Funds that best position you to run your own shop?
The dream for many people on this forum (those who are actually passionate in investing), is to run their own shop. I've spoken to lots of people in this business, all of whom have mentioned 1. how much of a difference it makes if your boss is not a dick / yet is truly an incredible investor, 2. the importance of a small investment team where you can make an actual impact / yet fund has meaningful AUM. Granted you have potential and know what you're doing, and the fund performs, these 2 factors can maximize your career earnings by the time you're ready to launch. It's uncommon, but the narrative/goal is to make enough money (there was a thread on the HF forum about this, I think consensus was $15-20m) after working for 10-15 years at some fund, and then start off on your own. I personally think that the best funds for this (MM funds aside, and specifically focusing on L/S or event driven SMs) are obviously Tiger, Lone Pine, Viking, Pershing, but also think Soroban, Darsana, Altimeter, Dragoneer, D1, and Appaloosa. What are some other funds you guys think fit the bill?
It's going to be a long list, but it's all about lineage. You can extrapolate based on sizable recent year launches and where the founders came from.
So yeah, the following profiles just help a lot in starting a conversation:
Any info on Appaloosa and Soroban? Does Appaloosa even recruit anymore, and how are returns? Both are >1bn per IP, so comp is probably elite tiger cub level, and both are obviously incredibly reputable shops
I have no idea.
what are your thoughts on starboard value? kynikos?
Kynikos avoid at all cost, it's basically defunct now anyways
I was wondering if you had any input as to why we don't see analysts or PMs from well-regarded LO mutual funds starting their own funds?
People pursue top LOs for lifestyle and comp. hard to recreate those fund economics and lifestyle while running own fund, especially since LOs have great admin, distribution and marketing infrastructure
Within credit I would also say PIMCO, GSO, CarVal, and Sculptor
bump
Confused why you put MMs aside. They are by far the best place if this your goal at the end you just need to be with a PM you trust/like.
MM model is made to do this basically. But being an analyst and PM is different skills. Which is why many never make the leap. Then being a PM who runs the whole show (most sr PMs at MM are the same) whole nother skill.
Curious, could you elaborate on why MMs are a better environment to eventually run your own firm? As opposed to SMs who may be more thematic, have longer holdings, and are less focused on quarterly results?
Based on calls I seen lately, MMs are basically raising cash out the wazoo with no real effort. Their model is proven now and they seem to be long capital big time not a shock for state of the world.
So basically all of them are looking to keep growing and only way to keep growing is to find more mid-size PMs or promote within somewhat. Then new PMs are basically getting access to more capital if they perform much easier as well.
So you dont need to raise funds someone does it for you. As for your question around environment all the stuff you mentioned is exactly why at a MM the whole team feels the heat vs just the PM, the PM is going to share that stress around.
Now the SMs their setup is to actually keep certain people as analysts like forever. Cause its a different skillset and a good analyst is worth way more than a crappy jr pm. So you never see the actual full skillset the PM has, add to it they dont have metrics to chase quarterly you may never fully understand their process or pressure. They may never bring in new capital to let your ideas grow etc..
MM model is basically way faster to PM now and ultimately if good enuff to spin out. Issue is much less patience.
Not the OP, but I think I speak for a "handful" of folks. I'm at a point where MMs aren't attractive to me -- I'm in MF PE, and I plan on (more like hope to if I even can) exiting to a top SM shop. To most MFPE guys, a MM HF gig seems like a bit of a downgrade, and the skillset/strategy doesn't really resonate with us the same way that top SM l/s shops do.
I agree it's a great way to eventually start your own shop, but for me, it just seems a bit out of the picture. Would/could much rather see myself at a big tiger cub and then spinning out, otherwise I will probably just grind it out in PE
Think this is a great perspective and why sometimes being an analyst for longer period works just as fine and possibly comp wont be hugely different. As mentioned the MMs prolly will lose their lustre as they have decided to just keep growing.
The other examples viking etc again lean more MM I would say. Elliot same.
Why do u have any interest in public markets if that’s your mindset? The real upside is getting gamble on yourself and potentially become a michael gelband or Diego Megia. If u alr have a cozy MFPE seat and are risk averse is the grass really greener on the other side?
Elliott is a decent place to launch your own fund since good path to making "portfolio manager". I've been pitched for three funds launched out of Elliott at ~ 500m - 1.5bn or so each in the last three days. Same as Viking.
