SM Tiger Cub vs. MM - Job Stability
Senior Associate at MF PE looking to exit this upcoming summer to either a SM or MM. There's been a lot of super helpful threads on here outlining pros and cons of both and I'm overall leaning towards MM currently (interestingly, so are a notable amount of other MF PE associates I've talked to) but wanted to ask a question on job stability specifically:
The current overall perception for juniors (and seniors I guess) is that job stability is significantly more unstable at MM platforms. Only 10-20% of pods generate the vast majority of returns for MMs, so odds are more likely that you'll be working for a mediocre or sub-par PM. Your job security is at the mercy of your PM, and vetting their performance is fairly difficult at the interview level. I've heard that if your pod blows up fairly early and you're a strong performer, there's willingness to shuffle you around within the firm if seats are available. Is this empirically true? Would be great to hear overall thoughts on junior job security at MMs (and SMs).
If the perception of SMs being far more secure (+ more financially secure too with high guaranteed 1st year pay for 2+2s), it seems like the best risk-reward path would be to gun for an SM and stay 2 years, saving up money and learning the ropes (recognizing the risk model is fundamentally different) with the optionality of going to a MM thereafter versus going to a MM with potential to make 150K and be out of a job within 6 months, no?
Curious if anyone disagrees / takes the other side of the argument here.
You can't "learn the ropes" that are necessary to be in a MM seat without first starting in a MM seat. Your aim should be to land in a top MM seat, not just any MM seat.
I made the transition from MF PE to SM HF a few years ago. I had a few offers from MM pods, but turned them down as they were all for newer teams / PMs and I continued to believe that’s not the job I want longer term. I made the decision to join a SM HF despite the structurally challenged industry backdrop for those firms for (1) work life balance after several years of grinding in BB IB / MF PE, (2) perceived upside by way of getting % of GP profits in a quantified timeframe (TBD on how this works out), and (3) stability of seat/team/firm. The last point is probably the most debated, but I viewed the risk of SM fund closure to be less than a newer pod at a C/MLP/P72 getting cut. SM HFs will probably slowly bleed AUM if they don’t perform, but that was fine for me as I was fine with capped upside in exchange for some downside protection.
Coincidentally, all the pod teams that I got offers from closed for one reason or another. I have no idea what happened, but the PMs ended up at different firms after 1-2 years from the time that I got the offer. No idea what happened to their analysts.
I have no doubt that learning how MM firms operate is a more marketable skill today. However, given I was able to find success in IB and PE, I’m sure I could have found 1-2 more seats even if I were to get cut at my first MM job, but I didn’t want the stress of constantly adjusting to a new job, especially given it disrupts your entire life in that first 3-6 month ramp period.
There is a lot of ways to go about your career, but it ultimately depends on what you’re solving for at that particular phase of your life. I’m very happy in my current seat and I’m learning a lot while getting paid well so no regrets. I think a lot of finding a job that you’ll enjoy is reference checking the team/PM and getting a good sense of whether they are the type to penny pinch paying their analysts. All in all, I’m very satisfied with my working relationships and believe I’ll be valued appropriately if I work hard and perform. If my fund shuts down at some point, it’ll be harder to start over, but even then, I’m not sure if I would want to jump to a pod shop in my mid-30s/early 40s. Hopefully I can continue to contribute in my current role and the fund performs well over time.
How is your comp, WLB, overall enjoyment vs. MF PE, etc.? Am in a similar position to OP looking at exiting to HF after 2+2 and any insight would be helpful.
From my conversations with peers, the pre-MBA MF PE Associate experience is fairly standardized across the board. There are subtle differences between firms, but for the most part, the diligence / investment process and day-to-day workflows are similar.
I think this dynamic completely breaks down for SM HFs as it really depends on the PM’s investment style/background, fund’s organizational structure, length of operations, etc. Two roles that look alike from the outside can be completely different when you’re actually on the job so hard to generalize.
In hindsight, I was probably too selective as openings are more on an ad hoc basis, but a perfect spot opened up at a fund that I was targeting when I started recruiting. I wanted to ensure it was a good fit on both sides when I was interviewing and it turned out to be a fruitful exercise. I’m 3 years in and I’ve been very happy with my WLB, compensation trajectory, and working relationships. I’m likely paid less than pods that are having blowout years given my bonus is obviously discretionary, but I specifically chose this path as I felt I getting paid on par with my peers that were on the Partner level tracks at MF PE firms. I’m sure I’ll likely be paid less than them once they make Partner on a lifetime basis, but I decided I rather front load cash compensation in my career and have a better WLB vs. signing up for the longer term carry game in my 40s. I also didn’t feel the need to tie myself to the MM eat what you kill model as the incremental dollars after a certain point wasn’t worth the mental stress. It’s all perspective as some people would find the place I work super sleepy and want that uncapped upside ASAP. By the time you leave PE, you generally should have an idea of where you want to take your life.
There's an above comment that summarizes it well - but I'll just add a few points to consider for the SM route:
Think job stability is all entirely a myth (to an extent) and is generally very nuanced SM to SM and pod to pod. I'd stress that the PM itself is entirely what will dictate all aspects from WLB, to comp, to performance, etc., and that is consistent across SMs or MMs. There are MM PMs who have tons of staying power and are some of the best performers in their respective firms, who will always put up strong if not consistent PNL, and will likely always be able to pay you decently. Imagine working for a guy like Matt Simon (now head of Ashler) in his hayday as a PM. Now that obviously comes with seemingly tougher WLB considerations (almost all my pod friends work > 20 hours more per week than I do), so that's another consideration.
