Outside of tiger global or something - why move to HF after PE vs stay on as VP or principal
make $10-20m of carry over life of fund with an army of associates doing your work vs $500k a year with 1-2 years of unemployment between gigs while working 80 hours a week on earnings previews and reviews
What a fresh and original take here - super insightful my man!
It has less to do with pay, and more to do with actual day-to-day. If you enjoy hands-on experience with PortCos, owning assets and enjoy deal-making (i.e. execution), staying on in PE makes much more sense, considering you'll be doing more of that towards the more senior positions.
If you enjoy fundamental research (i.e. building a model from scratch, trying to understand markets/companies, and finding ways to generate alpha) more than deal execution, you're better off going to a HF.
PE and HF are drastically different on a day-to-day basis. Sure compensation is still mgmt/performance fees, but the former is longer-dated with heavy DD but lighter fundamental research, whereas the latter is much more dynamic with lighter DD but more intense research.
Assuming you can make the same amount of money in both professions, lifestyle is a big draw. In the MMHF structure, you really are your own boss subject to the drawdown limits. There's no investment committee you need to convince. You're not really managing more than a handful of analysts compared to a giant team of associates at large PE shops. There's close to zero corporate politics, only a demand to make more money. And outside of fundamental information release periods (earnings, macro news, govt statistics releases) you don't need to physically put in too many hours in the office. If you're a good PM, you can spend 15 hours per week on average* for idea generation, put on the trade, hedge out your factor risk, and the rest is mostly just the waiting game. Spending 4x the effort on brainstorming won't get you anywhere close to 4x the alpha, and staring at a screen won't make your position any more profitable, so I usually just chill out if I can't thing of more trading ideas that week.
*15h/week on average is actually ~60h/week during high intensity periods and like ~10h/week during any other periods. And unlike IB, you're really working, coding, thinking very hard and deep during these brainstorming sessions. Other activities like watching a screen or monitoring an execution algo's progress I don't consider to be real work, since I could be reading a book or lying on a beach and be just as productive from a PnL perspective.
I never realized this about HF hours. Would you say this is the common experience? I’m working about 50-70h in secondaries PE.
Yea the key here is to work for the right people. On a given floor you will find teams like the aforementioned one but also teams pulling 75hr+ every week to grind numbers…. The key is to find the right PM who has an efficient process and typically those are the ones that can help you grow and take next step too (vs just having you grind numbers /stay as monkey)
Work 50 hrs a week and start pulling 7figs with 6 years experience and up. yeah fine it’s not that kind of money every year and comp/job security is more volatile vs PE but it’s a totally different lifestyle. You have the option to have free time and to me that’s really beneficial. It really is something to be able to go home relatively consistently at 5pm and just do nothing. I will say that this is highly dependent on YTD performance and culture of your fund/PM. My PM has “made it” so he grinds less now.
Im not going to make as much as the big dogs in PE but then again I'm probably not going to be a big dog in the HF world either unless I start putting on some serious risk. There’s some benefit to having front end loaded comp when you’re younger too but I do think I will cap out at 7-800k in normal years, 4-500k in bad years and 1-2m in good years if I continue this “senior analyst” route which is essentially having decent amount of trades on to get paid something but not big enough to make bank or blow up and get fired.
Do you want to do transaction management work, or take risk and run money? Pretty different jobs..
You should’ve played in the MLB if you wanted to optimize for money only…
You should’ve played in the MLB if you wanted to optimize for money only…
because some of us when we are looking back on life want to reflect that we did interesting work rather than transactional bs and politics. It is not all about money.
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