Leaving PE Assoc role to start a micro-fund?
I am an associate in PE. I come from a fairly well-off background and could raise maybe ~10M to manage. Would it be crazy to leave my job to just try to do that? I am thinking of investing in mostly long-only public equities. Is there any viability of scaling that if it goes well?
Based on the most helpful WSO content, here are some insights:
Personal and Professional Considerations:
Challenges and Risks:
Potential Upside:
Advice from Peers:
In summary, while starting a micro-fund can be a viable and potentially rewarding path, it comes with significant risks and challenges. Carefully weigh your personal goals, the current economic environment, and the potential impact on your mental health before making a decision.
Sources: Leaving the buyside, beyond bored - can't even motivate to change jobs again, Leaving the buyside, Leaving Megafund for Lower Middle Market - Am I Crazy?, Would you leave in this situation?
I believe so. I’d leave my job and do it with you. Let me know if you want to chat.
If you go this route, I would encourage you to find your “Charlie Munger” so to speak. What I mean is that part of what I enjoy about investing is the ability to bounce ideas and get feedback from other smart and passionate investors. I have some friends who went this route by raising small (under $100 million) pools of capital, and some of them often bounce ideas off of me even though we have no formal business relationship. Also, I would think hard about how your investment process could consistently generate alpha in the public markets. Some of my friends are good at diligence, but don’t do well at sizing and risk management. Even if you overall returns are Ok, it will be hard to attract any non-friendly capital if you don’t have a well-articulated investment process and demonstrate high volatility / poor risk management. Furthermore, I would say $10 million is really tiny to do this properly. You will likely have to outsource a lot so most of your management fee is going to cover overhead. If you don’t generate carry, you will almost certainly be taking a big pay cut.
Finally, consider your family dynamics. Everyone has different needs and your style might not be appropriate for each individual. How would you feel at Thanksgiving if you were down 20% for the year? Every situation is different, but many of my friends explicitly do not raise money from family for these considerations.
Not related to this post but see you comment a fair amount. UMM PE Associate that was kicked out after 2 years (not performance related - more related to headcount/politics and have great references from both banking and PE). Want to stay in UMM/MF or large MM PE in NYC but market was tight and been looking for 3 months unemployed now. Have a good cash cushion - at what point do i call it and do something else (banking, corp fin, strategy). No chance i go to b school
If this is your passion, stick with it. Bigger picture is recruiting is tough because firms are conservative on hiring due to lower visibility on fundraising. I’m starting to see signs the market is stabilizing, but it’s not going to happen overnight. 3 months is way too early to throw in the towel. Personally, I would commit to recruiting for until at l at least next summer. If you aren’t getting good interviews, then maybe reevaluate. Hope this helps and good luck.
Quibusdam aperiam non saepe deserunt qui. Aut praesentium suscipit aspernatur. Error beatae ratione dolorum velit similique voluptate. Deserunt esse a consequatur omnis.
Consequatur et molestias non. Quibusdam aut nobis modi optio non nostrum neque.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...