HFs are less snobbish than PEs
Coming from a non-target, non-BB/EB background, I find this to be generally/directionally true. Got interviews at some ~5bn L/S fund and very big LO names. However, almost no big PE shops would take a look at my resume or give me a 1st round interview. Fwiw, I can nail a 3 statement _ LBO model.
Have been thinking about why and the conclusion is: prestige really matters for PEs, whether it's your school or company's brand name because coming from those, PEs assume you are significantly better prepared, which may or may not be true. For HFs, it's more about raw intellectual, your interest/passion, and how you think about stuff.
I saved this priceless quote just for this occasion:
Best PM I know did his UG at a Big Ten school, hustled his way into SS ER, got to the buyside, and now makes 8 figures running a market neutral pod. I've never worked in PE but HF analyst/PM is the most meritocratic job on Wall Street IMO.
HF guys love to pump up their "raw intellectual horsepower" and lack of social skills but are really just butthurt that they don't have long-term locked-up capital and have to mark their assets to market rather than their own models. Note that every successful HF tries to bring PE-like features into their master fund (side pockets, privates etc) but no PE fund starts offering investors the ability to redeem at NAV.
This is EXACTLY why hedge funds are seen as more challenging and intellectually stimulating than private equity. You have less resources & information in the public domain to essentially evaluate the same sort of investments across equally strict return hurdles while marking your ideas to market on a daily basis. Of course both of us are subjectively pumping our own tires but there's a reason you've seen PE/VC funds try to trade public equities and fail substantially, while the likes of Tiger/D1 have had their public books crumble but their privates mysteriously stay afloat.
No one is "butt-hurt" their capital isn't under LT lock-up - I think it's fairly common knowledge after the past 6 months watching Klarna take an 85% mark-down that most private portfolios are on the brink of substantial losses and most allocators will be re-visiting their approach to guaranteeing capital preservation to a place like Tiger which can lose ~60% of their $ but can't redeem for 3 years.
Dude why play on hard mode? It's about making some cash and getting out, not proving whose dick is bigger.
PE/VC has benefitted massively by sailing with hurricane winds behind them. This cycle is going to show some nasty realities about the business model and a lot of allocators misunderstood the risks that they were taking with illiquid securities marked at a premium to liquid ones now.
It's not like PE is levering the highest quality of companies. So you have that combined with increasing debt costs and allocators who may not be able to meet their commitments because of issues elsewhere in their portfolio.
"Lack of social skills"
Lmao in PE you get cussed out by your MD for even speaking to the management team while in HF you're expected to build relationships with management teams as a junior
That are a decent amount people that work as HF PMs, making a lot of money, that went to state schools, or as some on here would say, "non targets"... or otherwise are from "non traditional" backgrounds.
They fly under the radar. They are really sharp. Really likable. Very down to earth. Work hard. They aren't assholes. There are more of these folks in the HF industry than PE in my experience (as a % of total workforce, not absolute numbers).
Love these types of people, tbh I aspire to be like these types of people.
Pe is banking 2.0, culturally speaking.
The people running private equity today were innovators and original thinkers in their time. The lbo? A new concept and market to the milken lineage; they weren’t good at doing what they were told but had to price risk no one had priced before. Pe personalities today don’t seem to match the legendary origin of this industry
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Being a HF PM is similar to being a pro athelete. People can see your performance on a day-to-day basis, and if you underperform for a medium length of time you get cut. If you perform well over that same time period, you get paid. The main advantage of having a blue-blood pedigree as a trader is the ease of getting your first seat. People are more likely to extend credit to a guy who went to the top schools, worked in the top funds, and has all the right social connections. However, if you don't perform, the market doesn't care you're getting cut all the same. On the other hand, performance is much harder to attribute to single individuals in PE. When output is hard to measure, people hire on the basis of inputs. At the analyst level, the hiring practices aren't that different between PE and HF since analyst performance is much harder to track than PM performance. Unfortunately as an analyst you have pretty much the same termination risk as the PM with none of the upside.