Which offer would you take?
Option 1: $4B long only that pays $750k and modestly increases over time.
Option 2: startup l/s low net fund with $300m in assets and good 3yr track record. $200k base + I get 8% of profits (performance and management fee net of expenses). They're starting to fundraise and targeting $500M in AUM by next year.
What do you guys think? For context I have 6 years of hedge fund experience at 2 different l/s funds
What’s performance been at the long only? If you can count on the fund staying in business and keep clipping that salary, pretty decent seat
The startup is pretty good economics. If you assume 5% returns at $500m and $5m in expenses, with 1.5/15 you’re making the same amount as the other fund, and there’s massive upside with scale and performance
They’re giving you pretty good economics. Even at $300M and 1.5/15 like the poster above assumed, if you pencil in 5% return and $3M in expenses, you’d get ~$600k all in which isn’t bad. Are you sure you get management fees?
Ooowee, that LO seat would really tempt me
How many years have they been saying this?
Moelis 100%
Just build a quick model.
1) figure out what growth rate and discount rate to put on the LO comp.
2) figure out what Sharpe and vol assumptions to layer in on the hedge fund side. Add a variable for growth (positive or negative). Set a threshold return and size level where they shut down. And pick an appropriate discount rate.
compare not just NPVs but shape of distribution and decide which you prefer.
just realize that with option 2 (and most hedge funds, losing your job / fund shutting) correlates with 1+ years with minimal comp. Meaning no one gets paid well in the year (or several years before) a fund shuts in most cases.
It's mind-blowing to me that no one here considers investment style preferences.
It's like you're deciding between being a public servant vs being an entrepreneur based on NPV. You guys are all focused on the wrong thing.
The people asking these questions have little experience. So I’m not sure they remotely know what their own preference is.
The LO sounds like a very comfy career spot. But if the HF has a solid strategy, super volatile times like we're in could get pretty lucrative pretty quickly (but they could also rapidly take a turn and blow up in your face). I think this just comes down to risk tolerance. If you want the safer, more consistent gig then go LO. If you are ok with making less in the near-term but having the potential to crush it in the med-long term, go HF.
You already have the HF experience clearly so think about your time there. Have you enjoyed it or have you wanted more stability? Would the hours be meaningfully different? The marginal impact of comp between the two unless the HF really knocks it out of the park are fairly marginal, so where would you rather be spending your time - pursuing personal interests or working?
Killer situation to be in either way so congrats!
I'd like to ask for a few days to consider the offer in its entirety." "Thank you for the job offer! This is such a great opportunity with your company. I'm excited to bring my skills to your company while continuing to grow my career.
What has performance been at the startup? Are they below high water mark? What’s their fundraising pipeline? If you don’t have these answers it’s going to be hard to commit to them.
My guess is LO is the way to go
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