What to consider when choosing a hedge fund as an analyst?
Hi everyone,
I was wondering if you join a fund as an analyst what are the key criteria to look out for? I tried to collect my own thoughts below. How do you think about promotion, long-term career, pay and pedigree?
- Last years Performance? -> Performance is indicative for pay but often varies from year to year, so bad indicator?
- AUM or AUM / Head? -> Also indicator of potential pay, but I assume larger AUM means less chance of getting promoted?
- SM / MM -> On this forum SM seems to be favored but I believe this is a personal preference in the end?
- Prestiqe -> Probably more relevant if you do banking/consulting, not so in a HF?
- Turnover -> Probably only available through LinkedIn search / talkin to someone. Should be indicator of promotion?
I am asking this since I have the opportunity to join a mid sized activist HF with AUM / Head of around 300MM. Outside of finance the fund is not know at all, but most people in the industry should at least have heard of it. The fund is only in two-three (one is very small) locations, overall with 1 person getting promoted to PM in 5 years and 1 hired externally (The firm in total has a bit fewer than 30 IP's with 18-20 assoc/analysts (some of them have 10+ years at the HF)).
My worries is limited option for promotion, smaller pay due to high PM concentration (2-3 assoc/analyst per PM) and also difficulties in exiting to another fund down the road.
Ah, the jungle of hedge fund selection can be quite the adventure! When swinging from vine to vine in search of the perfect fund to call home, here are some bananas to munch on:
Performance: While last year's performance might give you a glimpse into the fund's success, it's like trying to predict the weather in the jungle – it changes rapidly. Consistent long-term performance is a better indicator of a fund's health.
Assets Under Management (AUM): A larger AUM can indeed suggest a bigger paycheck, but it's not just about the size of the treasure chest. AUM per head can give you a clue about how much responsibility and potential bonus you might expect. However, don't be fooled into thinking bigger is always better; sometimes smaller funds offer more growth opportunities.
Fund Size (SM/MM): Whether to go with a small/mid-sized fund or a mega-fund is a personal choice. Small to mid-sized funds (like the one you're considering) might offer more exposure to different roles and a clearer path to promotion, while larger funds might offer more specialization and potentially larger pay, but with more competition for the top spots.
Prestige: In the hedge fund world, the shine of prestige can be less important than in investment banking or consulting. It's more about the fund's performance and the respect it commands within the industry.
Turnover: High turnover can be a red flag, signaling issues with culture or performance. On the other hand, low turnover might indicate satisfaction and stability but could also suggest limited opportunities for advancement.
Promotion and Career Path: You've noted that there's been one promotion to PM in five years, which might seem like a narrow path. However, consider the quality of mentorship, the fund's growth prospects, and whether they tend to promote from within or hire externally.
Pay Structure: The ratio of analysts to PMs can indeed affect compensation. A higher concentration of PMs might mean a smaller slice of the pie for each analyst, but it also could mean more opportunities to learn from experienced managers.
Exit Opportunities: A fund with a solid reputation in the industry, even if not widely known outside of finance, can still provide good exit opportunities. It's the skills and experience you gain that will be your ticket to new adventures.
In the end, it's about finding the right habitat where you can thrive. Consider what's most important to you – is it the chance to grow and climb the ranks, the potential for a hefty banana... I mean, bonus, or the opportunity to learn from the best in the business? Remember, every jungle has its own rules, and in the hedge fund world, it's no different. Choose the environment where you can best adapt and excel.
Sources: Q&A: 3rd Year Hedge Fund Analyst, Q&A: 3rd Year Hedge Fund Analyst, Differentiating yourself for hedge fund recruiting (post-IB), Q&A: HF Analyst @ $5bn+ Fund - Breaking In and Transition to Risk-Taking Role, Banking vs. The Buy-side: 10.5 considerations
You make zero mention of the team, who would be your direct boss, are they people you think will learn from.
Incredible to me that you are focused on AUM/head and the likes and make no mention of the people you met.
very good point. I left team blank on purpose since i thought it was very subjective and difficult for other to make an ejective decision on the other criteria. but i agree, especially since the team is so small headcount wise (per office like 10-15 not including admin), the culture is of course super relevant
(1) is the PM a good person to work with (2) is he good at making money (3) do u have a path of getting paid.
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