Easier to make the jump to a PM job at multi strat now or after a long(er) career on the sell side?

Based on the most helpful WSO content, here’s what you need to consider:

1. Timing the Jump to the Buy-Side

• Now (9 Years In):

  • You’re at a prime point in your career to make the transition. Many PMs at multi-strat hedge funds come from sell-side trading backgrounds, particularly those who have built expertise in market-making or risk-taking roles.
  • The offer you have (150M AUM, 15% PnL payout) is solid, especially if you believe in your ability to generate returns. While the base salary is lower, the upside potential on the buy-side can far outweigh sell-side compensation if you perform well.
  • The longer you stay on the sell-side, the harder it may become to transition. Senior sell-side traders (Director/MD level) often face challenges breaking into PM roles because hedge funds may view them as too entrenched in sell-side processes or too expensive without a proven buy-side track record.

• Later (15-20 Years In):

  • Waiting until you’re more senior on the sell-side could provide financial security, but it comes with risks. By then, the buy-side may view you as less adaptable or too far removed from the risk-taking mindset required of a PM.
  • Additionally, the buy-side landscape is highly competitive, and opportunities for senior-level transitions may be fewer. Hedge funds often prefer to groom PMs earlier in their careers.

2. Risk vs. Reward

• Compensation Variance:

  • It’s true that buy-side compensation can be volatile, especially at multi-strats where performance is closely tied to your PnL. However, the 15% payout structure is attractive and aligns your incentives with the fund’s success.
  • On the sell-side, compensation is more stable but capped, especially as trading desks face increasing regulatory and structural pressures (e.g., Dodd-Frank, shrinking prop desks).

• Job Security:

  • The buy-side is known for higher turnover, but sell-side roles are not immune to cuts, especially as you become more senior and expensive. Many senior traders are pushed out during downturns or restructuring, as you’ve noted.

3. Career Dream vs. Practicality

• If moving to the buy-side has always been a career goal, this opportunity aligns with your aspirations. Delaying the move for financial security might lead to regret if the right opportunity doesn’t present itself later.
• The current offer gives you a chance to build a track record as a PM, which is critical for long-term success on the buy-side. Even if this role doesn’t work out, having buy-side experience can open doors to other funds or roles.

4. Key Considerations for the Offer

• AUM Size: Managing $150M is a reasonable starting point for a PM at a multi-strat. It’s not massive, but it’s enough to prove your ability to generate returns.
• Payout Structure: A 15% PnL payout is competitive and provides significant upside if you perform well.
• Base Salary: While the base is lower, focus on the total compensation potential. If you’re confident in your trading strategy and ability to generate alpha, the PnL payout could far exceed your current sell-side earnings.

5. Final Thoughts

• If you’re confident in your skills and ready to embrace the challenges of the buy-side, this is a strong opportunity to make the jump. The longer you wait, the harder it may become to transition, and the risks of being pushed out on the sell-side increase with seniority.
• However, if personal financial security is a major concern, ensure you have a sufficient safety net before making the move. Consider negotiating aspects of the offer, such as a guaranteed draw or higher base, to mitigate initial financial risks.

Ultimately, the decision comes down to your risk tolerance, confidence in your abilities, and how much weight you place on achieving your career dream versus financial stability.

Sources: LO to MM HF?, Routes to Buyside PM, Q&A: Non-Target School to Portfolio Manager at a Top Hedge Fund – 6 Years Out of Undergrad, Routes to Buyside PM