Will just add that the SM seat can vary massively. I have friends at sub-scale SMs managing $1bn getting a fraction of the comp I saw at my own SM seat managing a similar amount. The burden of proof again falls entirely on 1) the PM and 2) the returns, with 3) ability to scale if you're smaller a backdoor call option should #1 and #2 play out well. I remember joining my fund ~7 or so years ago and first starting being told that we might not last through the end of the year. My decision tree on staying since then has largely been 1) I enjoy the work, 2) I am compensated fairly, and 3) I likely value my WLB more than I understand having not worked in an MM seat.
Last piece I'll add and the above poster talks about it.... but the MM seats seem massively more stressful on a per day basis. SM seats can be very stressful (if you have points in the GP/LP) but by and large you're not making the executive investment decisions so there's not a pure formula for how you're performing or what your personal PNL or contributions are. Both good/bad to some extent as there's plenty of SM accounts on here who've talked about "hey I've generated XYZ returns above that of the whole SM fund, how much should I be paid?" just to run into the wall which is that the fund's total returns dictate comp and it's almost never personalized. I think you're thinking about it the right way... but I don't want to insinuate that job stability is perfect at the SMs either. Melvin was a massive SM paying the best on the street by a mile and blew up, it CAN happen. A lot of these Tiger adjacent folks were down massively and are still below their HWM which limits your ability to front-load that compensation piece you talked about. It entirely becomes a gamble but you have to exclusively optimize your decision based on the PM and your belief / view that they are a money-maker....
I am a Quant PM so in some ways it is a very different world, but in case it is helpful the perception for us is similar to what you suggested - start in a stable seat at a large brand name SM with a collaborative model (think DE Shaw, PDT, etc), take the time to learn and build a personal balance sheet (even though as a % of pnl comp will be low), and take the risk to move to a pod when you are more senior.
Being a junior at a pod, especially if not on an established team, has never made much sense to me. In many ways it is the same risk as the PM without the upside. Main reason to work at a pod is having a formulaic bonus, I wouldn't move to one until you can get that. Exception would be you get an offer from a team that is a "SM within a pod shop" (e.g. for us this would be Citadel GQS, I am sure there are L/S equivalents) or you can't get into any of the good SMs.
Do you have a list of quant SMs?
Which other funds have more collaborative framework for equity LS please? Currently in a pod at MLP, but really want to move to collab setup (or at least something with less churn), but all the recruiters mostly tell me about other "pods" at p72/baly/BH/verition.
Posted this in a different thread:
The median tenure at TGM/Viking/Coatue/D1 is 3 years vs 2 years at C/M/P/B - does that feel drastically different to you?
isn't that because the analysts at those SMs get rich ($100 million) and retire or get poached by C/B/M with a $15-20 million guarantee to be a PM? Feels like those are the firms where pedigree is enough to get an MM PM job without risk experience. different than getting blown out of a pod
No
You're an idiot if you think that
amazing bait
Turnover is materially different across those shops. Coatue and Viking have much shorter tenure. TG and D1 are more stable
Regardless of SM vs MM, it’s going to be firm and PM specific. There’s no other way to answer it. There are PMs at Citadel that have been there for 10-20 years and have kept the entire team with them for that time. There are sector heads at SMs that have been let go 15 months into the promotion. Sure, tiger cubs and the best pods will have infinitely better retention then tier 2 and 3 platforms. But I don’t think the tier 2 and 3 SMs have incredible retention either.
If you want duration in this career, the only determinant (again, the SINGLE determinant) is your skill / value-add / ability to generate PnL. Nothing else matters. You’re a senior associate on a team at a platform and the PM gets bought out and leaves - what happens to you? They stick you on another team, unless if you’re not good at the job, then no one wants you. If you’re not good at this job, you’ll never make it at a SM either. If you’re good at this job, the reward is much higher at a MM than SM.
If you’re #1 concern is duration and you’re not sure if you’ll BE good enough in 3-5 years but think you just need more time, then join a LO where you can grow into a money maker and take your time.
You’re also underestimating the value of starting in the MM model versus making the transition after 2-3 years just to make a cumulative $500k of after-tax bonuses? Is that really worth it? Ive been doing this for almost 10 years, I got so much value out of being a MM associate, learning my coverage and thinking about the risk model but not having the responsibility of making $ in that risk model at that age, if that makes sense. It makes a really big difference. The SM senior analysts that take a PM bid at a MM almost always never work.
This
any SMs still worth joining today?
Keep telling yourself that. Most of the top PnL TMT PMs at citadel over last 5 years joined late career from single managers
you're not thinking statistically. yes, i can think of 4-5 ex-SM citadel guys that have killed it. but for every former smart, truly talented SM senior analyst that gets it and goes on to crush it in the MM seat, there are 4-5 that blowup. you're underestimating how hard that transition is. citadel pays up for the best SM seniors, who obviously have a higher chance of making $ than a random above average SM person.
edit: i work for a PM that you probably have in mind. he's done extraordinarily well in the MM seat (and i was his first hire). i can tell you there was a massive learning curve. easier said than done is all i'm saying.
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