How hard is it to achieve financial freedom in HF industry?
Hi! How hard is it to achieve financial freedom in hedge fund(or private equity/venture capital, since I am mainly looking into buy-side careers.) Do ppl quit huge firms and start their own or sth like that? Or just simply staying in the large firms long enough and climb up the ladder will get you to financial freedom? Thanks.
Not sure what you are asking. How do you define financial freedom? And the difficult of achieving this will depend on how you define it and also how you want to interpret difficulty (is it once you have broken in? How hard it is to break in? Etc)
You are asking if it is possible to achieve financial freedom, in essentially the highest paying careers in the world…so yes it is…but it seems like I’m missing something in what you are asking (failure rate is high, breaking in is tough, etc).
Financial freedom is pretty much a product of your wealth, your income, and your expenditures. If the former two (and especially the first) can sustain the latter then you are free. That is to say you can be financially free in many corporate professions as long as you keep your expenses low and accumulate sufficient wealth. Obviously HFs come into this.
Your income in HFs can be high but it is more than possible for your wealth to be low and your expenditures high. So the answer to your question, as always with stupidly vague questions like this, is "it depends".
If I were you, I would focus most of your energy on the exhibit below than your question:
This matrix is great. From what I've read, "financial freedom" is some concept discussed online by the types that tell you to skip the $5 daily Starbucks so you can retire 2 years earlier. In their minds, work is a punishment you want to free yourself from asap.
Kinda hints to what quadrant OP belongs in.
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My vision of financial freedom has always been basically putting enough away that (assuming you're a good investor) you could manage your own assets and maybe a small amount of outside AUM for a fee and make mid-6 figures annually. So I'm guessing it's probably something that starts to be feasible 10-15 years into a public buy side career, at which point it may or may not be attractive based on your in-place comp and lifestyle wherever you are. So maybe like early 40s depending on how expensive your lifestyle is and how willing you are to take the risk of going it alone?
Curious how you (specifically) would manage your own assets after you've socked enough away?
Am noodling on this myself, but a lot of processes that still have some edge (confidently expect above market return over long run) are not doable outside an institutional framework (requires access to deals, legal, data, other infrastructure, etc.).
I'd take the opposite approach.... Strategies that are not scalable for institutions.
Buying more illiquid small companies, and special sits-type stuff that isn't actionable for funds of any reasonable size.
I say this in theory, but in reality it's wayy to early on in my career to tell you I can confidently perform well doing it at this point. Would have to get comfortable with that before I actually took the leap.
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