Potential Choices for HF Roles from Undergrad

Hi, I am an undergrad in my junior year at a target school, interested in public markets. I am very interested to hear what some of you think about my (possible) options for post-undergrad employment, below. For more context, I have been interested in public markets for a very long time. Personally, I am comfortable in a self-starter/unstructured/entrepreneurial environment. My longer-term goal is to manage my own money and start my own fund.


First one is a SM $200m fund with, currently, two investment analysts and two partners. ALL INTERNAL CAPITAL ... no outside investors, which provides nice flexibility. Exceptional people (smart and insightful), flat structure, meritocracy, no bureaucracy/politics/bs.  Everyone works their ass off but returns are phenomenal. Looks like fund will try to expand over the next ~10 years and continue compounding into $Bs. Seems like a high quality shop, and one where partners are looking to continue building/growing for years to come.


Second fund is a very established (30+ year history) $5-$10B value fund. 1/2 is internal capital and 1/2 is external. Only a few people (3-4) on the investment team. Phenomenal, consistent returns over the last 30 years. For me, potential to manage some of the book very early on, plus possibility of capitalizing on new strategies at the fund (i.e. if the fund looks more at growth/tech/small&mid cap/etc than just value as AUM grows). 


Third fund is a MM ~$150m fund. Only a few years old, but good returns so far. Not much else to say other than talented team.


Four option is not a HF, but MM PE firm. Known in its PE vertical. Everyone is smart, but firm is more bureaucratic, structured, etc. so this would be a more average post-undergrad PE experience.


Any thoughts would be very appreciated. Thank you!

 

The $200m SM is interesting with all internal capital, but is that necessarily a good thing? The ability to raise capital is not a matter of just returns but also network and ability to sell to LPs. The fact that they haven't raised any is odd and may indicate you wouldn't build an LP network while there which you would need to effectively launch your own fund. I would try to understand that dynamic more before signing.

The value fund sounds like Sequoia, if it's them or a similar firm that sounds ideal. Big, well-respected name on your resume that doesn't come at the expense of actual investment ideation practice, whose scale also offers the potential to do late-stage private investments a la Tiger, Altimeter, D1, etc. and possibility of meeting institutional LPs. I know a decent number of L/S PMs who initially started in fund-of-funds because the exposure to the HF network was unparalleled. Something to think about.

 

So the $200SM used to have outside LPs but I think the GP made enough $ to turn into an all internal capital fund after a few years of great returns. Do you think having 100% internal capital provides any benefits? I feel like it makes a fund less bureaucratic and political -- do you think this is true? 

The point about exposure to institutional investors is interesting. Is that a deal breaker or just an added benefit? How easy would it be to meet inst inv if I started a fund after X years of working at the 100% internal capital SM fund?

 

Interesting. I know some PMs who have great track records but due to the unique natures of their strategies were unable to scale their HFs to >$1b and decided they'd rather just manage a large sleeve at a MM. You are correct that there are benefits. I work at a much larger HF with permanent capital and there is a greater appetite for long-term investments and wider risk limits here than at say a standard MM.

I would read up on HF launches that really scaled to be sure on the second point. Your network will likely be lacking at a small fund with no outside LPs, so moving to a different fund and/or getting an MBA may be necessary. I'd read about Altimeter Capital and its founder Brad Gerstner and other key players there. They launched with I think $3m in 2008 and now have many billion under management, an inspiration and example of beating the odds.

 

My advice: Don't do it. HF is not a growth oriented sector to join as a 22 year old.

If you can get it, option 2 is the best opportunity, altho it is weird to me to run a 5-10B value fund w/ only 4 people.

If the AUM of the PE fund is $1B or more, I would take that, as PE has far more tailwinds and investor interest than hedge funds, but sounds like you would rather do public markets.

 

2nd option. Yes AUM matters. Without AUM, there's no stability. Without stability, you can't learn. Learning is the only thing that matters for you at this age. And ditch the mentality of "trying to run a book ASAP."

 

Makes sense. What if the smaller fund keeps compounding (its all internal, so no worry about LPs pulling money) and over the next 10 years hits $xB and the larger fund makes good returns, but keeps returning capital as to not get big (so, stays around ~$10B). What I'm getting at -- other things equal, is there a benefit to being at a fund that has expanding AUM and riding that wave? I think the learning component will be equally high quality at both.

 

Everything you said is correct. If that fund does what you think it will do, you will make a lot of money, at a very young age. The thing is you need to weigh the upside/downside in regards to YOUR CAREER. Is the small HF run by a well known investor (I doubt it - else he wouldn't be running it at this size) and can he/his reputation land you a seat if things don't work out? I know way too many top target "I am passionate about investing" kids who joined a sub-scale "hedge fund" out of school and end up regretting it. Take it from someone who was in your shoes not too long ago.

 
Most Helpful

You are clearly attracted to the upside of a new fund from partners who have a strong (but short) track record. These opportunities are common and are not a great place to start your career.

You should focus on the base and downside cases where the fund does decently well but you are still looking for a new role in the next 2-5 years. This is 80% of the outcomes for someone in your shoes. 

You are infinitely more marketable coming from a $10bn brand name fund than from a $200mm no name fund. You are very junior in your career and the firm on your resume is important.

If you seek the upside of a new fund launch, you can then pursue that opportunity after you’ve had experience at a larger firm. If you do well, you could still earn partner title and economics at a very young age. 
 

Your first job should be about maximizing pedigree and experience. 

 

Ipsa quia corrupti quia qui autem ut atque. Explicabo similique dolores et earum.

Et qui quidem sit reiciendis. Quos quibusdam consequuntur neque asperiores tempora. Velit aspernatur mollitia labore ut voluptatem nulla voluptas. Dolor minima impedit enim voluptatem repellendus enim officia. Non ipsum quas est at temporibus voluptas nulla.

Sint vero nesciunt inventore enim. Et aspernatur fuga aliquam tempore omnis. Occaecati nemo et sed doloribus a.

Ratione repellat praesentium quaerat consequatur omnis eos dolorem. Vero vitae ut laboriosam repudiandae. Sunt animi aut est amet praesentium nulla. Ut ipsa aspernatur magni odit repudiandae nihil.

Career Advancement Opportunities

March 2024 Hedge Fund

  • Point72 98.9%
  • D.E. Shaw 97.9%
  • Magnetar Capital 96.8%
  • Citadel Investment Group 95.8%
  • AQR Capital Management 94.7%

Overall Employee Satisfaction

March 2024 Hedge Fund

  • Magnetar Capital 98.9%
  • D.E. Shaw 97.8%
  • Blackstone Group 96.8%
  • Two Sigma Investments 95.7%
  • Citadel Investment Group 94.6%

Professional Growth Opportunities

March 2024 Hedge Fund

  • AQR Capital Management 99.0%
  • Point72 97.9%
  • D.E. Shaw 96.9%
  • Citadel Investment Group 95.8%
  • Magnetar Capital 94.8%

Total Avg Compensation

March 2024 Hedge Fund

  • Portfolio Manager (9) $1,648
  • Vice President (23) $474
  • Director/MD (12) $423
  • NA (6) $322
  • 3rd+ Year Associate (24) $287
  • Manager (4) $282
  • Engineer/Quant (71) $274
  • 2nd Year Associate (30) $251
  • 1st Year Associate (73) $190
  • Analysts (225) $179
  • Intern/Summer Associate (22) $131
  • Junior Trader (5) $102
  • Intern/Summer Analyst (249) $85
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”