Longevity of Hedge fund career: how long do people last in this industry?

For someone who makes it into a Hedge fund analyst job (any strategy) either out of undergrad or from IB/PE or post-MBA, how long do people last typically in the industry? Do people have 40 year careers in this typically (become PM by the end, either at same firm or another firm)? What if you're not good enough to make PM eventually--then what happens? Do people typically not have 40 year careers in a HF capacity?

 

Can't generalize across strategies.

No one has a 40 year career - the industry barely existed 40 years ago.

You can have a long-stable career with more P/E like, less liquid, and less competitive strategies (credit, mortgages, etc).

Public markets is a crap shoot - a lot will depend on your luck in finding good PMs/jobs. M_As_In_Mancy this isn't rocket science, no one is leaving b/c they're too dumb , though some might decide they're not interested enough to work as hard as it takes. A bunch of people with top pedigrees joined Blue Ridge, Eton Park, Tourbillon, bla bla bla take your pick just in time for the "prestige" funds to blow up and leave them jobless.

 
Most Helpful

Avg tenure at multi-mgr (non-survivorship adjusted): 2-4y [the real average for analysts is closer to 1-2y]

To the person above who suggested sub 5y is indicative of lack of intellectual chops or motivation - you're way off mark. PM (and fund) performance are arguably far more crucial than a jr employee's performance. And given the tight drawdown limits at such funds, intellectual rigor from a jr employee will almost never be a determining factor. The interview process at such funds are both extensive and challenging - you can be confident that most people who have a seat at the big funds possess the intellectual rigor and work ethic.

Will also say this, it is embarrassingly common for an analyst to be stopped out less than a year after joining a multi-mgr. There's no love loss at these funds, the entire team gets canned. Less common at single mgr, but it also still happens (i.e founder decides to turn fund into a family office, fires the analysts hired 3 months ago).

The buyside isn't the panacea for wealth that it once supposedly was. If you're still walking this path, you have to be partly delusional, partly confident, while maintaining a healthy dose of humility fortified from accumulating battle scars. And most definitely, one has to have a love for markets/ investing. To you, the 'average tenure' is largely irrelevant, because deep inside you're convinced you're an outlier among outliers. You truly have to believe you're the next George Soros/ Warren Buffett. That is, until the market gets you...

 
Macro Arbitrage:
And most definitely, one has to have a love for markets/ investing. To you, the 'average tenure' is largely irrelevant, because deep inside you're convinced you're an outlier among outliers. You truly have to believe you're the next George Soros/ Warren Buffett. That is, until the market gets you...

This...this right here is everything in HF/Investing and capital markets in general.

 

People might get annoyed with me saying this, but I think working as a programmer at one of the big quant funds (citadel or two sigma) is the best route to a lengthy career. Its really not hard to make 500k at citadel as a programmer, and if you study for 6 months for the interview, youre basically guaranteed to pass. You probably wont end up making 7 figures, but youll have great income with good outside career options. The traditional path as an analyst is more difficult and honestly has less expected value.

 

You probably need to set expectations of "not that hard." The average programmer at Citadel doesn't have a longevity of more than 3 years and the overwhelming majority don't make $500k. If you subset it to only quant programmers in the front office in an alpha generating role, you have a very small number of people, most with substantial experience, and they still don't have median tenures >3 years. Most of those people have advanced degrees as well and aren't coming out of undergrad.

 

Agreed.

To put it into perspective, something like 40% RenTech's quants have one or more PHDs in advanced degrees such as Physics, Math, Statistics, Comp Sci, Various Engineering subsets, etc.

This isn't a "how does a $10 increase in XYZ impact the financial statements" level of prep (which I'm not talking down to at all.... but you definitely need some perspective).

 
Controversial

Not sure what typical is, probably on the shorter end.

But I do think it's the wrong industry to be asking that question. Hedge fund investing is unique in that there is no need for someone who is only good/decent. The people/firms who are the very best usually have highly scalable strategies, and all the money goes to them. It's the reason Carl Icahn can run $20b and many smart guys I know can't raise $10m.

This is different from every industry I can think of. At any other job, if you're mediocre you are still adding some value. I can hire the best lawyer for $1,000/hr or a decent one for $500/hr. That's because the best guy only has 24 hours in a day, which makes room for the decent guy to come in and take some business at a lower fee.

