Long term LO prospects vs MM HF
LO seats seem highly respected and coveted on this forum - the question is when taking a long term view (someone in their 20s today planning their career), how are these seats going to continue to be so attractive (and lucrative and secure) in the future?
It seems like MM HFs are in the ascendency and will be a better place to be in, in say 20 years. The death of AM and ER seems to be talked about to death (yet they continue to service in somewhat reduced and less attractive form). But the Wellingtons, Capital groups still seem like extremely attractive options (at least on this forum) - question is are those economics worsening (fee compression, private markets eating market share) for the big private players and is it a good idea to position for a long term career in this industry?
This is aside from individual preferences as I know the styles are very different (these have been discussed a lot on here)
I don’t think anybody is going to be able to give you an accurate guess here. There are too many variables - secular pressures, cyclical dynamics, technological advancements, Active vs Passive flows, Private vs Public flows. If i had to guess i would pick MMs being in a better position 20 years from now. They are more technologically advanced, are an alpha driven product and are constantly churning out underperforming PMs. LOs are still a fantastic place to be but i struggle to see how owning MCD/TDG/V/NKE/DE is a job worth paying somebody millions for with questionable real track record.
I do worry that if you are joining now you may not get those big LO paychecks 15-20 years down the line when you finally get the promotion. A lot of the ER MDs came out of school watching their MDs make $5-10M in the 90’s and 00’s and now that they got the nod they are making $1M.
Now for your own career I am not sure how much this dynamic matters as if you did MM for 20 years you would either be out of the industry long before 20 years, or insanely rich and burnt out at the end of it.
Aren’t you ultimately paying for performance vs. investment process? If an investor gets you 15%+ compounded over a long period of time well outperforming the selected / relevant index, do you really care how they got there? Understand there is a second layer of convo about risk-adjusted returns, but as a client, I care first and foremost about performance and if they do it by owning Apple through the various debates, I’ll be fine with them vs. some fancy investment process that gets you flat with the index. Obviously it’s easier to blow up in a concentrated strategy, but we are looking at things after the fact.
if they actually got the returns 'd agree with you
LOs dont outperform is the problem, esp not post fees.
Lol yeah show me the LOs making 15% annualized consistently over 20+ years
This is wrong. Even if “just owning AAPL” gets you to the 15% annualised return number, many people don’t want to pay a lot for that. People want market neutral returns as an alternative asset class to investing in boring equities. Just owning AAPL doesn’t diversify away from that risk.
WSO in a nutshell:
2017-2019: PE is heaven
2020-2021: Tiger/crossover HF is heaven
2022-2023: MM HF/LO is heaven
next year ????
Distressed/RX is heaven
All of the AM firms are growing their alternatives teams, personally know Wellington and Fidelity are trying to start a private credit platform and PIMCO is significantly growing their privates side as well so I think they will do fine in the long term
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Anybody know what the comp like for the semi-public entities like PIMCO, T. Rowe, Franklin, etc.
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