IB>HF for junior comp?

Know that it's been talked about before but was recently talking to a few people who graduated in '2021 or 2022, and was wondering about how comp seems to stack up between HF and IB? i've seen a few guys at EBs hit $200-$300k as AN1, and $300-450k at AN3/AS1,


Am starting to think that supposedly comparable HF options out of undergrad(not tiger cubs etc), are a little sad looking comp-wise. Juniors at the pods(p72/citadel), or SMs(select, DE shaw etc), are struggling to hit those comp levels, and that's before taking into account the fact that they may not get such bonuses like 30+% of the time.


I get that HF is probably more intellectually interesting and has less workload(time-wise), but it seems like the Risk/reward for an early HF career is rapidly deteriorating even for those who care about investing somewhat.  At this point, might as well milk IB and invest on your own


Was wondering if you guys had any opinions.

 

The HFs you name (top funds) pay closer to $300-350k all in first year (base, bonus, signing). Usually guaranteed (or with little volatility as the junior comp is less directly PnL tied). Overall HFs are still risky and the expected comp shouldn’t be looking at outliers, but you specifically called out some of the higher paying funds. 

 

You can make the same argument for PE as well where the EBs pay more at the junior level than your MF PE. I personally think about it on a risk-adjusted basis, i.e. am I getting comped appropriately for the risk? I agree your P72’s and other MMs likely underpay with substantial risk since you’re not even guaranteed a seat for Year 2 out of college, and not many places would want to hire you; that’s why nearly every single person I know with a P72 offer turned it down for IB. That being said, HFs do offer the ability to make more at a younger age, albeit with the potential to be unemployed at any time. I’d like to think hedge funds are cognizant of the salaries on the sell-side, and they’re willing to pay out in good years, but that’s not always the case. Point being, the HFs you want to be at will pay you so you wouldn’t think about what it’s like to be living a straighforward life in IB. As a reference point, I joined a SM fund out of undergrad and was comped more than Centerview despite it being a down year for the fund.

 

yeah heard that the p72 guys are underpaid at least for their "academy", but not really sure if theres actual truth, esp after thry get on a pod. mind elaborating on what you've heard?

 

Couple points here and caveat by saying I’m coming from a SM lens. First, the academy itself doesn’t guarantee you’re placed into a pod. You could spend a year doing everything “right” and if you’re not matched with a PM, your time is up and you’re already searching for a new job in your 1st year while any future employer implicitly knows you didn’t make it through the academy. I’m not exactly sure what % of new grads don’t get placed, but it’s a material number from what I’ve heard. Second, the compensation to take on this risk is ~$175k - $200k all-in. Of course, that’s a sizable amount of money for anyone at any age, but risk-adjusted versus EBs and BBs comping $200k - $250k? Seems like a bit of a mismatch, especially when you have a broader exit set out of IB. Lastly, my experience has been a lot of your single manager funds won’t even bother looking at P72 analysts for hire because of how they’re taught. If you’re a fundamental investor with multi-year holding periods, then you’d rather hire a “clean slate” from PE or IB as opposed to someone who’s taught to overanalyze earnings and think on a quarterly basis. There will be pushback from some people that say “1 year of MM/P72 Academy means nothing, and it’s more relevant learning than IB,” but I find the only ones touting that aren’t the ones in the drivers’ seat. Of course, you can make a career and money with whatever investing you want, but I think many people go into P72 out of college for the sake of being at a hedge fund and don’t even think 2+ years out or what the job actually entails (ironically).

 

How did you go about going straight to the HF world post undergrad? Currently at a MM rn that doesn’t hire undergrads out of college. Wondering how I should go about recruiting.

 
Most Helpful

Stock pitch competitions and networking, which aren’t mutually exclusive. I did your stereotypical competitions on campus along with a couple larger national ones and built up a decent network. I also did a good chunk of cold emailing for funds I had come across while looking at different stocks. I would say the majority of people told me to do GS/MS -> MF PE -> Reach Back Out, but I had some calls where it started off as just the PM/Analyst doing the call to be nice and then they slowly became interested as the conversation progressed. Can’t count the number of times people initially told me they had no interest in hiring out of undergrad and then 2 weeks later, I’m in a more formal interview process with the investment team. To summarize, just reach out to people and have some ideas prepared.

 

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