FoF Questions (prestige, WLB, pay)
After recently researching the FoF industry, I have an assumption (most likely completely false) that FoF isn't as respected/prestigious in the financial world. Is this correct? I have always wanted to become a VC, but due to the traditional background of the job, I feel it's almost impossible because I most likely won't student engineering/cs or cure cancer. I feel like FoF somewhat resembles VC to a short extent. Do any top graduates from the best ug b-schools ever matriculate into this facet of finance? Do most FoF firms solely do this, or are they mostly combined with other types of finance? Is it considered PE or AM? Also, what do the top people in the FoF industry make, because I feel like I never see anything about them in finance news? Is this a hidden gem in the finance world, or is there a reason why it is less known?
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I believe your research came from WSO, and in that case yes you are wrong. Nothing wrong with FoF, it is an extremely lucrative career and I would argue it’s overall better than traditional IB/PE if you take into account WLB and Benefits.
You are still investing in companies and funds, the only difference is that you piggy back off the due diligence a traditional PE firm would do. Your role is to decide whether or not their DD is sufficient to warrant a minority investment from you.
Don’t know why FoF is hated on this forum, pay is good (maybe not as high as PE but still making 6 figures easily), WLB is insane (40 hour work weeks), meal stipends, Ubers, wellness stipends, and company retreats.
The only real difference between these roles is: Pay, Hours, “Exit Opps”, and DD Depth.
Even then, FoF is an exit opp, and most people that work in that industry tend to stay for the long run because it’s actually enjoyable
Agreed with everything you said. With that being said, I would say the co-invest groups within FoF firms are interesting to work for but if you're buying secondary LP shares or true 'FoF' work I found that to be terribly boring sitting on the PE side
Agree with the above. Know a few people who moved from traditional PE to FoF co-investment and they seem very happy.
If you compare FoF to the likes of Blackstone/KKR, I’m sure the later gives you more prestige and cash. However, I’d argue large FoFs might be a better deal than many mid-market funds there. Pay is on par with good WLB. Carry is a lot more diversified vs. in MM if two of your investments go sour your carry gets eaten.
Look, I know this sounds crazy and snobby, but eventually one day I want to have wealth to provide for generations of my family. Also, I have also been incredibly entrepreneurial, so I eventually want to start my own fund. If I scaled a FoF/AM fund to be one of the main funds in the industry, could I theoretically earn myself $1B. I know this is crazy.
Good luck doing that with direct PE…
Theoretically, yes you could do that and be very, very wealthy. Is it likely? Not at all. But I would assume that since you interact with a lot of LPs in secondary transactions and GPs in co-invests, you can build the connections you need to set up a FoF shop (LPs for committed capital/secondary deal flow, GPs for co-invest deal flow). Assuming you build a track record and have the right pedigree, it is a possibility 10-20 years into your career to start a fund. Being the top fund in terms of returns or AUM is another story entirely. Though, I wouldn’t consider it the path of least resistance to your end goal at all.
Not in FoF but I’m in direct secondaries on the buy side and it’s so chill. Absolutely love it. Very good WLB and we still look at and invest in cool companies. Even the private capital advisory bankers are doing very well. Secondaries space as a whole is overlooked on this forum because it’s not as sexy as UMM/MF buyout but the economics can still be very favorable. You could do a whole lot worse. The partners of my fund have been very successful.
Do you do traditional secondaries or complex?
It is fairly simple from the transactions I’ve been on so far. We directly replace shareholders on the cap table who want liquidity. We are not doing GP or LP stakes, it’s direct only. Typical would be buying out a former founder who’s had nothing to do with the business for years. We have also done it for past employees, VC funds, and angels. Our check size isn’t huge but it works well when these guys have a few million locked up and they want to buy a house or something. Can get a good discount on shares in this market.
Mind PMing me?
My brother in Christ, you're still a high school freshman, and yet you're already forming so many biased/ toxic assumptions such as 'FoF isn't respected/ prestigious'? Do you realize that other than ruling out many potentially rewarding careers for yourself, you are also developing a very warped and unhealthy view of the world? What's gonna happen if you keep doing this is that you're gonna 'focus all your efforts' on VC, but since you don't have the experience to know HOW to do that, you're gonna go down a very warped path. You're gonna rule out networking with a lot of professionals because they 'dont work in VC/ prestigious high finance' or because they work in FoF/ WM or some shit. You will also block out valuable advice from adults/ professionals/ friends/ wise people because they 'don't work in VC', etc. That attitude will show in your college applications and internship recruiting, and trust me, recruiters and admissions officers are experienced enough to see thru you and they will not like this attitude. Furthermore, the danger with forming so many assumptions this early in life is that they will quite easily morph into your fundamental beliefs of the world (speaking from my experiences from therapy here) - and that will make it harder for you to chip away at them.
And the obvious problem - what are you gonna do if you do not break into VC? Are you gonna get depressed and turn down a FoF offer if it crops up?
Bro, start developing a more holistic view of the world and enjoy the journey while it lasts. Being hyper ambitious and focused on VC in high school is good, but you need to pace yourself and make sure you don't burn out
Can anyone please provide a rough estimate on comp progression for a career in FOF?
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