How can HF analysts afford families (NYC)?
Looking at the PE thread on expenses and lifestyle it seems almost impossible to plan a family in NYC working at a HF unless you are a top PM. If you are a 30+ year analyst at an MM/SM making mid high 6 figures a year (aka not at tiger/lone pine) with insane volatility of earnings (zero or nominal bonus years) and the chances of getting canned every year, fund shutting down how do you get comfortable with committing to kids/tuition/mortgage given the high cost of living? Vs a PE/IB VP making similar comp with more visibility in career trajectory? Even if I made a lot 1 year (say $2-3mm) that could go to zero the next and you aren’t building a mortgage/home equity on 1 year peak earnings. How do you commit to years of private tuition if you might have to live off savings for 1-2 years if your team is laid off?
do people just defer families in the industry or find a partner with a steady job (doctor Corp dev etc) while they swing for the fences? Or they only do if after getting a massive guarantee/bonus ($5-10 mm) that de risks their career after?
(Asking because I’m one of these analysts unclear if he think about starting a family vs move out of NYC and find a job that is stable with reasonable COL and no need for private school tuition)
In my experience, I think >50% of analysts in the industry come from minimally wealthy families - in that parents funded their uni tuition, apartment in Manhattan, and/or more. But yeah, for the rest of us, you def won't have much luxury if you want a family. Only going to live without thinking too much about money by the late-30s to mid-40s, if you're not fired. And yep, PE is a "better" career path in this sense given the higher visibility. IMO.
My solution has been essentially to just live off my base. My wife works too so between us we have a decent enough income stream that can cover our expenses while our nest egg compounds.
Others i work with are more aggressive but I essentially am always assuming my HF career could end next year. Once those fixed expenses get ratcheted up (Mortgage + Kids/Private School) its hard to go back. you dont want to be in a situation where you have to move or take your kids out of school if you get fired.
Even if HFs go away next year i can probably get a corporate job in the $200-300k range + my wifes salary so we live like that has already happened. One day we will spend more money once we have a lot more liquid $
Makes sense. Aren’t base salaries like $200k though? Aka $120k after tax which seems really tough to support a family w/2-3 kids on much less a mortgage or school
Yes also curious to learn more here - base typically caps out at $200k so how are you living off of $120k after tax with private tuition / mtge / other expenses in NYC?
What corporate jobs do ex HF guys target?
Usually IR but can sometimes get addl responsibility leading treasury, Corp dev Or FPA
You are basically saying you will never choose to have a spouse/family unless you can achieve a certain standard of living. Very typical thinking when you have less than 5 yoe as you assume wife/kids will adapt and fit to your lifestyle. As you get older you will see there is more than 1 permutation to life. Some people commute, some live in a smaller place, some send their kids to good public schools and have tutors to do the rest. So on…
Also not sure one should panic on how typical PE vp lives their life. You are talking about people who have minimal control on their schedule/lifestyle for the first 8-10 years after graduating.
Hardest part is finding a good spouse who will always support you and raising your kids your way. Beyond that over time will figure it all out.
Any advice on the spouse part?? lol
some people get $400-500k in base.
live off that and save 100% of your bonus.
Very low % of analysts get that, even lower % if 35 y/o
There are top PMs with $200k base. HFs tend to be very very bonus weighted
Next thread: How Can Billionaires Afford Families (NYC)?
What you're describing is an upper class lifestyle in one of the highest COL areas of the world. As a relatively junior investment professional that's not a guarantee in this industry, or even in PE. If you flame out as an Associate/SA and don't make partner in PE the 4br co-op on Park Ave and two tuitions at Dalton won't be paid for either
The irony is that most people working in L/S HFs don't have this mentality which is part of what it takes to be successful in these roles.
Interested. Curious when people pulled the trigger on the home and at what liquid net worth, it’s worth taking the risk.
Net liquid assets > purchase price (gross, not equity), ideally more like 2x+
Seems excessive no? You basically can’t afford a $2M home until you have $4M liquid which is like needing to make $10M+ on a gross basis which can take 10+ years?
