Would you make this move?
Hi,
I am currently struggling with a decision to move from the sell-side to a platform HF. I have an offer incoming (been told by management that offer with concrete details incoming soon) but given I have gotten info on roughly what the terms may be over the course of my discussions with them, I was hoping those rough details can be sufficient to generate a high level picture. Obviously, there are various personal factors that would impact such a decision but I am looking for outside opinions from people currently at a HF primarily from a comp perspective and career risk-reward.
I am currently a macro trader at a BB and have been doing this for 5 or so years now. I sit in a seat with relatively low franchise value and primarily make money from principal risk that I put on. In that regard, things have been going pretty well for me and my PNL has been good as well, dare I say so myself (10-15mm first full year, couple of years 20-30mm, one year 30-50mm, one year 50-100mm largely in that order but have kept ranges and may have mixed the order up here and there in the interest of anonymity). I have also been well looked after in my current role from a comp perspective (1m to 4m USD in total each year for the last few years; very consistently correlated with PNL).
This is the first time I have taken interest from a HF seriously and based on rough guidance, it seems like they will be offering me in the ball park of 150-250mm AUM, 5%/10% DD limits and 10-15% payout. At this point, whether they will offer a signing bonus is unclear and I'm not sure what terms they will offer to buy me out of my current deferred stock.
Obviously, it is impossible for me to say how I will go if I make the move but if I assume I can make 20-30mm PNL, the payout does not seem to be meaningfully more than what I can potentially make in a really good year in my current role. I understand that the upside is more and the AUM can grow with the track record, but I don't want to fall victim to selection bias as I have generally only heard of buyside success stories.
All else equal, would you guys see this is a good opportunity relative to my current seat? Are there any things to watch out for/clarify before making a decision?
Appreciate the advice in advance.
From my pov, you’re in a good seat. Making 1-4mm and take risk how you want to us a pretty great thing. Plus you have stability. If you go to a platform, 10-15% shot you string together 3+ great years out of the gate and get stability, 75% shot you’re out of a job in 2-4 years and 10-15% shot you’re out of a job in <2.
my general view is platforms act as though your pnl will be the same but unless you’re only given drawdown limits and no other constraints, that is unlikely.
comp upside doesn’t seem big enough to take that risk.
at your comp level, you don’t need to try to make 5/7 a year for a few years best case with risk of 0s or job loss.
You need to maintain stability and to bank as many more 2-3-4mm years as you can at your current role imho.
Thanks a lot for this. My hunch was taking me down the same lines as well - the upside in the short-term seems fairly negligible and I'm not at the stage in the career when I'm looking for home run years.
U make that much 5 years out of college or u had other jobs before? What kind of product do you trade (cash or derivs)? Also what do you do with like 4 mil assuming u r in ur 20s/early 30s? How typical is ur pnl for someone of your tenure? I would think you are at least in the top quartile.
Bump
First job. Trading derivs.
I am around the age brackets you are suggesting. You invest the money, maybe spend 100k or so on something to treat yourself after a really good year but the rest is used to try and grow assets. My PNL is rare for what I trade/franchise etc. regardless of tenure.
Hi - could you please shoot me a pm? Would like to ask some questions
Congrats and thanks for the answer
Obviously I'm not experienced but do you like the culture of your desk? If the only upside to the platform is a marginal comp gain (with 5x more stress and much less job security) then no point in moving tbh.
Yes, I really like my desk/manager and the general culture as well. I'm not looking to run for the door by any stretch of the imagination so I'm more so going through the exercise of figuring out what sort of realms these HF offers need to be in to make it a tough decision. I've never properly gone through the recruiting process with a HF so I have no concrete benchmark for what they actually offer and I'm using this to gauge the upper end of the offer spectrum (hopefully) given how desperately they are looking to hire PMs at the moment.
How are you able to make this Pnl from a low value franchise seat? Is the majority of your risk directional or RV? Would think that for books with less franchise value you would get a smaller risk limit; so curious how you are able to make outsized pnl in the seat.
They're running spec risk in derivatives (if i've read the post and comments correctly) so definitely big upside.
Yes, through running speculative risk. Mixture of directional and RV, dependent on the macro environment. 2022 was very much skewed towards directional while 2021 was more on the RV side of things.
How much prop is it versus market making?
Varies per year but I would say over a multi-year time period, it probably is in the realm of 80% prop.
