SS ER to L/S ER MM comp expectations

Hi all,

Not sure 100% sure if I'm going to make the move to buy-side yet, but I believe I'm close to an offer at a L/S equity at a MM/pod fund, therefore I wanted to gather some thoughts on what I could expect compensation wise given my background.

I have 4+ YOE in sell-side equity research covering tech. Compensation is currently around $200K. Role is with a new PM (new to firm, but not to being a PM), NYC area, not sure book size but plan on asking soon.

TLDR: First question, any thoughts on what to expect on base + bonus for someone with 4+ YOE in sell-side ER?

Now, I understand the big contrast/change for people who are entering the l/s equity world from i-banking, as the work itself is much different.

Without having first-hand knowledge, my sense is the change is less dramatic for someone in sell-side research. If your coverage universe is the same, you already know the bull/bear, drivers, etc. for a large majority of the companies (granted you usually have a more expansive list, so maybe you have to get a bit deeper on 10-20 names). You might spend more time on "real" work and less on repetitive, clerical-type work, but spend more time (+ stress) mulling over having to deal with putting real dollars to work and being right/wrong.

But in the end, this all does not seem to much of a drastic change... Or am I grossly misunderstanding how much of a different beast being at a l/s equity market-neutral fund is vs. sell-side?  

TLDR: Second question, in terms of the work, how much of a change is it from sell-side?

Comments (6)

dickthesellsider, what's your opinion? Comment below:

But in the end, this all does not seem to much of a drastic change.

It IS a drastic change cuz your opinion can mean real $$$ put to work, so now you need to have real views (not reactive upgrade / downgrades) with real stress. 

If your coverage universe is the same, you already know the bull/bear, drivers, etc. for a large majority of the companies (granted you usually have a more expansive list, so maybe you have to get a bit deeper on 10-20 names). 

I believe your coverage universe will grow to 40-50 names over time and you need to know them inside out and will even need to model more deeply than you have done on the sell-side. 

  • Associate 3 in ER

Thanks, this is what I'm looking for. FWIW, I cover about ~30 right now, so 40-50 was kind of in-line with my expectations.

I guess more broadly speaking, would you say your hours/flexibility on sell-side < buy-side and stress sell-side > buy-side, or are both worse on the buy-side?

To be honest, I want to eventually explore buy-side, even if not now, but I'm trying to gauge whether it is worth waiting until I can land a good SM L/S role (perhaps LO too, but I assume changes are slimmer there) or just take the MM L/S role now, then see where it goes from there. 

dickthesellsider, what's your opinion? Comment below:

Everything regarding this profession needs to be said with a disclaimer: it depends - depends on how poor your WLB is now at sell-side, how chill / intense your future pod PM is, how they run the team, what's their process, etc. 

Compared to sell-side

  • Hours: Same or worse. Investing is output-focused - you can put in long hours and produce nothing or you can work 2 hours a week and make a lot of money for your PM. If you are not a wunderkind, you will need to work hard and see whether you can add value in your seat. There should be some correlation between how much you work and how much value you can produce - but it's not 100% correlated.
  • Flexibility: I bet it's better
  • Stress: way more stressful
Most Helpful
nutella, what's your opinion? Comment below:

Made this transition myself a while ago (SS ER to SM HF, though now at a MM). A few thoughts:

  1. Your job in picking a MM pod seat is really just about optimizing for the right combination of PM personality/style and PM skill level (i.e. do they make money). Your PM determines everything about your quality of life, your learning curve, and frankly your earnings potential, so diligence that hard. Call their old junior analysts. With a new PM to the firm make sure you're crystal clear on track record. They should have some ability to document historic P&L. Different situation working for an established PM w/ history at the firm vs. new one. Longer leash = better job security. MM seats are abundant and will be for the foreseeable future, so don't just jump at the first offer.
  2. On compensation, assuming the book is profitable in a given year, expect all in comp of 3-500k. If you hit the ground running and are an all star, maybe higher.  If the book loses money expect nothing beyond your base unless you have some sort of guarantee worked out w/ broader organization.
  3. Prepare yourself for a completely different level of news/research/information flow vs. the sell side. On the buy side you get blasted with a dozen research distributions for every subsector/geography combination you cover, in addition to a lot of other alt data and paid news that you probably weren't looking at on the sell side. Took me a while to get used to it and understand how to wrangle it. 
  4. The base elements of the work are similar, but the outputs and your workflow will be very different. For me it was a huge improvement. All the bullshit I didn't like about being on the sell side was gone, and the job is distilled to doing what you need to do to make money. 

Best of luck.

  • Investment Analyst in HF - EquityHedge

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