Your >2x rule actually is how I looked at my home purchase. If I lost my job and was forced into early retirement, I wanted to have enough assets to (1) pay off my mortgage so that I could lower my cost of ownership to just property taxes and maintenance; and (2) after paying off the house, have enough assets to generate, on a risk-free basis, enough income -- in combo with my spouse's income -- to live a stepped-down but reasonable version of our current lives. The last thing I want to do is to be forced to sell our house and uproot my family. But that's just me. I grew up poor so I place a lot of emphasis on financial conservatism and providing my children with a stable home environment to grow up in. I have found that a lot of my friends in the industry with similar backgrounds think similarly to this -- i.e., we feel fortunate to be in a job that pays well but we also realize that this can be over in a snap of a finger.
I’m on a higher base than most, but my wife and I basically waited until we had enough cash to buy a place and we put 50% down and left the rest in the market. The other thing is that many places defer for 2-3 years so even if you have terrible spending habits, if you have a great year you’ll still have payouts for a couple years.
Finally, many places actually can cover bonuses on 0% return, especially for the junior people. MMs can be more ruthless, but that’s not how all funds work.
Am thoroughly enjoying these kinds of threads.
The cat is finally being let out of the bag… as others have alluded to, >50% of the guys that are “killing it” i.e. living in nyc, have kids etc have family backing some aspect of it.
I can think of two guys genuinely killing it in my network (3mm+ bonuses in 2021) that actually fund their own lifestyles completely (and maybe take of a poor family member) along with family. One guy is still renting and refuses to buy for the reasons already outlined. The other guy is about to buy but mostly because his spouse has serious family money to fall back on.
The rest of us are mere mortals, intellectually curious and semi prestige whores that probably range on 350-850k depending on the year (200-250k base) and live “regular” upper middle class lifestyle (1.5mm in nice town, two cars, two vacations).
That's it. Won't complain about being in that range either.
Will say this thread is amazing. Almost nobody else in my life can understand the financial decision behind buying/settling down. As mentioned even other HF analysts are in different circumstances, some doing amazing, some not well, some have family money.
I like the 2x gross price rule, seems fair to me if you like to sleep at night (hard enough in this career).
We're all exceptionally lucky to be paid multiples of US AGI for staring at computers and picking lines on charts.
anyone can answer/share thoughts here..
1) how many years of buyside experience gets you to $200k base at a HF? buyside base salaries for analysts are very low $120-150k typically (based on online job postings)
2) let’s say you have all the options in the world career-wise (HF/LO/CLO/bank desk etc) which one offers the best risk adjusted choice?
…..if you’re not marrying rich, have family money or a high-rolling spouse - HF career seems like a very risky choice for a mid-career professional (4-6+ yrs of competitive experience) without being forced to restart at a much lower compensation band with more/if not the same hours.. which might not feel worth it.
3) is rising up the ranks on the sell-side at a bank/desk/WM offer better higher paying risk-adjusted career in credit? salaries are pretty high there for mid-level people - $200k+
It’s funny to see how ppls perceptions of killing it change over time. Nyc is not a good place for a family unless you are really wealthy.
What would the average hedge fund analyst make per year, base plus bonus? I am not talking about the tiger/lone pine guys either, just your normal everyday NYC-based hedge fund analyst.
All-in like $500-1M for Senior Analysts (5+ years) in years with a bonus pool assuming a SM with decent scale $500-700M+ or MM assuming fund economics (IP/AUM) are decent.
Which, for broader context, probably translates to $500-600K avg inclusive of an inevitable 0 bonus yr every few yrs
How much of that $500-1M is base salary?
This is exactly why HF is not a good career choice and pays high upside.
A reasonable question. My own experience:
I started a family with pretty close to zero net worth (b school loans) and moved to the buy side shortly thereafter. Oh and my spouse makes like zero money but also works full time, quite the combination given incremental childcare/school costs.
On top of that, the first fund I moved to imploded - it didn't shut down, and I wasn't let go, but came close. But despite all that I am incredibly thankful I made my way to a L/S seat because of what happened since then. The 2-3 years of training at that first fund was enough for me to figure out how to make money in my space and find a senior analyst gig where I'd get a % of P&L payout. That ended up being my ticket out of having economic concerns because of some strong performance in the years since.
In terms of making it work in NYC vs elsewhere, it's pretty reasonable to live in the city with kids on say a mid-6 figure average income. But obviously we weren't plunking down $50-60k/yr for each kid for private school tuition in my first few years in the HF world, and even now that we can afford it we're not rushing out to do it. We actually really like the school our older kid's in and it's free, so our younger one will go there too. NYC works fine for all sorts of budgets, you just have to be flexible. Bottom line is you just manage your finances conservatively as you build up your personal balance sheet to the point where the income your assets are throwing off hits exit velocity.
