SS ER -> HF Advice/Questions
Hey all- appreciate any advice or guidance in advance. I've currently been in ER at a BB in Healthcare for little over 2 years. Looking to make the jump to a HF in the next 6-12 months. Would love to chat with people who are currently in MM, SM, or LO roles (trying to decide which direction to go) as I'm curious to learn more in order to make a well informed decision. Few questions I have below, thank you:
1) Compensation structure and typical compensation for more junior role
2) Day to day work and work/life balance
3) How success is measured (assume its being in the green at MM/SM and beating index at LO)
4) Coverage responsibilities and ramp timeline
5) Other information you would be critical in making a decision
Other information you think would be critical in making a decision**
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thanks
1) Comp varies - my understanding is that SM can often times offer points/equity in different structures in the fund, or some sort of "co-invest" as an LP. The base varies very widely on a number of factors.. AUM, existing headcount, hierarchy, etc. There's SM's out there with > $2bn in AUM that may have < 10 analysts and have strong base pay commensurate with pods/platforms (typically pay higher bases as rule of thumb). Bonus comp is entirely return driven in my experience but would be curious if any other HF people have different experiences on bonus pay.
2) Day to day work - I think it's largely split between new idea generation and existing coverage maintenance. Again varies by fund style but it's probably 40/60 split. Both consist of tons of reading and lots of modeling. Likely changes or differs by coverage list as well and given you're in healthcare maybe it's more reading than modeling (no clue just speculating). WLB is good (relatively)... I find my time is my own and it's a bit more "self-starting" than structured types of roles in PE/IB where you have designated calls and clients you're interacting with constantly. I work > 60 hours a week and then earnings can ramp to ~80-ish, but it's predictable/known when earnings are so you can plan around it.
3) This is tough question. I know of certain platforms that have tracking "simulators" where analysts deposit their best ideas (assuming they aren't yet managing their own risk) into a tracker that they can measure they're own performance. Other times you can more or less quantify your own ideas PnL in a straightforward way. In SM world it's much tougher assuming the PM has full discretion as it's a bit of a grey area to how it's being traded and managed.
4) I cover > 110 stocks at this point, definitely more than the average (not bragging, confessing) and my ramp was ~30/year. Not all are actionable though in my view. MM/pod you are usually 30-50 ish, all 1-2 sub-verticals and you need to have a tradeable view on all of them. Imagine the ramp is quicker (6-12 months to max out coverage).
5) It's just different styles as I've noted in other posts. You have pods/MM which are insanely good breeding grounds for sector/sub-sector specific analysts who know everything about each company / industry / sector. The software guys know the $ in stock-based comp LTM down to the 6th decimal, you get my point. These guys also tend to take very short-term views (often 1-3 months) and can flip quickly in and out of positions. It's a lot more about sentiment, positioning, setup, and then backing into earnings estimates and figuring out the move. You're also fully hedged across the board from beta to factors and are running +/- 5% net so it's all about harvesting alpha and lots of the time that looks like pair trading.
SM/LO tend to be slightly longer in duration - anywhere from 6 months to 3+ years. Those investment processes look a lot different and while they're wary of earnings prints and near-term trends, it dictates a lot less about what they're likely playing for. Just consists a bit more of "how do we see this company in 18 months and what's not priced in based on that view today?"
Thank you- this was an incredibly helpful breakdown. Maybe few quick follow ups whenever you have a chance:
1) You mentioned you cover > 110 stocks and MM/pod probably closer to 30-50. How deep in the weeds are you on your names and how deep do you think the 30-50 guys are? Know depending the subsector some companies could have hundreds, thousands, or even millions of individual products across various segments so curious how people typically spread their time amongst the names with a virtually unlimited amount of information at their disposal? If I understand correctly, there is probably an inverse relationship between depth of research and investment time horizon?
2) You flagged a 40/60 split between new idea generation and coverage maintenance. How often are new ideas typically brought to the table maybe in your role and then what you know from MM/pod? And then similarly I know the buyside tends to have far more accurate models than the sell side. What does that process typically look like of refining estimates and models from your experience?
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