Path to wealth.

2nd option (large-scale fund) is much more probable, lower risk, and richer in exit opps (easier to lateralling given fund reputation). That`s why it`s so difficult to get in those funds.

Especially if the comparison is vs. you *joining* and not *founding* a small HF, which means your cut has a natural limit even if you print a lot of alpha (say 20-30% earned carry at best case top 0.000centile.it usually it is 10-15% for a deputy PM / right arm to the founder that does well). 

Higher risk-adjusted returns in this biz IMO is joining a $2B+ renowned fund at a good seat, lean enough team, doing well, getting your LSD-HSD carry for 10-15yrs and THEN trying to home run with your OWN fund. 

Main ways I've seen outside having your own fund:

1 - MM PM: 15-30% carry on $500mm-$2B avg. AUM per PM

2 - SM HF/LO senior analyst with carry or sub PM: 2-10pp carry on fees @ $1bn+ AUMs

3 - PM @ FO: 5-25pp carry on low opex AUMs fees

4 - Senior analyst @ Large LO (T Rowe, Wellington etc.): low-risk $500k-$3MM comp over many years (as opposed to MM analyst comp in general which is subject to high turnover)

Bump

How hard is it to start your own fund and how do you show a track record if you've only been an analyst for a year? Would you have to reach PM or at least senior analyst to gain credibility? 

This is based on my experience over the past decade in finance, others may have different views but this path usually ends up as a pretty safe way to make a ton of money.

1. Get a job in investment banking right out of college - some choose to jump right into the buyside after college, but most don't realize that investment banking provides a really good skillset for those early on in their careers (attention to detail, worth ethic, excel/powerpoint/formatting skills, basic valuation/finance/accounting, etc.). I've worked with those without an investment banking background on the buyside, and it is really easy to stand out with an IB background.
2. After two to three years, jump to the buyside at a private equity firm or hedge fund that has a good track record (10+ years, multiple outperforming funds). Find partners/founders who are relatively young (~40-45 years old or less) and are still extremely motivated/work hard. Try to figure out early on which path is better for your skillset, working in private equity vs. hedge funds is very different.
3. Now this is where the wealth comes. You have to be patient. Most people quit private equity/HFs or jump shift to different funds very quickly after just a couple of years. The big money comes in the form of carried interest payments or large paydays from a good year at a hedge fund. Those don't come right off the bat, they usually come after 4+ years. Over time you get more and more % of the economics cause you build a reputation. So be patient, stick to it and learn the ropes to get good at that buyside role.

I'd stay away from <$250MM funds without locked up structures. The economics aren't there and there is too much risk with that small size (unless the founders are really good at what they do and have locked up 5+ year private equity style capital). Bigger funds = bigger payouts, it's that simple as there is more money to go around. 

Here are more resources I've written over the years if interested on building a net worth in finance:

• Top 1% Net Worth By Age In Finance
• How Much Do People In Finance Make? Let’s Just Say, Millions.
• 9 Steps to Save 1 Million Dollars in 10 Years

TLDR - investment banking to buyside at a decent size/good fund with managers who are very hard working and good at what they do. Stay there for a long time, build a reputation, get more % of the P&L/carry over time. Most quit after 2-4 years on the buyside. The real money comes over time in stages, not every year.