HF vs. MFPE out of UG

Potentially similar situation (incoming MFPE SA). Bump

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Depends on the specific fund, but for the most part If you're confident in your abilities to perform in the HF route, then go there. Otherwise, do PE, learn as much as you can, and get another badge on your resume before making the jump to a riskier role

I’ve gotten so many DMs about this, these are my thoughts. Made a thread about this, strongly believe MF PE programs have little relevance to public mkts, modeling aside (and 9x out of 10 the pod analyst is better / = lvl modeler as PE guy. PE guy great at slicing up a data room and making cool looking slides). The 3 years you spend spreading comps and doing stupid minutiae will not help you become a better l/s analyst…

As someone who did one of these programs, I regret it a lot. So I’d pick the HF, because if that’s your goal LT, you’ll spend your early years building a process, learning your coverage, finding your groove, which is so important when your young. That’s infinitely better than whatever you’ll learn in PE. Now the question is…what kind of HF? If it’s a smaller SM (I’m assuming you don’t have much experience anyway), there may not be much training, but that’s okay because maybe you’ll learn through osmosis. The platforms have training programs and, more importantly, will give you coverage / all the resources you could ever ask for…ask yourself among the guy who went to a platform, SM, or PE out of college, who will be the best analyst in 5 years (where pod / SM guy would’ve been an L/S analyst for 5 years, and PE guy would be one for 2-3 years)…it’s night and day, 9x out of 10 it’s 1. Pod, 2. SM, 3. PE, with a big gap between 1 and 2.

I just don’t see (assuming you actually want to have a career in L/S / HFs) why’d you’d ever pick PE over it. If you know that your goal is HF and you’re confident in your ability to be a good HF analyst, why would you not pick HF out of school? If it’s a platform or established fund, there a chance you never need to leave / if you want to (and you’re a good analyst or PM), it can open so many doors for you. If you want to do PE…obviously don’t pick the HF.

I did the PE —> tiger cub SM path and I promise you it’s not nearly as lucrative or stimulating or enjoyable as you think. Again, if I could do it all over again I would’ve just done PE —> Platform. Starting at a pod in the new year, enjoying my time on vacay until then.

Personally, I disagree with the above on almost all accounts and would do MF PE in a heartbeat due to training, brand recognition, and optionality. Caveat is that I’d rather pursue a MF PE career than a pod - there are exceptions, but PE has better compensation, stability, and skill development than HF. 

This has been discussed so many times on this forum.

Look at it this way, you will have a ~30 year career and currently have 2 options:

1 option will "set you back" 2 years before going to a HF (your current goal), but will keep a lot of doors open if you dont continue in HF industry / get fired / want to pivot (which a lot of people do)

2nd option will get you to your current goal 2 years quicker, but will significantly limit your options outside of the HF world. 

2 years in the grand scheme of things is pretty much nothing. I wish people would mention what exists are available post HF stint more on this forum (wish someone said that to me). Very limited and most people hope before that happens they made enough money to retire.

If you look at it rationally, there is very little upside to going to a HF 2 years earlier. You cannot extrapolate and say I will be good so wont leave / get fired. So many people that leave / get fired are exceptional, but the markets just dont care.

Maybe this is the "grass is always greener" perspective, but as someone that was hired by a L/S fund at the age of 22, I would advise doing P/E.  Your optionality is just infinitely greater and there is more security.  PE is a better business model. Its capital that is locked up for 7-10 years and marked quarterly or annually with discretion.  You also carry some risk to the specific fund manager - what if the HF is doing great for the last 5 years and suddenly has a terrible year (i.e. Melvin in 2021). 

You'll likely have 3-4 great funds to choose from coming out of PE recruiting. You might like it better than you do public markets after spending more time in the system. 

I'm in my mid 30s (and not far from late 30s).  My PE friends are really starting to see the effect of having some carry in multiple funds.  My PE friends in their mid 40s have meaningful carry in at least one fund and some carry in two funds.  They have $5M - $10M of annual income taxed at capital gains rates with high visibility indefinitely.  I would say that 70% of my hedge fund friends are out of the game, 10% have sub-par HF outcomes (i.e. will never get past analyst at small funds), 15% have careers that loosely mirror PE counterparts, and one to two are absurdly rich.  Its a distribution with a very fat left tail.

Finally, the golden age of single manager funds was probably 2006, Tiger Cubs peaked in 2021, and the multi-manager model feels very close to peaking right now. 

Its a real first world problem - congrats 

I tend to agree with the poster that MFPE largely has no relevant skills that would make you a better public markets investor for L/S. If you think about it, a PE investor has only made investment decisions after receiving 100% of all information whereas public market investors don't get that same benefit but still have to make investment decisions with 10% of the information that a PE investor would get. The raw modeling skills from PE may translate, but understanding how markets work and why a stock does or doesn't work is an entirely different process that is not developed in PE.

I also believe the mindset of "what do I do if this doesn't work out" is the antithesis of what makes a great HF investor. Most people who are successful in the HF have full confidence that they're going to succeed. This mindset doesn't have to carry to PE because if an investment starts going awry you had committed capital locked up and 5-10 years to fix it.

Optionality is overrated, if you're good then you'll make more money faster than any of your peers that went and did IB or PE first. If you're bad, go get an MBA. It's pretty simple to me. It's not often that you see people that did PE and then went to HF, flame out and then go back to PE. All the options that the other posters have listed are pretty accessible through an MBA.

0.5th world problem right here

I'm in a similar position as you, but I figured that once you are at a hedge fund you are instantly judged on performance. Maybe you get some extra slack if you're younger but to some extent performance is king. So for me I want to spend extra time working on my investing skills in a lower-stakes environment with more training infrastructure before I put myself in a do-or-die setting. Granted I'm more interested in LO which I think has more skillset overlap with PE but ya

People with more experience in the industry feel free to correct me if I'm wrong

Sidebar but I'm immensely jealous of the internship opportunities you had during undergrad. Two summers at HFs followed by MFPE rising senior summer.

Depends on the HF. If it is a platform like your internship at BAM, maybe best to stay in PE.