But if I have $100m to give to a hedge fund, the very best fund has room for me, so I have no need for the fund that's only decent. Either I go with the very best or maybe I decide I don't like fees and I go with Vanguard. This is why passive has grown while most of the HF industry (except the very best) have struggled to stay open in recent years. I think the barbell distribution will continue to take shape.

So due to scalability, only the best firms stick around. Now how does this relate to your question. Well, the same concept trickles down to the people working at the firms. If you are a top PM, you can probably manage $10b as easily as you can manage $1b. Not always the case, but often enough. So the firm can push more assets your way and doesn't have any need for a decent performer.

Thus anyone planning to go into investing, especially liquid investing, should only plan on a long career if they plan to be an extreme outperformer. It's by definition a bad proposition for most people, and a good proposition only for someone who feels this irrepressible itch that this is the only field for them. That person also probably feels they will be an extreme outperformer. A mentality of "how long is the typical career" is a very different mentality from that.

This is less true for illiquid investing where the illiquid market will give partial rewards to those who do the work to acquire information, relationships, etc. For example a local RE investor can do alright just by virtue of elbow grease because his market is illiquid. But at a HF this doesn't apply.

 

In general the more small and illiquid the companies you invest in, the less scalable a strategy is. So the classic scalability problem is the guy who’s got a great micro cap strategy with killer returns on a few companies but can’t manage $1B because he’d need 40 companies to put that money to work and his strategy is designed to find 5-10 opportunities at a time.

 

Generally you have the following stages:

1) 3-6 months: are you able to deliver the quality of work at the speed required for your PM. If you're coming from a standard 2 year IB program, it's assumed you can do this and there should be no surprises. If you can't deliver error free work you will be shown the door.

2) 1-2 years: you understand how your PM works and you produce error free work that meets exactly what your PM wants. You can be relied upon to deliver what the PM wants.

3) 2-5 years: you start to develop your own ideas and your PM listens to your ideas and opinions on his ideas. If you can't do this you will either get shown the door because you don't add much value to idea generation or you leave on your own as comp doesn't increase.

4) 5-10 years: you start to get direct linkage to P&L and potential comp increases substantially. At this stage you are like a PM and you will be judged on your ideas.

I would say most guys crash out at stage 3 as they can't generate differentiated ideas. There is no room to be a career model monkey in the HF world. IF you can't generate ideas you exit the business.

 
Funniest

This is funny because there is no chance that most PMs last >5 years at a MM. Sure there are some outliers that build 15 year careers there but those are the exception rather than the norm. Here's the typical timeline for an analyst

  1. 0-3 months: Super excited to be working at one of the big brand name MM shops. Believe everything your PM says is gold. Work very hard to get up to speed with research, trading process. Meet other analysts/PMs in similar styles or coverage groups at the firm. Everyone is super smart and nice - this is the cream of the crop after all.

  2. 3-6 months: Get access to teams realized performance. Realize that it's not as good as you thought. Talk to other analysts/ PMs at MM and realize that most people are struggling to make money and there are 1-2 teams in your related asset class/ coverage group that consistently make money. You are not on one of them.

  3. 6-9 months: After working hard for the first 6 months, your PM gives you some risk to play with. You start trading a small book and make a little money.

  4. 9-12 months: Your team ends the year flat and you learn that your bonus this year will be 0. Unfortunately, at MM if your team makes no money, there is no money to be paid out at the end of the year. Your PM tells you that he is has a great feeling about next year. You agree and dream of your 500k bonus next year.

  5. 12-15 months: You start noticing people disappearing around you. Your friend who's desk you'd always stop by on the way to the kitchen now isn't there. There's another person sitting there. You could have sworn he had always been sitting there, but don't rule out the fact that you might be going crazy.

  6. 15-18 months: The year has started off good! Your team is on pace to make money this year and your tiny book is also doing well. You start calculating in your head - if we make 20mm and get 15% and there are 4 people on the team then if my PM is generous I might take home..... Only 9 months on the year left to go but you see sunshine around the corner

  7. 18-21 months: Things have taken a turn for the worse. The book was not positioned correctly for some external event, high volatility period and the team is now bleeding money. Risk is scaled back and the team is trying to weather the drawdown.

  8. 21-24 months: One day you come in and your PM isn't at his desk. That's weird, you think, he's usually always here by 9. At 10 you get a call from HR letting you know that your PM has been let go and they are trying to find another seat for you at the firm.

