I have about 20M in an trust I get pretty (right out of college). Advice on what to do?
I am currently on the IB/PE track, but that is a lifestyle I don't want to endure; I have an opportunity here to start something big. Should I do an HF or a VC firm? Also - I have more than 20M, but this is what I would be willing/allowed to start a company.
Ah, swinging from the vines with a hefty trust fund right out of college – what a jungle of opportunities you've got there! Based on the most helpful WSO content, here's a bunch of bananas to consider:
Risk Appetite: Starting an HF or VC firm is high-risk, high-reward. Can you stomach the volatility?
Experience: Most successful fund founders have significant industry experience. You're fresh out of college, so consider if you have the necessary expertise or if you'd need to partner with industry veterans.
Long-Term Goals: What's your endgame? Building a legacy, making a quick buck, or something else? Your goals can shape the path you choose.
Lifestyle: Both HF and VC are demanding, but in different ways. HF can be more intense day-to-day, while VC might give you more flexibility for strategic thinking and networking.
Impact: Do you want to be involved in early-stage innovation (VC) or in trading and investment strategies (HF)?
Regulatory Landscape: Understand the legal requirements and compliance issues associated with starting a fund.
Network: Your connections can be crucial in raising capital beyond your own and in finding investment opportunities.
Education: While not mandatory, further education like an MBA could provide valuable knowledge and networking opportunities.
Remember, you don't have to rush. You could gain more experience in IB/PE, or even work at an existing HF or VC to learn the ropes. And hey, with that kind of capital, you could also consider being an angel investor or setting up a family office while you explore the terrain. Whatever you choose, make sure it's something that gets your tail wagging with excitement!
Sources: What should I know before starting a Hedge Fund?, Join startup HF or pursue MBA? Seeking advice.., Would you ever consider joining a start-up fund that your friend started?, elite M&A -> elite HF -> failed startup founder -> decent HF?, Do I join Global capital markets, S&T or IB, if my goal is to end up in a hedge fund
With $20MM, you’d probably not be able to start a traditional hedge fund or firm where you can hire plenty of help and have access to proprietary information. However, if you have a strategy, that’s definitely enough to start a fund where you do all the trades and decision making, and maybe hire an analyst or two to help. Think something like Cornwall Capital from The Big Short book. Definitely mostly depends on if you can execute a strategy largely by yourself.
Lastly, if you get this going, I’d love to work for you
Think you should continue your path. There’s a lot of value in the 2+2+2 path in the training and pedigree it’d give you if you needed / wanted to fundraiser externally in the future. Wouldn’t go deploy all your money when you could go into a learning program getting experience while deploying other people’s money. Just my 2c
Travel the world for a couple years, get married, etc.
After you settle down, work for someone in a business you're passionate about. Learn the biz, and start your own company.
Congrats, hoping to put my kids in a similar situation!
I'm in a slightly similar situation except not as good. Get access to the trust around 35 and its around 20 flat. Honestly I'm interested in finance in its own right and am pursuing it over other things because I like the craft of investing. Seems like just becoming a wage slave in IB is going to mayybe double your inheritence if your really good. Why not just do something you really enjoy. If that happens to be finance, go that route. If you receive it out of school then you pay 0 opportunity cost. Never heard of people doing this though.
Put $5M in 20-30 year treasuries for truly passive tax advantaged cash flow that can fund your daily life and do whatever you want with the rest. Honestly could just dump it all in VOO and forget about it.
If I were you, I’d be optimizing for purpose and personal satisfaction in my career decisions. Compounding interest will candidly account for the bulk of your overall net worth in 40 years even if you do the IB / PE partner track, so the financial rewards of those careers are largely irrelevant in my opinion.
Consider applying for a fellowship - something like Schwarzman Scholars in China or Fulbright or even Teach for America or Americorps or the Jesuit Volunteer Corps. Could even work for a UN charity or something like Bronx Lacrosse if you don’t want to miss out on fun early 20s in NYC. Something that gives you new perspective on life and that allows you to make new memories. Explore who you are as a person and what motivates you and then figure out what is worth dedicating your life towards.
If you do stick with banking, maybe try something like the IFC as an exit op instead of traditional PE.
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