HF vs Career Banker @ CVP/PJT?
Have summer offer @ one of those 2 in the bag for next year, and wanted to get everyone's take on this. Not sure if I want to spend my career in banking or not, but I know I don't want to do PE -- it'll either be banking or HF (L/S). Assuming I can manage to sway some partners and get them to vouch for me in HF recruiting from the banking gig (btw I plan on doing CVP/PJT out of school), would you guys rather have a seat at a top HF, or work your way to partner @ a top EB? Culture seems about the same honestly, banking obviously has the stability edge, I have no idea about comp, and there's a lot less stress with banking. What's everyone's take on this? I suppose I'm shunning myself from Tiger Global caliber funds by not being open to PE, but what kinds of HFs would I have access to from CVP/PJT?
It really depends. I think people overestimate their performance capabilities when they look at HF's. Because most people can't swing it at MM's, let alone kill it at a Tiger Global, Lone Pine. So from a comp perspective, I think the stability of a CVP could far eclipse that of a patchwork quilt resume of someone who struggled to hack it at HF's.
Obviously, if you are the exception to the rule and murder it in an HF, then there is basically no better industry to make a ton of money sans pro-sports. I just think that most people are delusional and will never reach these levels of HF comp, whereas in IB it's far more about surviving the hours and then LSD 7 figures becomes a very real possibility.
Hedge funds offer more upside at the tail end outcomes, but banking (not just those 2, but in general) absolutely offers greater comp from a median and risk adjusted basis as far as careers go. Reaching MD level and carving out a long term career as a banker isn’t necessarily easy per se, but it’s definitely easier to achieve than a partner or senior level role at a HF where you can consistently earn 1-2 million - there are simply vastly more spots available as a banker. Additionally, banking compensation at every level is much more stable with guaranteed increases/promotions at each step of the way. When it comes to HFs, your pay can swing wildly to the downside and there isn’t really a clear path for upwards trajectory past the mid level. You can be fired far more easily, oftentimes for reasons beyond your control. There is a huge element of luck inherent in a successful HF career that doesn’t really exist in banking, and that luck can turn in any given year. The competition for good seats is fierce and there are numerous perfectly competent people that couldn’t quite make it for one reason or another. Whereas in banking, if you have the requisite skill/competency and are willing to put in the work and lifestyle sacrifices (obviously easier said than done), there’s a high probability you will make MD. And I say all this as someone that works at a large HF and has done well thus far.
You should really only pursue the HF path if you truly enjoy the investing process - not just the idea of it, but the actual day to day work which is far less glamorous. In many ways, charging HF fees for fundamental investing in public markets is a declining industry (despite the banner year last year) that is falling out of favor with LPs on balance. If you are strictly focused on maximizing career earnings and value stability/certainty, investment banking (or even private equity) is generally a much better bet.
I have a very similar situation to the OP, and this was a super insightful answer. I think I speak for most guys in out situation, we have a passion for investing, but also see ourselves as dealmakers. The natural combo would be PE, but I'm also just not interested in PE haha. Also what kind/level of HF would a partner be able to consistently make at least $1-2mm? Also once you're a partner, would you consider that to be a stable seat -- sounds like it'd be hard to lose your job unless you royally fuck up right? Or AUM takes massive hit.
I'm probably going to take my EB FT offer, do my time as an analyst, and if I really like it I'll stay, if I don't, I'll leave to an HF. Now would I have a hard time recruiting into the top top HFs that seem to prefer PE associates? I could also stay until end of associate years, then go to H/S/W, and try to recruit for HFs from there I suppose.
The partner seat is stable, but there aren’t many and while the seat itself is stable, HFs are a lot less stable than an IB. So the chances of losing your job are very low (and there are a ton of contractual obligations that protect you), but there is still a chance the firm loses a lot of AUM or blows up. Remember, a HF starts at 0 every year. And every year you only get that performance fee if you can generate positive returns (and not just levered passive returns, although those still exist), and a down year can ruin everything (look at the number of funds that close, or even what citadel went through in the financial crisis).
edit: I see someone gave me MS saying this is inaccurate. I should add that I am a partner at a HF, so this is my experience (as far as stability and contracts).
CVP analyst here, I would say the framework I would use to think about this decision would be thinking what options / routes are you looking at long-run (even outside of high finance), how would you "score" your desire to be in each field based on the qualities of the job (ie level of responsibility, type of impact, team dynamics, industry, etc), and which bank will give you the highest likelihood of getting to your best options.
I would enter banking with the idea that these places are launchpads, you shouldn't be trying to say XYZ position is exactly what you're wanting out of school cause you have no idea. Instead, thinking of the qualities you like and where those can be found (ie corp dev, startup, high finance) may help drive your screen.
PJT would set you up better for the HF route in all honesty. CVP is a mixture of consulting and banking since our advisory engagements take a lot of our time so we have more of a pipeline to corp dev, startups, VC, GE, and MF PE. I personally haven't seen as many people go to HF's but it still does happen with good placements. PJT, on the other hand, has some solid mandates in the distressed and turnaround space that pair well into HF's. Also not to mention the deals there are much more transaction-focused.
Bit rambly but feel free to respond with any questions.
I haven't really heard of people going to W/H/S since if you're in banking what is the point lol.
My GF is eastern and so I get the pressure to get an MBA from the family but really there's only 4 reasons to get one: 1) to find a husband / wife 2) you wanna work in some dark ages PE / HF fund that requires it (most don't nowadays post-2008) 3) to network / start a company 4) to take an expensive holiday.
If you already work in banking option 1 makes sense, option 2 really isn't needed as most funds this day in age don't require an MBA, option 3 you can do by working for CV using your in-depth advisory connections for some sweet corp dev positions or just start one yourself (one of our clients is literally trying to snipe our analysts for corp dev), option 4 is just personal choice - is it worth a couple of hundred thousand dollars and years of your life to be an alcoholic and travel when you can just take time transitioning between roles or make a "startup".
If you can't tell I am very anti-MBA for people at EB's and BB's since you're already at the top. Beyond clout / prestige, I personally don't think they're useful so take my opinion with a grain of salt.
To answer your point on the distressed space, yes the main advantage of CVP would be it is more of a generalist program. We work on companies of all shapes and sizes that can give you more to talk about. However for the HF space, the distressed scene is poppin and having a stronger background at PJT may suit you if this is what you want.
The way I recommend thinking about it is how is each firm different? While they all seem the exact same - given they compete on the same exact deals - they compete in very different ways. Better understanding the type of responsibility you're given, the type of impact you have, the type of clients you work with, etc all can play into the story of your next step. You just have to understand what each firm does differently and can decide from there.
If you have any other questions, feel free to come off anon and I can PM you. I am writing these on the desk so not the most polished thing in the world.