  9. 24 months: You are jobless and bonusless

 

Sounds correct for a MM. I only have experience working at a SM so my comment above was aimed more at that side of things. While I saw a lot of turnover at the junior level at my SM I also saw a number of guys build solid 10+ year careers and make a lot of money along the way. I think the MM path only really makes sense for guys who can play the quarter-to-quarter game well and are comfortable with that kind of career volatility. I used to have breakfast regularly with a small group (1 guy from Baupost, 1 guy from Michael Dell's family office, a girl from GSO and a guy from York) and none of us had any desire to go down the MM route despite the rumors of massive payouts for the top performers there.

 

Ha! This is gold and not inaccurate.

I have spoken to PMs that have lasted >5yrs. Generally they run the biggest books for their sector. I'd love to see a similar write up for quants.

Generally, even for the groups with longevity you're looking at 2-3% PnL on notional. Equity teams also tend to have larger team sizes. But yeah, its hard ask and generally I don't understand why people struggle so hard to get into an elite university, recruit for top IBs, only then to jump into this hellfire.

Btw, one differentiation is that there are platforms that don't have the same risk aversion.

 
Analyst 3+ in HF - Other:
This is funny because there is no chance that most PMs last >5 years at a MM. Sure there are some outliers that build 15 year careers there but those are the exception rather than the norm. Here's the typical timeline for an analyst
  1. 0-3 months: Super excited to be working at one of the big brand name MM shops. Believe everything your PM says is gold. Work very hard to get up to speed with research, trading process. Meet other analysts/PMs in similar styles or coverage groups at the firm. Everyone is super smart and nice - this is the cream of the crop after all.

  2. 3-6 months: Get access to teams realized performance. Realize that it's not as good as you thought. Talk to other analysts/ PMs at MM and realize that most people are struggling to make money and there are 1-2 teams in your related asset class/ coverage group that consistently make money. You are not on one of them.

  3. 6-9 months: After working hard for the first 6 months, your PM gives you some risk to play with. You start trading a small book and make a little money.

  4. 9-12 months: Your team ends the year flat and you learn that your bonus this year will be 0. Unfortunately, at MM if your team makes no money, there is no money to be paid out at the end of the year. Your PM tells you that he is has a great feeling about next year. You agree and dream of your 500k bonus next year.

  5. 12-15 months: You start noticing people disappearing around you. Your friend who's desk you'd always stop by on the way to the kitchen now isn't there. There's another person sitting there. You could have sworn he had always been sitting there, but don't rule out the fact that you might be going crazy.

  6. 15-18 months: The year has started off good! Your team is on pace to make money this year and your tiny book is also doing well. You start calculating in your head - if we make 20mm and get 15% and there are 4 people on the team then if my PM is generous I might take home..... Only 9 months on the year left to go but you see sunshine around the corner

  7. 18-21 months: Things have taken a turn for the worse. The book was not positioned correctly for some external event, high volatility period and the team is now bleeding money. Risk is scaled back and the team is trying to weather the drawdown.

  8. 21-24 months: One day you come in and your PM isn't at his desk. That's weird, you think, he's usually always here by 9. At 10 you get a call from HR letting you know that your PM has been let go and they are trying to find another seat for you at the firm.

  9. 24 months: You are jobless and bonusless

lmao this is frighteningly accurate. But to be clear, you can make it through all 24 months in about 6.

 

Generally I think people last longer if they don't cry at work.

I am Holly R. Malin and I am working with a Custom Leather Jackets retailer which is known as The Leather Makers. It is a premium brand that provides Custom Leather Jackets at the reasonable price of market.
 

Currently working at a HF and I can only imagine what would happen if even one of our interns were unleashed into a non-finance world corporate job. So I wouldn't worry about how long your HF career would be. I nearly jumped ship to a job in an industry I spent some time covering and got a raise in the process.

Overwhelming grasp of the obvious.
 

"If you are a top PM, you can probably manage $10b as easily as you can manage $1b. Not always the case, but often enough. So the firm can push more assets your way and doesn't have any need for a decent performer."

managing 10bn is definitely not often as easy as 1bn, and performance on absolute basis almost always suffers. i don't think superstar theory so neatly applies to this industry

 

“According to the NFL Players Association the average career length is about 3.3 years. The NFL claims that the average career is about 6 years (for players who make a club's opening day roster in their rookie season). Players with at least one Pro Bowl appearance usually have the longest career of all NFL players.” • NFL: average career length | Statista

So not very long...

