is if your sellside franchise has any weaknesses (i.e. low sector interest, subpar stockpicking, too high level of a view) that could prohibit successful execution in a buyside seat.