I have noticed that most PE analysts / associates at top funds go over to the public markets side at firms such as Viking, Tiger Global, Maverick etc. etc.
I was just curious if there is a reason for this? PE seems to be more stable than HF and in general is growing more while the HF space seems to be an industry in decline.
Any thoughts would be appreciated.
Many thanks.
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My .02 as someone considering the same (and so obviously this will be a biased answer) but had never really thought about HF before:
I think to myself: I can spend all day focused on generating ideas, testing them by building simple models, doing industry / supplier / competitor calls, and using my brain instead of just spreading data rooms and herding cats (advisors) all day? Yes, sign me up. I would do that for 1/5th of typical 2+2 1st year Analyst salaries. That actually seems like a decent job.
An obvious thing here others haven't mentioned is the salary. Look at funds like Lone Pine, where they have $1bn+ AUM per analyst, now apply 2 and 20 fee structure to that to see how much the average analyst makes... yup, over $60mm a year. Sure, this is not accounting for operational costs and the distribution would probably be top heavy, but it wouldn't be unfathomable for the new hire to be pulling in mid-seven digit salaries. Not to mention that the growth trajectory can be insane if you do good work.
A 1st year at Lone Pine does not make anything close to mid 7 seven digits. Are you insane?
There are several things wrong with your calculations. The 2 and 20 fee structure does not apply to their full AUM. The senior Investment Professionals take the lion share of fees. Sure there is a ton of upside if you perform well over a few years there, but I think it's wildly misleading to say that the fresh new hire would be pulling mid-seven digit salaries in their first year. In either case, I do agree that the upside at a place like Lone Pine (all else equal) would be better than your standard MF PE job.
Ok but here's the thing. Last year, Lone Pine was a $40bn fund that was up 25%, with only 10-15 IPs. If the ~7-10 analysts (not the 1st year ones, but even them you could make the case) at a $40bn fund up 25% didn't get paid $1mm last year, then they would leave to a place where they would, as that would be absurd. And the thing is, they're not leaving, as Lone Pine has extremely low turnover. Lone Pine has like $27bn in public mkts, maybe 2bn of that is Mandel's, so call it $25bn. If they're up 25%, apply 2 & 20 fee structure, and carry pool is $1.25bn. Not so unrealistic for an analyst to make $1-2mm and an MD to make multiples of that...
Like what do you expect this is arguably the greatest fund out there, analysts are going to make 7 figures in a good year if they perform well, that's how it works there and that's why everyone wants to work there
I can't believe someone in the industry actually asks this. Any reputable public markets firm blows PE out of the fucking water by a huge margin. PE as an asset classes is completely ridiculous and I would not put a single dollar into this. The illiquidity and waiting game is beyond joke. MAYBE if you have an access to top deal flow. But even then, you wait, wait and wait.
Juniors going to top HFs are among the smartest individuals in finance who noticed that being a PE modelling monkey can give you a brain damage instead of professional growth. Nobody cares about face time, politics, etc. at tiger cubs - performance is the only thing that matters.
You are actually paid to think and execute, not dance around with bankers and copy paste files from data room to another data room.
HFs are THE ballers in finance and anyone who is saying that PE is mOrE StAbLe aNd GrOwInG is, no offence, retarded.