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Career Resources
Coke or Pepsi? They're for completely different types of people yet at the same time nearly identical products in terms of the kind of wealth/access they can lead to.
Hedge fund. If you are a rockstar you can easily start to work for yourself after a couple years. With PE you always need connections and have to cow tow to big whigs around the world to make sure your business does't implode. But at a HF you are simply engaging with public markets and can't be blackballed out of participating unless you do something really stupid.
Plus insider trading on the dark web is easy to get away with ;)
imagine thinking running a hedge fund doesn't involve any cowtowing... you still have LPs you know
Tbf I know several people who had a few good years in HF and then just managed their own money with niche strategies going forward. Having $10m-20m and being able to make concentrated but hedged positions can generate you an easy mid-6 figure a year income w/ a growing principal if you're good at your job - which you must have been (or insanely lucky) to get there at all.
From what I’ve read, PE seems a lot better for risk averse people. Your comp won’t swing tens of thousands or even hundreds of thousands (if you’re more senior) depending on the market performance for the year which is the case for HF. Don’t HF also have better work life balance since you work market hours? If I was good finding gems in public markets, HF seems like it would be better WLB with more comp upside.
HF has more upside comp, with at least a couple key caveats: 1) your risk of getting fired is usually much higher (especially MM pods) so you should factor that into the comp (probability of making it far enough to reap any of the benefits) 2) also mostly for MM (and outside of partnership and equity stakes in SM) you are talking about single year upside. PE firms make it in carry, which can be huge payouts if the fund performs.
As for the swings in “tens or hundreds of thousands” it’s more like hundreds of thousands to millions, so the comp can be VERY variable, so while at a HF you may still make a decent living (as most HF/PE/IB jobs do) in an poor/ok year, you can go from few million to few hundred thousand year to year (and your risk of getting fired at some shops is high during this time).
Hundreds of thousands is selling it short. Try millions if you're legitimately senior.
Even a mid-level analyst is seeing hundred K swings.
I’d probably choose HF over KRR. Nobody has even heard of KRR. Pretty easy choice.
So I met this IB guy in 2005 who worked at Bear Stearns and one of his interview questions that he gave was "Spell Bear Stearns" - he said some people spelled it "Sterns" and he would tell them to get out immediately lol.
HF because time value of money. Your big payouts come today vs. PE when your fund has an exit in 10 years. Large payouts today re-invested become very large numbers in 10 years vs. the PE firm that finally sells its shitco. and pulls out its 3x cash-on-cash, if it's lucky.
Answers fail to mention the most important point imo: the personalities, skillset of the two jobs are completely different. The type of investor you are will define the asset class and the type of investment (liquid vs illiquid).
It’s unlikely you will have to choose between the two and if you are in that situation, take time to think what you are better at. HF analysts would make very bad PE investors and vice versa (!)
Why would HF analysts make "very bad" PE investors?
Many PE investors exit into a HF after a few years so technically they wouldn't be bad.
Move HF to PE is very rare. In HF you use public info for short term trades. In PE you need extensive DD based on private info to build a multi-year plan for the company.
The main reason however is personality: in PE you need to build a network, engage management, be a good communicator: there are a lot of soft skills involved. As a HF analyst you focus on the hard analytical skills, you execute the trade and you try generate profit: you don’t actively add value to the company you invest in.
Based on the personalities I know in HF, they would make bad PE investor: selecting a target company is really only the minuscule first step in PE: most funds know which companies are good but you have to win the auction and the journey starts there. Same the other way round: It’s not a given that a PE professional is a good stock picker.
It’s not an opinion, it’s just how it is. Both are very good career paths but you are unlikely to fit both.
Would you rather invest in a market thats the most competitive market in the world where everyone with an internet connection can compete and prices are updated daily to reflect all available information or invest in a market where you bitch around other people to provide absurd amounts of financing at way too low of rates, financial engineer ebitda adjustments to meet leverage covenants, and play hot potato with mostly dogshit companies every 5 years and try to convince the next guy it isn’t dog shit? Personally the latter seems like a ticking time bomb to me, but hey it’s worked out for over a decade now so who knows
So you’re saying they both stink? :)
LOL @ AQR being considered a "top" HF.
Where are the top HFs though? All SMs missing. All tiger cubs missing. The list is inaccurate. Please fix.
Guys, I'm a college student from Europe and thought that these were the top firms. If you know better, please tell me so I can know better and also change it.
First and foremost, many consider CVC as not in the running for one of the top three players in PE. You missed out on Apollo or Carlyle for PE. And for HF, AQR is great, but not as top-tier as Bridgewater or RenTech.
CVC is definitely top notch in Europe; probably not in the US
Since when was Bridgewater that prestigious? There are plenty of large hedge funds that aren't run like a cult.
Not to be a total heel here, but really... it depends on the person and their goals. For top-tier PE (e.g., KKR or 'KRR' per OP, Blackstone or 'BlackStone' per OP) positions, you have that name brand on your resume for life. If you decide to leave for whatever reason, you will have a 1-up for the rest of your career. During that time, you'll be exposed to mega deals, be very well compensated, etc. Not saying it's all sunshine and the golden ticket, but being employed at those shops is a good problem to have.
For HF, look... The potential upside and PV of the upside can be staggering. From my understanding/colleagues' experience at HF, it's a love/hate relationship. When things are good, they're great. When things are bad, it's terrible. I've seen friends at HF have a few bad quarters and it ruined their desk/lost their job. Granted the risk on the HF is something we all know about, but still something to think about.
To your question... I'd likely choose HF. Process is shorter-term and higher-tempo. This is missing some steps, but at a glance... 1) Investment idea, 2) modeling/case building, 3) pitch to seniors. PE--in no particular order--has 1) Deal sourcing (can suck), 2) reviewing/monitoring existing investments (can suck), 3) DD on possible investments, 4) Admin (NDA, NCND, Deal Documents), 5) Coordinating with Bankers, Legal, Accountants, etc., 6) Coordinating efforts on fundraising, 7) Working with the debt syndication, 8) Structuring the exit, 9) Executing the exit. For someone like me, I'd rather work on my own ideas with a shorter runway to execution. But for someone else, PE may just be more engaging/interesting.
This list of steps is not very good. You have omitted the entire 5 year holding period between (7) and (8) where you actually get to grips with the portfolio company and its management team with the intention to create some value.
Thanks. Please see the third sentence of the last section on 'missing some steps'
It is very stereotypical banker behavior to always maximize for future career options. You go to a top school to maximize your options after graduation. Then you go to a BB bank, top consulting firm, or similar to maximize your options after the junior stint. Then you go back to a top school for your MBA, to maximize your career options. And when you're finally ready to settle down and truly start your career, you still maximize for any possible career change, down the road. This goes hand in hand with the general risk aversion people in the community display.
As for top PE firm or top HF? If following the above philosophy, I'd probably go for a top PE firm.
I would pick a PE firm. More stability, my opinion. I don't like to risk and HF is more risky. If you add this option to the business then it is a gamechanging feature, my opinion.
HF so i can make fun of amc/gme apes still bag holding
HF
What's life without a little risk? We're all gonna die someday, it's not the end of the world if you get kicked out from HF.
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