 

I feel like most people are employable in some analyst capacity until they are in their early 30s. If you have not made the leap to managing money by then, your career is going nowhere fast. Most of my friends were actually not able to make the leap. But by virtue of being in a high-paying finance job for 10+ years, they were able to exit the industry with a decent amount of savings. Now, fast forward another five years, most of them are still managing their savings on a full-time basis. It's certainly not for everyone.

 

Not sure why you're getting MS but you're 100% right. I would say early to mid 30's and you better be a PM or find something else to do.

You see a lot of senior analysts but they get kicked around from shop to shop until finally they get sick of the rat race and do something totally different (buddy of mine at a different Tiger cub now starting a restaurant).

They're also rarely making big $ as PMs will pay you the minimum so you don't leave, almost all the money accrues to the top, unlike for PE/IBD where you see decently high paychecks for junior MDs and even directors and VPs.

 

What else do ex-senior analysts who don't move up to PM go on to do, if they still want to stay in the industry? is moving to PE an option?

 
SanityCheck:
Not sure why you're getting MS but you're 100% right. I would say early to mid 30's and you better be a PM or find something else to do.

You see a lot of senior analysts but they get kicked around from shop to shop until finally they get sick of the rat race and do something totally different (buddy of mine at a different Tiger cub now starting a restaurant).

They're also rarely making big $ as PMs will pay you the minimum so you don't leave, almost all the money accrues to the top, unlike for PE/IBD where you see decently high paychecks for junior MDs and even directors and VPs.

I will agree to disagree here. There are lots of senior analysts around who are pretty good. Some have run risk and were not any good at it/unlucky. They either got canned or moved back to their analyst role. No shame in that at all. They have realized they won’t be PM again or ever and don’t want to take that PnL risk and pressure. Totally cool.

After all IT’S JUST A JOB. They are making at least mid six figures living and working in a great city, have less stress and can go on about their lives. I’ve even had guys who are PMs (used to be analysts) kind of wanting to go back to analyst life. Diving into companies and capital structures or whatever without having to wake up to manage the book in case something is blowing up and being able to enjoy their vacations. Because once you manage risk, it’s literally with you. All. The. Time. And it’s on you to make money/not lose it. And there is just so much that is out of your control and that you can’t hedge or whatever.

I posted in another thread about people at banks (esp on S&T side) voluntarily not chasing MD status and even refusing it as long as they got paid well. Same principle. Smaller target on your back. You are a trusted commodity, making (relative to the average Joe) tons of money and can afford a nice life.

Not a trade for everyone. But a legit trade and one that’s not necessarily reflective of “career progression” or whatever.

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

I've been in the industry for the last 6 years, worked at multiple of the largest multistrat funds. I've probably interacted closely with over 30 PMs over my career. Some stats:

  • 10-15% have had any sort of career progression or career stability - e.g. moving to a similar role at a competing fund, getting a bigger book at a competing fund

  • 10-15% took a demotion at a competing fund

  • 40% left the industry

  • 30% are jobless / havent updated their Linkedin / gone dark

  • Only 1 hasn't left their original firm in the last 6 yrs

Other data points:

  • Out of all of the track records I've seen 0 have had a Sharpe consistently over 2. Maybe 1-2 have Sharpe over 1. And the rest have Sharpes between -2 and .5

  • One of the multistrats I worked at, within 6 months everyone who I had befriended at the firm had been laid off - at that point I decided it wasn't even worth it to make friends at work

People glorify this industry and the big multi-strats as an easy way to make a ton of money. In reality, the expected value of your career earnings as a PM at a MLP or Citadel is actually pretty low. Maybe you'll get lucky and take home a couple bucks one year but then you'll get fired and struggle for the next 5. Overall you'll earnings will be comparable or less than a senior software engineer at a FANG.

At this point, people who succeed and stay in the industry don't do it for the money. They do it because they love the game.

