Working at small HF after undergrad
Thoughts on taking an offer at a small HF (150-250 AUM and sub 10 headcount) in a tier 3 city (Think Nashville, Tampa, Austin, etc). My long term goal is to work in NYC for a L/S equity HF. How would this offer compare to working in IB/ER at a MM/BB/EB straight out of undergrad?
Some other context: The compensation and hours would be very solid. My biggest concerns are that I will spend a lot of time across different sectors (So I won’t become an “expert” on 1 sector like an IB or ER guy). I’ll also have to self teach myself a lot of modeling concepts. The fund also doesn’t have much prestige so it might be tough to find a job if I get laid off during a downturn.
Bump
I am not from the US nor have I worked for a L/S Equity HF before. So take what I say with a grain of salt.
A friend of mine started his career at a small HF in Europe with less than 10 employees. A bit bigger than yours in terms of AUM, but still a "no name". He recently moved to a MM L/S equity HF that all the kids want to work for. What I'm saying is that it's totally doable. However, he told me two things:
1. He was hired for his sector expertise. At the SM, he focused on a niche early on, and it just so happens that the fund in question recently decided to invest in that niche. Since he was one of the few in the L/S equity space who knew the sector well, he was in a good position to stand out.
2. He regrets not starting out in IB. Don't get me wrong, I pointed out that it worked out for him in the end. But he still thinks he lacks the training and was "lucky". In fact, before landing the MM spot he was looking for opportunities in IB and considered losing two years of seniority just to restart as an A1.
I don't want to discourage starting at a small HF. But keep in mind that MM L/S Equity HF require specific expertise and you may lack the training you would get if you start in IB.
Good luck!
I did exactly what you describe and was lucky enough to make it out, but I definitely wouldn't recommend that path to anyone else. You will get no looks from headhunters, will have a difficult (if not impossible) time making connections, and will most likely be stuck there and/or wash out.
Go for IBD or any brand-name buyside shop. If you want to maximize optionality for the best buyside role at 24-26, your odds improve by taking the more prestigious IBD roles out of undergrad.
Could I transition to ER after two years at the fund?
If you don't think you'll be able to stick it there for the long run, you should just do IB/ER program. Small funds can be incredible because you get to work with pedigreed PMs without the insane application requirements at the large funds, and when you're one of the first hires, you can really carve out a role when it goes from $100mm -> $1bn. But if you were planning to move cities/funds anyways, just do the more prestigious structured program (IB/ER).
Also consider how long it's been around, how the momentum is for fundraising, and whether the ~10 employees is too high a count for that size and could spell issues. For context, I only decided to join a startup fund out of college since it was 1.) relatively decent scale ($100mm for 3) and 2.) they had great pedigree and we quickly raised to $250mm despite IP count staying at 3, which makes this quite lucrative.
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