Reality for Undergrads and Juniors
Is the Hedge Fund Career a bad option for 99% of people?
This is a question I have been trying to answer for myself as I took the option to recruit and work at various mid sized hedge funds albeit with great pedigree and with the executive teams being compromised of former higher ups at top funds.
Posting Anon here but would like to collect thoughts and can PM for specifics.
In short I have built relationships with many billionaires, family offices, hedge fund managers, executives of large public and private companies. (Genuinely not a nepo)
The commonality amongst all of them was their opinion of the Hedge Fund Career path.
In short:
1. The amount of people who can consistently make money is minuscule and near zero.
2. Extreme sacrifice is needed. Daily PnL, bosses micromanaging, extreme losses, negative feedback loops, never being able to avoid the volatility of emotions due to wins and losses.
3. Structurally the product especially L/S SM HF is hard to get into and harder to raise money in.
4. Luck is a major factor in everything in and around the space. You cannot force outcomes through wit and hard work.
5. I may be better suited in other avenues. I have been offered jobs by my mentors, typically they are within privates or at their firms in some capacity. Was told I would be a great wealth manager as I was able to sell myself into having a relationship with the mentors in question (which hurt my ego lol)
In short it’s a tough career with very few old people. There is many reasons for this. Will I be regretting my decision to work at a Hedge Fund out of undergrad?
Kept anon as possible since there is few people with this profile - happy to opine back and forth via PM.
Imo, for people who have already reached the PM level, it's probably not a terrible career. At the more senior level you have a lot of exit options, a network built up and you are technically the boss (bar management above you ofc). That said, it really sucks from the point of view of needing extreme sacrifice - I worked for a PM who would go to macro/broker dinners nearly everyday and would barely sleep in the evenings because he would wake up for Japan (not sure why, we didn't even really trade Japan..). He would then nearly always come into the office completely moody. Tbh, I haven't met any PMs who seemed happy with life.
For junior people such as myself - yes, it definitely sucks as a career to start in. You are at the complete whim of PMs (who more often than not are psycho/sociopaths and have personality disorders) and you career, at least early on, is dictated by them. In terms of pay - you can easily get shafted because it's hard to really measure an analysts worth and most PMs will only pay you what they think is just enough to keep you around. If your PM is mediocre (a very likely outcome), then you'll find your bonus years being quite volatile and it's likely you'll end up hopping once or twice with them throughout your career - so expect some instability.
More generally speaking however, and this is just kind of my opinion, I think that hedge funds tend to attract some of the worst people i've ever met. People who give up pretty much every other aspect of their life so they could work more which to me seems a bit nuts, especially when your pnl isn't actually correlated to hours worked so much.
It’s no surprise that this industry is tough (look at the other comment or countless threads on this forum) if you’re not at a certain seat, are above average in terms of skills and performance. You always need luck on your side too. A combination of that is rare so the # people who achieve the right tail is minuscule. The average/below average HF employee is someone who probably churned through subscale funds, never made it past mid level at those funds, and lives under the whims of the PM.
That said, if you do make it to the right seats, and if you genuinely enjoy your work, it can be a great seat even in the non right tail outcomes. It’s probably one of the few non tech jobs where you constantly learn something new and get instant feedback on your work. I went from a small fund where my PM made my life miserable everyday and where I hated the industry… to a large fund (cap group/fidelity/wellington) where I’m surrounded by super smart people who genuinely care about your development, get any and every single resource I need for my job… and I genuinely love my job. The environment matters a lot too.
You are also 99% setup for failure if you work under a crap PM in your first job out of undergrad… that’s why many people including myself recommend doing IB to get your base skills up and buying time to think about what to do before jumping in the HF land. The latter also opens up doors to much better quality seats than straight out of undergrad usually.
Are you going to regret your career if you don’t achieve the right tail? Yes… if you’re looking to get into this industry with the sole aim of achieving the right tail that only .1% of the industry participants in any industry achieve, it’s a bad career for you.
As an aside, I think ppl on this forum like yourself do a great disservice to other jobs by putting them beneath themselves… like why were you offended when someone suggested that you would be a great wealth manager? Especially if it came from a billionaire or the like?
A wealth manager for the UHNW people you supposedly have in your network would achieve a great pay outcome with an amazing WLB. That’s like maybe 90% better than most of the average analysts on the HF side. I’m genuinely curious why you think that’s beneath you? In fact, if some billionaire told me I could sell myself well and be a wealth manager for the ultra rich, I’d follow that path and ask them to open doors for me.
I want to thank you for the really insightful comment. I’ll keep the original wording up on my post but it certainly came across and read the wrong way!
The ego pain was caused from hearing I was good at sales instead of analytical acumen and that I should lean into the sales side. Some of these relationships came from sending pitches I made etc. so I had taken pride in my ability on that front.
I’ve tried to idealize myself into the best analyst I can be and like many on this forum looked up to the well known Hedge Fund mangers.
This primarily is the reason for which I’ve written this post. Seeking clarity into my decision and generally the decision to join this career path over say wealth management.