 
Analyst 3+ in HF - Other:
I've been in the industry for the last 6 years, worked at multiple of the largest multistrat funds. I've probably interacted closely with over 30 PMs over my career. Some stats:
  • 10-15% have had any sort of career progression or career stability - e.g. moving to a similar role at a competing fund, getting a bigger book at a competing fund

  • 10-15% took a demotion at a competing fund

  • 40% left the industry

  • 30% are jobless / havent updated their Linkedin / gone dark

  • Only 1 hasn't left their original firm in the last 6 yrs

Other data points:

  • Out of all of the track records I've seen 0 have had a Sharpe consistently over 2. Maybe 1-2 have Sharpe over 1. And the rest have Sharpes between -2 and .5

  • One of the multistrats I worked at, within 6 months everyone who I had befriended at the firm had been laid off - at that point I decided it wasn't even worth it to make friends at work

People glorify this industry and the big multi-strats as an easy way to make a ton of money. In reality, the expected value of your career earnings as a PM at a MLP or Citadel is actually pretty low. Maybe you'll get lucky and take home a couple bucks one year but then you'll get fired and struggle for the next 5. Overall you'll earnings will be comparable or less than a senior software engineer at a FANG.

At this point, people who succeed and stay in the industry don't do it for the money. They do it because they love the game.

This.

Except for the last paragraph (at least in my opinion). This game is all about money. And at a higher level (when money isn’t as important because you have enough, it’s about ego/competition). My two cents

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

Both quant and non-quant. One of the biggest shocks for me personally was the average quality of PMs at multistrat funds.

From my experience, the vast majority of them I would never let touch my money - there is an extreme paucity of quality research, understanding of risk management and general investment acumen. A lot of PMs at platforms are glorified day traders. They don't really have a plan, take some broker or management meetings here and there and put on gut trades that are recommended to them by their buddies or some random sell side research piece. I always thought multistrat PMs (both quant and nonquant) were the panacea of hedge funds jobs, but the reality is very different when you see it from the inside.

If you take a step back it does make a lot of sense though. Assume that an average multistrat fund has a Sharpe 1.5 and 100 teams. Assuming that each team manages the same amount of capital and is uncorrelated to the other teams (obviously both of these assumptions are stretches but not unreasonable) then the average Sharpe per team is 0.15, which really is indistinguishable from noise.

Now if you add in some more realistic assumptions, which are 1. that there are a handful of teams that are managing a large amount of the AUM and printing reasonable Sharpes (~1) and 2. that the average pairwise correlation between teams is probably slightly higher than 0 and 3. there is survival bias as the good teams stay and bad teams get cut, some back of the envelope math will yield that the median Sharpe of all teams at a multistrat is actually closer to zero and likely negative.

In reality the majority of multistrat returns are generated by probably BS and do your due diligence on the team you are joining. If you are a PM candidate, I've always found it surprising/funny that all the recruiters say you need to have a Sharpe 1.5-2 to be hired or be competitive, when in reality no PM teams actually realize those performance numbers. Just a dirty little secret of the industry

 
  • The extreme case.I know a guy who has stayed as an analyst/researcher for more than 10 years, hopping between some top funds. He is comfortable with his compensation and has no desire to move into a PM role because he dreads the responsibilities and pressure involved. The average PM do not last very long. Anecdotally, in the MM funds, which are dominant but tend to have strict drawdown tolerances, most of them do not last more than 2 -3 years. I heard rumours of a case in MLP where a PM was let go after only 3 months.

  • The typical cases I know, People spend between 3- 6 years as a researcher/analyst, getting fired once or twice and hopping between funds. At this point they either take up a PM role or exit the industry. Common exit routes are the sell side, and in recent years the tech industry. Common reasons for exiting is that they have hit the ceiling as an analyst/researcher, but cannot or do not wish to move into a PM role.

  • For those who make the jump into a PM role, many last no longer than 2-3 years in a MM fund. Those who get fired will try to join other MM funds, but usually this happens only once or twice in their career before people stop buying their bullsh!t excuses. There were also those who exit into the sell side or into the operations side as senior executives. Successful PMs can either move up to manage a team of PMs or spin out and start their own fund.

 

What about single manager funds? Do Analysts at SMs never get the chance to set up their own shop (i.e. a seed agreement with their SM fund) or is the only route to your own fund a stint at an MM as a PM?

 

This happens but it (like many things) is not easy. Some can get seed arrangements from their former bosses, but others have to know capital providers probably before leaving, have a great rep, catch the right side of the fundraising market, show some track record and hope for the best.

I haven’t even begun to discuss actually putting money into the business, getting set up, hiring people and dealing with the operational side. Which by the way has more and more demands on it places daily.

This business is getting harder and harder to get into/stay in every year. It’s not like the late 90s or early 2000s where so many people could easily raise capital. Times have changed.

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

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