What happens after 30?
It seems like the HF career can often be very short, with most analyst starting in their early/mid-20s and then leaving to start their own fund or making PM at a multimanager after 5-10 years of experience.
That said, what happens to the people who can't start their own fund/make PM? I have noticed through friends/linkedin there are more 30+ year old analysts (or analysts with fancy titles) who are still at single managers, pitching ideas, and have the same role as the 25 year old newbies except with more experience. Is this a viable career path (either based on compensation or skills learned)?
I worked at an asset manager and a family office both of which were filled with former HF PMs and analysts. Seemed like everyone who hadn't hit a homer out of the ballpark just trades off pay and prestige for lifestyle and keeps hopping ship until they retire.
Can confirm. I was looking to start my career off at a family office for the very purpose of more relaxed balance (I live in a L/MCOL area, so I can take less pay for the same or still better lifestyle than a place like NY or LA). May not hit your walk away figure on your 30th birthday, but you're able to have a happy family at home and healthy blood pressure while you take just a few more years to hit your number at 38-40 instead.
Edit: I didn't see anyone jumping ship actively. But they would hang out until they themselves retired, or the family decided to liquidate the fund and politely tell everyone they don't have to go home, but they can't stay here while handing massive walk-away payouts to everyone as they walked past the guard and turned in their badges. Within a quarter, the band got back together at another family shop and lather, rinse, repeat.
What’s your number?
At an SM, a senior analyst pitches an idea and gets to take significantly more risk versus a new analyst. Some of these SMs have huge capital bases so when senior analysts move the needle on the whole portfolio, it’s very rewarding. They’re also generally perceived to be less cut throat and stable than the MMs - if and only if the AUM capital base is stable and sticky. You don’t have to be a PM at an MM to be pulling high single digits millions.
Since when do analysts/sr analysts at SMs make high 7 figures? What kinds of funds?
The career analysts who are essentially one or two levels below the SM PM at funds with >$10b AUM. I’m not saying it’s common at all. But if you’re at a place like Viking or Pershing or whatever, I’m sure the economics are pretty good.
Gotcha. So basically the partners/PMs there that are basically analysts. Still though, I imagine a high 7 figure year would require returns north of 30-40%
30-40%? No way performance needs to be that high.
Could you break down the math/show your work?
Not him but I'll give a random hypotehtical example
$15B single manager firm
$10B of it is essentially a long only or pseudo LO type strategy
$5B "true" L/S
You return 10pct on the LO part, outperforming market modestly - a decent year, but not a "home run". That's $1B, of which netting out a bunch of fees etc you end up with ~$100m for the comp pool
You also return 10pct on the L/S part, or $500m. this is a good year. It's a higher fee structure, let's say you end up with ~$150m.
That's $250m to go around - founder/PM/CIO individual takes 80pct, leaving $50m for the rest - call it 3 "partners" (essentially super-senior analysts) and 7 analysts under them of varying seniorities. the 3 partners take $12m each (plus whatever share of firm economics), the 7 analysts split the rest ($14m) - the 2 fresh out of PE guys get $500k, the 3 mid level guys who've been there 3 - 5 years get $1m each, and teh two senior analysts get $5m each.
Adjust the numbers however you want I'm simplifying a lot/ignoring some costs, but the point is clearing $5m if you're a 10+ year analyst at a fund like this doesn't take that much, and numbers can get pretty crazy in better years - a lot of these funds have had their share of 30 - 80% years. The tough part is getting the job and surviving for that long.
Also, just as a point that should be brought up, many analysts don't want to be PMs. Its a totally different job and some people really don't like it. Many people like digging into investments, not going to marketing meetings and talking about lots of random high level macro stuff that has nothing to do with analyzing a specific investment idea. PM is a good gig in that you set your own rules and make the most money...but its also a completely different job from that of a sr analyst.
Could you (or anyone else) elaborate on the difference in responsibilities between Analysts and PMs?
pm runs/oversees book, does position sizing/portfolio construction, obviously picks what names r in the book (ideas sourced from analysts), probably comes up with a few ideas of their own but not as much, handles other stuff too like mktingAnalyst sources ideas and gives to pm. Sometimes analyst gets to run small portion of book (not just mm funds- viking does this)
In my experience I'd break it down like this (of course this can vary wildly by strategy - I'm in credit). Basically, depending on the firm being a PM can be mostly a marketing/managerial role and not an investment analysis role, which is what many people enjoy and hence why they got into investing.
30-60% of time is marketing - being on the road, taking calls, reviewing deliverables, writing white papers, etc.
20-40% of time thinking about portfolio, allocating, listening to analyst pitches, asking questions, etc
10-20% of time doing actual investment research
10-15% of time is internal corporate bs - dealing with mgmt, compliance, reporting, portfolio analytics teams, etc.
5-10% of time is staying on top of high level news trends, seems less impact to portfolio, more marketing
But doesn't compensation plateau out at a certain level if you stay on as a career analyst?