Appreciate the Two Cents here, beyond sales I don’t know if I add value in that realm unfortunately. Always figured the hedge fund path and becoming a moneymaker in public’s was my pathway to provide value to people in my life. I’ll genuinely think on this, thank you.
The ability to sell yourself is one of the greatest skills one can have imo. There are tons of smart analytical people but only a select few can combine both (or frankly sometimes have the ability to oversell and ride the wave). If you have the greatest trade on the planet but can’t sell it to your PM… how useful can it be.
Analytical skills can be developed over time and sales can be taught but usually more of an inherent skill I think… you’re still young and have plenty of time to choose careers. So don’t go one way or the other yet… just keep an open mind and lean into whatever your strength might be
Analytical acumen lol brotha you are 21 years old using AI for your hw pls chill on the Kool-Aid
What makes you say the 99% setup for failure re:crap PM out of college? Just performance not opening up doors or what?
But you now work at a LO, which is totally different from working at a HF (esp MM). So the lesson from your story doesn't correlate to anything about a HF career
Yeah admittedly in my above comment I was being a bit more negative than I should have admittedly... Moreso because I wanted to highlight that the career isn't what you tend to see in the salary threads on this forum (i.e. the usual post of some L/S equity guy who made sub pm within 3 years and somehow made 100mm pnl in the prior year) - that's not to say these outcomes can't happen, it's just that they are so far from the norm.
I agree mostly with the guy i'm replying to - the environment matters a lot in the hedge fund world (and in any job I guess). But you will need to accept that you tossing a coin when getting your first job out of U/G here (I would personally say that this extends to even if you're coming from some other career i.e. IB) and you could end up with a sucky PM that you don't really have the tools to DD before you join. If you do end up joining a sucky PM then your life will be incredibly miserable.
And as an FYI, when I say "sucky" or "bad" PM I don't necessarily refer to their ability to make money but moreso with how they are to work for. You could have a PM who is decent at making money, but won't really mentor you much or teach you much past a few basics while also treating you like ass (yes I know there's learning through osmosis, but in certain cases that will only get you so far).
To the guy above me - good job on finding a place you're happy at, i'm genuinely happy for you.
Regarding joining out of Undergrad, that makes sense and confirms what I have been thinking about. Given I have to be sparse on detail here and given the relationships I have built with these important people was predicated on a love for investing, would it be appropriate to solicit them for help when Full Time Banking roles come around?
Happy to add details where necessary here.
Additionally, thankful for your genuine response. It is very helpful.
would you do HF even if u knew that after 5 years you're thrown to the streets after losing your job 3 times prior because the pods you worked at closed?
if that's not an issue, go for it. But if on the contrary you might look at your PE colleagues and think "wow, I wish I had that net worth by 28 years old, and a cushy stable job..." then you should avoid it, because it seems you're valuing other aspects of a HF job that might not materialize.
Just thinking out loud here but it’s not like you make the decision for the rest of your life. Say that you go straight to HF out of undergrad but end up finding it doesn’t suit you, you can pivot to wealth management. It’s actually a good angle cuz you can say hey I’ve been an analyst and know these organisations from the inside which means that I’m better when it comes to deciding where to allocate. You also manage to scratch that itch and not have to spend the rest of ur life wondering what could’ve been if you picked the HF route. I’m just a student at uni so maybe you wanna disregard what I say.
Kinda building on this, as someone who's going into IB and want to go into HF space. What is the typical outcome for those who wash out of HFs entirely? I understand it's extremely risky and almost even delusional to expect a nice tail outcome, so what do people who perform below median end up in afterwards?
There's no defined path after that. Can be anything
Of course, but just curious to hear what have been the typical cases after this
i did buyside for a few years and left to do IR (fundraising) as i was always more of a person who enjoyed conversing/making connections. could not be happier as i really disliked being an investor. if you're good at raising money from either consultants, pensions, UHNW/FOs, you'll be doing pretty good for yourself. not HF PM money, but people who have portable relationships that aren't just attributable to the firm are all pulling >1mn at essentially any shop from my convos that i've had.
It's pretty baffling how averse people are to sales (myself included, for years tbh)... unless you're going to be a quant or PM, essentially all of finance is sales at the end of the day. even senior PE partners/LO PMs spend half their time marketing to existing/new LPs– you'll almost always have to do it if you're successful... most sales people didn't go to target schools and were internal wholesalers at some point, so for those with banking/buyside/target school experience i think it's really a feather in the cap when you get in these meetings.
Look at the founders/C-suite people at the funds kids drool over on this site... almost all of them have a founder/someone who made a fuck ton of money because they could raise some capital. Whoever is able to get 500mn in commitments for a new fund will be fucking loaded as it costs nothing for the firm to procure other than paying the person who raised the money lol
Really loved reading this man thank you :)
Would you be open to a PM to discuss this a bit further?
Can drop a personal account to message - im OP
Sure, feel free to drop personal for PM
Just get in the door and see what happens.
People are too myopic, there are a lot of different funds and investing styles and places that need investment experience.
You can always pivot
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