What happens if you flame out of HF?
2nd-year PE associate in NYC considering moving to a fundamental hedge fund.
The upside case is pretty obvious. What I’m having a harder time understanding is the downside case.
Say you leave PE, join a reputable single-manager or multi-manager fund, and 1-3 years later it doesn’t work out - fund shuts down, PM gets cut, performance isn’t good enough, or you simply realize public markets aren’t for you.
What do people actually do next?
In particular:
- Can you realistically go back to PE / growth equity, or is that door mostly closed?
- How viable are VC, corp dev, strategic finance, or other operating roles?
- Does 1-2 years at a good HF generally add to your resume even if it doesn’t work out, or can it leave you in an awkward no-man’s-land?
- How different is the answer if you leave after 1 year vs. 3 years or even longer?
- Does the type of fund matter a lot (single-manager vs. pod, fundamental long/short vs. more short-term)?
Basically trying to understand whether taking the HF shot is a relatively reversible career bet or whether you should assume that once you leave PE, you’re committing pretty heavily to the public-markets path.
Would appreciate any insights.
Taking the leap from PE to a hedge fund (HF) can be a high-risk, high-reward move, and understanding the downside is crucial. Based on the most helpful WSO content, here’s a breakdown of what happens if you flame out of HF and how it impacts your career options:
1. Returning to PE/Growth Equity
2. Viability of VC, Corp Dev, Strategic Finance, or Operating Roles
3. Impact on Your Resume
4. Duration of HF Experience
5. Type of Fund and Strategy
6. Reversibility of the HF Bet
Key Takeaway:
Taking the HF shot is a calculated risk. If it doesn’t work out, you may face challenges returning to PE or pivoting to other roles, but it’s not impossible. The type of fund, your tenure, and how you position your experience will significantly influence your options. If you’re unsure about committing to public markets, weigh the decision carefully and consider whether the potential upside aligns with your long-term career goals.
Sources: Any career regrets after moving from PE to public markets?, Why I Left PE & Switched to the Public Markets, Lesser known MBA career options? Looking for advice on what to do post-HBS.
Hard to turn around.
You should pursue HF if you love the dynamism and volatility of public markets. If there's any doubt around that, you shouldn't try.
this guy is totally right. allcthe downvotes are the retard PE assos who just cant accept this truth.
Lots of copium from the PE b0is here lol. You leave PE, you ain't going back. PE in today's world is a circlejerk of "Did you pay your dues enough to collect benefits from the top of pyramid scheme" and if you leave (ESP to a high tail end outcome field) and then come back like a loser, you are deemed to have not paid as many dues. This is the avg expectation, ofc exceptions exist but if you're posting this simple but existential question on WSO, you should also ask yourself - are you sure you don't live in the fat part of the distribution?
You’d have to be a retard to downvote this
Forget PE. But for those that have left the HF world, do they tend to just go corporate? Corp fin or IR etc
As someone in LO equities, I just haven't seen many people leave public equities. Have seen 1-2 take early retirements because financially they're able to, but I am curious where those who left HF in their 30s and 40s tend to do. Lot of folks on this forum say 'join a startup' but frankly not everyone will want to do that, esp. with a wife and kids. Curious to hear your thoughts
If you leave a HF in your 40s you retire. If you leave a HF in your 30s you probably retire.
The HF industry is not one where you last long and remain poor. Unless you're really doing it for the love of the game e.g. the guys who trade microcaps
There's a very large group of people who went from IB or PE to a HF and lasted 1-2 years. I would guess most of those people went back to their old jobs, or went sell-side. Most people who last 2+ years make enough money out of it.
There is a pretty large group of people who haven't found the right seat and just kind of drift around but most people in that group love investing and would do it anyway. And they still tend to be pretty rich.
Do you think it is a valid reason that I just want to make money in public market?
In PE associates can be pushed out within 18 months / 10-20% chance to be promoted to VP, and still a long way to principal and partner (+PE market is already crowded so limited returns for carry)
HF / public market seems just better risk/reward to me and more merit based, unlike PE where it is a mixed of capability + politics + generational windfall that do not exist now
bump
You jump off the vessel
Stop being so risk averse to preserve optionality in your career. Frankly no one knows, there are datapoints if you track those on LinkedIn who’ve done this move
This isn’t profound, but it’s all about your own network. I have people I’m friends with who work in real estate who work at MFs that have asked me to interview for openings even though I know 0 about real estate. Similarly, I know people who have gotten roles at large tech companies with no consulting/ib/engineering background purely bc they had a friend who said “this guy is smart and a self starter, he’ll figure it out”. Things are not set in stone. Even though some funds across asset classes may require a very particular background, I think there are always exceptions to the rule.
^ This
Joining the military is always an option.