Anyway if you are a hedge fund analyst you probably already know all this and just wanted people to tell you you're not crazy for thinking this. You're not crazy, high volatility income requires conservative financial management.
Isn't that the appeal of the HF world? That massive upside, and eat what you kill lifestyle?
As somebody in roughly this situation for most of my 30s:
1) don't live in NYC. Move out to a nice suburb. Savings are twofold: lower housing costs and you can send your kids to public school. Best if your fund is located out there too
2) have a spouse with a stable income. Mine makes 225 a year or so, enough to fund most of our lifestyle
3) don't live a baller lifestyle - I fly coach, live in a house that's in the 1-2MM range, kids in public school. From the outside, I live the lifestyle of a moderately successful doctor or lawyer while making 3X as much. This way the savings accumulate faster and you wouldn't have to cut back if you were forced to take a big pay cut
100% similar sitation
Solid advice here. People often fall in love with the potential lifestyle that comes with the income. Know a few people who live modestly with a high salary range.
This is ridiculous imo. What's the point of reaching a pinnacle position in your career trajectory with high annual earnings if you aren't going to enjoy the fruits of your labor? I understand if youre saving for retirement or kids or something, but if you're debt free making close to 1m household income, and don't plan on leaving the industry, then enjoy it. PMs get paid like athletes now and I've seen them saving and spending to live that life they earned.
You don't get rich by saving, you get rich by earning more.
Spending money =/= living life to its fullest
When you stop becoming materialistic and live within your means you'll understand this.
You get rich by earning a lot and saving most of it. My household income is in the 1.5 million range on average, and we spend 270/yr (taxes 600). That's 630k a year post tax in savings for retirement and my kids' inheritance or in case I lose my job and have to take another earning half as much. We're worth about 5.5 mill (3 liquid) in our early 40s and I'm pretty close to being able to simply hang my keyboard up if I wanted to.
Meanwhile I see a bunch of short-sighted people making more than I do, spending almost all of it, with no savings to speak of outside of their home equity. Hedge funds go bust constantly, PMs lose their jobs and good luck finding another job paying anywhere close to that in public markets as a 40 year-old.
This is why I'm single
I mean...u can probably afford to have a family bro
You answered it yourself. It doesn’t work. Earnings vola and turnover are the most underrated characteristics of the industry.
If you get to $2-3mm in liquid net worth by 35 (around the time you'd have your first kid in all likelihood) a lot of things can work themselves out because you'll have cushion to finance mortgage payments with your passive income. $2-3mm is down the fairway if you join a $100mm+/IP fund and do okay for 5 years. That's ignoring prior savings even, which most people joining the HF industry in their late 20's / early 30's will have a decent chunk of.
Life is very different once you hit certain levels of liquid net worth I guess. Having 5mil is probably enough to live a decent lifestyle without working and without actually taking any risks. IBKR gives 4.68% interest on cash accounts right now, that's 238k income a year and since it's a long term capital gain, taxes are very low too. It's just crazy, and this is the most risk free strategy to make money, I think with a liquid quant strategy it will be probably very easy to hit 10% a year, considering the low AUM is not going to impact markets in any way. There are some tickers out there with very strong financials, they just trade between cycles, lol, CCJ for example.
Man, I really have to reach that kind of net worth, my ADHD makes things very hard for me, getting things done is a battle, the only place where I could focus for hours and not get bored is markets. But I need money for markets, I told my mom to buy TSLA back in 2018 but she didn't(she was very right not to listen to a teenager kiddo), if she had listened me, I'd be surfing in Costa Rica right now instead of typing these words, lol.
I don't think interest income is actually taxed as long term capital gains although it avoids payroll tax. The more serious problem is the 4.68% is close to zero real (inflation adjusted) return and post tax is somewhat negative. Obviously this amount of net worth gives quite a bit of runaway to survive several bad years but I don't think it is nearly enough to retire at that withdrawal rate.
Performant analysts in a good SM or MM team make way more than mid/high 6 figures
from poker
50k+ per month
This post is rigged! “How can HF analysts afford…..?” -really? You might as well ask “how can the Fortune top 20 guys afford…..?”
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