Formula is -> S/M manager styled firms that have a clear path to PM, good brand name, and that have the scale to grow. I'd think that a strategy like Holocene will produce a few fund spinouts as well.
From what I've heard, eliott doesn't have any real "portfolio managers" in the sense that you won't get to call all the shots yourself . Every investment requires approval from the top and paul singer and Jonathan pollock are heavily involved in each and every single investment they make. So you're really just a risk taking senior analyst who makes investment recommendations and gets paid based on said recommendations but they call you a pm instead. Atleast that's what I've heard. Could be wrong though.
do you know how pnl % gets structured for senior analysts/PMs at elliott?
I think Viking is the clear winner, they have had like 5 launches in the last year alone (Alua, anomaly, voyager, masterton, the new one coming out, a few more)
Look if you’re serious about launching a fund one day, like yes the answer is MM - Millennium et al.
You basically run your own fund, some have their own offices, their own distinct names, and when you want to spin-out, you get seeded and then go raise hundreds of millions / billions. It’s running your own fund with 1 LP. Then you raise external money
Viking has also had several launches but my understanding is these are all clout launches, not skill launches, which is/will continue to die down as that style becomes out of favor - their CIO who just left will raise a bunch of money, but it does seems like they’ve lost of a ton (a ton) of talent, so not sure there
If you want to raise big money you need to be a risk taker / ideally a PM. That limits you to the pods / some funds that many of you think are SMs, yet really are pods. I promise you, no employer/analyst (not CIO or founder) is raising billions from D1, Soroban, or the other true SMs.
Many of the firms listed above might have good seats, but don’t really offer this path. Let’s look at two extremes brough up several times before – Viking and Pershing Square. According to posters above, they are arguably the best two firms to make tens of millions of dollars and start you own firm.
VIKING
On Wikipedia, I count 15 Viking lineage launches + Nin Jing (pending).
That last one is your comp. Which is a total of 1 comparable situations in the last ~14 years.
Also, where are the analysts from a decade ago? Here is a rough cut:
2012 Investment Analysts:
A variety of interesting outcomes but not make $10-15mm and launch a fund.
PERSHING SQUARE
Scott Ferguson (Pershing’s first analyst) started a fund in 2012 and Paul Hilal (Ackman’s college roommate) started a fund in 2019. That’s all I can find looking at org charts for the last decade since 2014. There have been several analysts who have been there for a while, likely earning great compensation. And little turnover - 1 retiring with a nice send-off and 2 that look pushed out. But they aren’t starting their own funds.
You’re extremely incorrect to assume folks outside of the 5-6 dinasour, senior-most guys are making 10-15m, that number is just wildly off - I can confirm that
I’ve had friends leave because of comp, will leave it at that
Again - let’s distinguish between clout / access to lots of family $ launches versus skill / exceptional PM launches
Most of those outcomes easily >$10-15mm? And those jobs probably cushier than the pain of launching a fund?
Was involved with a new launch. First, should recognize that it is getting a lot harder. LPs just want to give their money to the largest platforms (usually multi-strats) and defer the capital allocation decisions to them. Industry wide trend is assets concentrated at the top, and its unlikely to change.
Two most reliable ways to launch are:
1. Long track at a MM, in many ways are already running your own business, and this just becomes another "step" in gaining more ownership.
2. Many years at SM with outstanding references from leadership there. We took this path, but more important than the brand of the fund were the bosses vouching for us. Had a billionaire (well known name in the industry) doing our reference calls and saying we were worth taking a shot on, and that is what moves the needle.
Outside of these two approaches it is very hard to fundraise today even relative to 5 yrs ago. And the path to getting there is much more in your control at a MM (skill + some luck) than from a SM (some skill + a lot of politics/luck).
Nice leadership team to provide references to prospective clients for a fund launched by ex-employees. Not everyone would do that. Hats off to you and your previous employer.
Yes most won’t. In our case some of leadership was in our favor and some was not so used that to our advantage.
I'm a student studying finance and physics right now. I'm just interested in just developing my skills for the first 3-5 years of my career. Would you suggest going to a smaller shop and building my knowledge and skills there where I can have much more of a direct role, or should I aim to go to a big name place to start? Eventually, I'd like to be a PM or asset manager more broadly because it seems to be one of the most fascinating job mandates, but I understand a career is a long time and am in no rush as long as I love what I'm doing throughout the process.
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