If the role exists across BB I would assume staying on the SS offers way more stability than buyside. Sounds like they pay out as well. I think you are in a great seat.
I can't add any color here but just wanted to say you have the kind of role I would dream about. Not sure how you got to where you are (would love to learn) and if this a very quant and math-heavy role?
Agree. Can you explain your background?
I won't go into too much detail given the other information I have provided in this thread but I come from a quantitative background primarily. Numbers and risk-reward come naturally to me. Macroeconomics, in the context of the real-world rather than what textbooks teach you, came over the course of time in the seat and I'm still learning a lot on this front.
I think people that have entered the market in the last 5-10 years are massively advantaged relative to the rest because they have had the benefit of seeing low volatility (pre-Covid), a cutting cycle and now a hiking cycle as well. And all this while they are new and impressionable. From what I have seen, people with more experience tend to have a bias towards the regime that was most prevalent during their formative years in the market (usually some combination of low rates, QE and disinflation).
My role doesn't have to be but the beauty of it is that you can make it very quantitative if that's your skillset. There are various different approaches that people can choose to take to make money in my product and the macro environment will dictate which approach works best at any given point in time, which is why I think the best approach is to have all these tools in your arsenal.
Couple things;
Think you need to a take step back and understand how much value you have brought to the bank versus the opportunity the last 3 years. But also need to understand that strategy did very well cause we went from "extreme cycle" to "another extreme cycle". 2023 is going to be a much more grind year, so if you nail all hats off to you. But in 2023 you are really going to see how much the bank likes you.
Your skillset will not match what needs to move towards an MD role and over time you will see them trying to get you change it somewhat. This is the main reason a lot of people leave for the buyside after a run like.
Fund offer; too low that is a basic offer for a "good SS trader" with experience not someone with your resume. So either this fund does not fully believe your strategy. Somewhere closer to 500aum. Costs/Investments in staff upfront they are willing to give you and so on, potential to change your strategy if market conditions change and so on. I see no love here its a basic offer.
Just wanted to second this perspective because I think it is very solid advice and I would stay where you are for now. I don't have perspective on how basic offer for a "good SS trader" differs from a basic offer for someone lateralling from another fund, but a better than basic offer for someone coming from a HF will include some form of up front guarantee to compensate for any deferred comp, lost opportunity cost if you have to sit out any time and miss out on opportunities, lost goodwill, hassle of transitioning, et al... These are not offered up to just anyone, but if you are truly in demand, then it is in market convention. I have heard some quotes from HHs recently (who obviously always exaggerate because they over-index on a few data points and are paid to get you to switch roles) that are in the $1-3m range for people right now in macro products who have reasonable successful track record (multiple year length, reasonable performance stats, blah blah blah).
Thanks.
I have also been hearing stories of massive guarantees being offered so I am curious to see where they land on this front.
I’m a bit apprehensive though because I heard of one situation where a SS trader made the move and got a big chunk of equivalent deferred to make up for the bank equity being left behind. However, when he blew up, the fund let him go and he didn’t get any of that equity. I’m not sure if this is standard protocol or just the result of a loosely written contract.
Can you elaborate on what you mean by this statement?
When you approach the MD role your main tasks are to "manage the brand" and "manage good trader personalities". You are no longer expected to out-wit the market though if you do that is a nice added bonus. Very likely OP got paid more than their boss the last two years as the higher up's know who really made the money and their boss is happy to manage such a person.
My hunch, OP is say trading something like repos and has spent a lot of time using their unique background to update opportunities and is now able to see "flows via his seat" so while its a low franchise seat (possibly low margins) they see how the market reacts and what happens. Spending time on their specific model and being able to see this flow has allowed them to be ahead of the market.
So really the next step would be to find someone similar to themselves, who's younger can do all the grind work (maybe bring a even stronger similar skillset) and let them achieve similar success and focus on the building the brand. When you put up those kind of #s everyone on the street all of sudden wants to talk to your desk.
In reality this is all such hard mental exercise for most people and the moment you see "I am adding more value to the bank, than its offering me now" aka market-conditions, management decisions etc...You are better off spending 100% of your time trying to "out-wit the market" and knowing the few customers who only trust you will follow.
Again all a hunch...
Thanks a lot for this. They haven’t come to me with the concrete offer yet so I benchmarked based upon what I’ve heard them offer to other SS traders. But nonetheless, this was very useful.
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