Obviously. Anyone in any career plateaus - companies, regardless of industry, only have so many seats at the top and not everyone can/wants to be at the top. If you think a ratio might be 1:10 PM/Analyst on average - all 10 can't become PMs. Also, once you hit a certain level of comp it really don't matter unless you like to spend absurd money. If you're a career sr analyst covering the same sector(s) its a super easy job leveraging years of compound knowledge. Not a bad gig to clip 500k-1mm+. Lets put it this way, the comp of a sr analyst is very high, even for high earners, a level most people on this board will never achieve - not in a rude way just saying not many jobs pay that much and they are not easy to get.
This is what I have seen: move to LO, move to tech / fintech startup, move to FOF/endowment/family office investing in HFs, become a small business owner (e.g. restaurant), move to some sort of consulting / third-party research role, and continue to middle along at various HFs.
Have seen some HF guys to go banking. For distressed, I've seen some guys go to rx (ex: anchorage-> pjt)
Also starting a SPAC too
So when do you get fired? Is it true that if Financials are up 20%, and you make 10% return, you would be fired compared to someone who lost 30% in investing in Utilities but the sector was down 70% and would have another year to survive?
for LO - yes, you get fired for underperforming indexes/benchmarks even if you made money in absolute $ terms
for L/S - you should be hedged so you shouldnt get to a point to be down 30% , and if youre hedged properly outperforming means making money in absolute $ terms
Ok can you just say sorry I will perform better next time and they let you survive another year?
yes but only if you say please and buy them a nice christmas present
I don't have any hard data on this, just my observation with folks that work at multi managers. But, it seems like there's a significant drop off / funnel effect on people that leave the industry in the 0-2 year time frame, and then again in the 2-4 year time frame. Then, there's the 5+ year folks
I think the 0-2 are the guys who come on after banking, research, or PE at a junior level and end up leaving because they either don't like it or they're not good at it and get fired. I've seen these guys either go back to banking, go to business school, go back to research, or join another team / pod at a junior level.
I think the 2-4 year folks are those that end up being decent mid level analysts (usually on the same pod for this time period) but they know it's unlikely they're good enough that they'll become senior enough to run their own sub books or get paid a significant amount of money relative to how much they're working. I've seen people in this range either leave the team voluntarily i.e. quit or involuntarily (PM blows up, which is common in multi manager). These folks tend to bounce around from pod to pod if they're pretty good at their job, join a smaller firm or team (outside of multi manager land), or going back to the sell side.
Based on what I've seen, once someone gets to 5+ years, they either continue to work as analysts with other pods or become PMs. As someone else mentioned, being a senior level analyst at a pod shop could have amazing economics and could be a good career role for those that want it. You can run a sub book, get paid as a % of P&L based on your own ideas, have tons of capital (many teams run $1bn plus books, implying that the senior analysts' name will have many dollars behind them), and the ability to focus purely on idea generation and digging into theses. These guys can get paid 7 figures plus and are approached to run their own books by other firms: some take it, some don't. I've seen people turn down first time PM roles in these situations they find the above attractive, they're good at it, and they have a system in place.
If they left to run their own book, it would likely be in the $1-200mm range to start (probably what they ran as a senior analyst anyway, or less if they came from Citadel where analysts can run $1bn sub books), would have to hire and manage a team, rebuild all models, get comfortable with expanding coverage and sector coverage, and managing risk of an entire book. So, it could be a couple of years before you start making real money again like they were as a senior analyst. If something blows up and the person sucks at being a PM, there's huge downside. Who's going to hire you again? Makes it tough to pitch yourself as a PM again, and another PM is going to be skeptical about hiring you as a senior analyst because he probably feels you're either trying to take his role or will jump ship asap. More career risk here.
Most of these folks end up retiring at some point at a HF or leaving the industry to work as IR or something lower stress.
Are track records really tied to a certain individual? Like is there a database of John Smith and what returns he posted at Citadel pod for example if he gets fired and looking for a job at Point 72.
How often is the thesis really differentiated? I see a ton of crowded names when looking at 13Fs.
Depends on how senior you are, but generally yes, especially if you have a sub book, that will be open the the firm. The grey area is when the senior analyst doesn't officially run the sub book but knows how much of the P&L were based on his names. Doesn't apply if you're a junior person with only a few years experience.
That being said, there's nothing you can legally share with a potential employer about your past performance other than verbal otherwise you'll get sued.
citadel specifically tracks junior peoples performance very closely, much more so than many other firms. Most big MMs are starting to do some format of this.
you often see analysts/jr PMs in blown out pods either get promoted to full PMs or allocated to a diff pod if their personal tracking was good.
just because something is crowded doesnt mean something can't work. look at short zm/pton type trades this year.
ofc there are also cases where crowding blows you up
13F's provide 0 value when looking at MM's
Thanks and are you fired or let go or asked to resign if the portfolio blows up.
your resume usually gets passed around internally to see if anyone wants to interview you, otherwise you're generally fired after a couple of weeks. easier to get re-hired / not let go if you're junior. harder the more senior you are because you're (i): more expensive and (ii) the team is more likely already to have a senior analyst that covers a specific sector
If you are a number one sell side analyst II rated how easy is it to get a spot at a citadel or p72?
Isn’t average age of standard PM like 40?
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