2. if you fail HF, its not the end of the world. do you really need to hear this from a random anon? if you are unemployed now, do you really have no tangible skills or confidence that you can make enough to feed yourself? you can literally start a biz, join a random startup, do whatever - doesnt have to go back to high finance. any successful PM and analyst i have seen never asks this question. they are just absolute hardos for trading and theyd rather trade than go on a vacation because it gives them less satisfaction. i know it sounds cringe but you are literally trying ti competenwith these people
just to add to this great answer...clearly it doesn't mean every person with skills/desire/confidence/work ethic makes it...but the types that do are the ones who know they would figure it out a million different ways if the first one doesnt work out.- family office, less prestigious funds, PM downshift to analyst, IR at a corporate, long only, endowments, buying a small business, b school and reinvention, corp finance as a coprorate. as for which one specifically well it depends on relative skills/desire/network/risk taking/emergency fund/luck etc. what i will say is it is quite rare absent some weird outside factor (health/family etc) or wrongdoing that a qualified/hardworking/resourceful/resilient person flames out and downshifts permanently to a very "mediocre life."
Downside is you're out of 'real finance investing', though you may be able to salvage it with finance adjacent things (corporate finance, accounting firms doing deal diligence) and/or shift to another role in 'real finance' (equity sales, PWM, etc), some try entrepreneurship, and/or search funds etc.
I think the mindset you need to adopt if you're going to have a career in publics investing is being comfortable with the big swings (provided you do your analysis etc); i.e. being comfortable taking career risk (and being right) is what I believe separates the 'also rans' from the stars.
Tbh not enough real data pts here curious if some could share
It's more all of the above, rather than none of the above. The experience of that job can be mapped to whatever hypothetical post-HF opportunity you'd want, because it's mostly a research/knowledge-gathering function and it's done in a demanding environment.
Only doors that might shut are industries that have very defined entry points, which pretty much means PE, but I have serious doubts about how much the PE door would shut. PE wants two things: (i) past knowledge of PE for the rubber stamp that you're OK and (ii) pedigree which is generally well-regarded if you're coming from HF.
For anything outside PE, I don't see how HF experience would be anything other than a strength. Maybe certain specialized ops roles that really require specific knowledge, OK fine, but those doors were always narrow to begin with.
Some general advice: up until your mid or late 20s, all careers feel like "tracks". Very path dependent, need to hit the right entry and exit ramps etc. But by age 30 and probably sooner than that, it becomes the wild west. No more tracks, no more paths, employers just want the person with the most general talent and drive.
PE idk id assume pretty hard. IR, Strat Fin (depending on how well you know the industry), Corp Dev (PE modeling is much more valued here than HF exp) I have seen a lot of. I have only seen a couple go VC route.
path dependency is real. stop playing for optionality / theta to decide what you like. certain brands and industry coverages work better if you want to go elsewhere. can also leave you in no-man's land -- have seen it cut both ways in multiple cases. don't try to plot your future so carefully... man plans / god laughs
The return path to PE is largely welded shut. I’d say harder to go HF back to PE than getting into PE to start with. I’ve seen a dozen friends come to this woeful realization.
What do you do if you flame out? You’ve got ~2-3 strike outs you can absorb. After the first 2-3, you’re basically branded a journeyman HF guy. There’s still sort of a market for your talent, but you’re essentially fired and looking for someone to gainfully employ you every 2 years. No fun.
What I’ve heard people say — which is most eye opening — is that you don’t get opportunity at life changing upside without the potential for life changing downside.
Sure, there’s a never work again upside outcome on the table. But there is also a never work again downside outcome. When you wash out of the HF game, you have a skillset that’s entirely useless to rest of the world.
not sure why people hate
to simplify the question, if someone flames out of HF can they still go to the same startup role as they could have gone to had they simply stayed in PE?
Of course they can. They just need a little more agency.
Startup hiring is massively less rigid than IB/PE/larger HF hiring and most recruiters and firms care a lot more about your actual capability. In a sense it's a lot more similar to $1bln AUM HF hiring where hustle is incredibly important.
Could anyone add a perspective on what this looks like after going in MMHF straight out of undergrad? thanks
Delete
Simple heuristic:
If you are okay dealing with sharp-elbowed narcissistic sociopaths -> stay in PE.
If you are okay dealing with eccentric people who may be on the spectrum -> try hedge funds.
Death
Buyside used to be a great, longer term career.
Now you last a few years at each fund and hope you make it in that time. So basically you roll the dice each time. It all depends on your luck, some skill, the market, your PM, how generous your boss is, etc.
After each job, it’s harder to get the next one. And eventually you move on to something else.
People with great resumes or experience get a lot more shots than others though.
Et laborum dolorem excepturi corrupti qui. Laboriosam delectus rem velit fugit ad consequatur. Et ut nisi soluta magnam dolor eos fugit illum. Nulla vero ea qui odio quod qui voluptas. Excepturi a qui saepe est qui. Quas quis voluptatem dolor nostrum ut quibusdam.
Ad earum et voluptatem harum quia assumenda. Tempora quisquam non ut. Eius laboriosam quaerat neque minima consectetur. Quis quo quas cum distinctio. Sunt facilis quisquam voluptatem molestiae odio quaerat.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Beatae saepe impedit optio rem. Laborum iure consectetur temporibus libero accusantium optio sunt. Quisquam et animi eum laborum aut nobis minima veritatis. Temporibus assumenda modi dolor vel dolore. Distinctio aut est tempora voluptatem autem et.
Aliquam sed accusamus in qui corrupti sed quia quaerat. Esse eaque aperiam repellat corporis recusandae.