Joining 1bn+ startup L/S funds?
Hey all,
I’m currently a 2nd year associate at a MFPE firm doing traditional buyouts (think KKR, BX, Apollo, Warburg, Silver Lake, H&F) and am wondering if it’s a good move to join one of these recent startup funds focused on L/S equity with a bent towards TMT (capacity to do privates).
I was 2+2 IB /PE and am certain I dislike tedious execution and transactional-based workflows and would prefer pitching trades and running KPIs diligence. So I would like to move to L/S equity but I am not sure if the blow-up risk of a smaller platform outweighs the amount of potential upside I could get from joining a rising star. Full disclosure I do have an offer to join one of these startup funds. Options are to give it a leap of faith or to stay at MFPE for another year or two and keep looking around for a larger, more established fund.
if anyone has any thoughts that would be really helpful. On the list below I included D1 but obviously not a comp and I don’t have an offer from them.
Kinetic Partners (Partner from Darsana)
SurgoCap (PM from Lone Pine)
Anomaly (PM from Viking)
Avala Global (PM from Viking)
Mane Global (PM from Moore)
Alua (Partner from Lone Pine)
Voyager Global (PM from Viking)
D1 (CIO from Viking)
Xn (Partner from Soroban)
Untitled (Partner from Tiger Global)
I know a lot of these are down 15%+ YTD. Appreciate any insight on career advancement (path to principal/senior analyst, compensation structure, workflow, difficulty of managers, stability or composition of AUM capital, etc).
Thanks very much in advance
don't have anything to add but interested
This may be controversial but my thoughts below:
- if you are extremely interested in pitching trades and doing the deep diligence and think you will have talent for it, join CGE, Surveyor or Ashler, one of the Citadel podshop businesses. You will have the most meritocratic outcome and these strategies can do well in any market environment
- if you want to do TMT privates go join a fully focused privates effort like a16z, sequoia, etc
- L/S SM doesn’t really have an edge or stability anywhere and is mostly dependent on the ability of the founder to raise capital. The crossover funds that aim to have a flexible mandate often times are just marketing and fall short at both public (not as good as seeing the trends and KPIs) and private (not as good as sourcing and getting deals), leaving you dependent on founder to raise another fund / more capital as well. The best outcome is you go to start your own fund and that is very tough unless you are leaving from a Viking or a Tiger.
In line with the marketing point, timing of fundraise matters a lot. The funds with fresh capital like Surgo are much, much better positioned than the other ones that launched in the last year+ and are down. Very tough to overcome a -15-25%+ year one.
Have heard good things about Mala and don't doubt her ability to pick up oversold quality tech names when the equity world seems to be falling apart. The PM I used to work for was undisciplined and obviously was only a herd follower (which is saying something in an industry where it's very hard to discern herd-follower vs "smart").
What is CGE?
citadel global equities
The answers to the questions you listed are going to be difficult to answer. Every one of those firms is going to be different and with the exception of a few, there just aren’t enough analysts and enough history (firms haven’t been around long enough) to be able to answer questions about career progression, comp, etc. You should ask those questions before you accept the offer but only the founder can answer those for you. Then the question is whether you believe the founder and whether they have a history of being fair and of keeping their word.
In general, I think the profile of start up you got an offer from are attractive places to be from your seat. I think they’re good places to start your career on the public side because you can learn directly from some good investors that have been trained at the larger platforms. If it doesn’t work out, you can always go to a MM later. I think MM platforms can be attractive so that’s not a knock on them, but I think for your first public job it doesn’t hurt to learn under a SM style for a few years and see if you like that, vs the other way around. Especially if you’re coming from a 2+2 background.
Regarding the blow up risk, yes there is blow up risk but that’s the case with all HFs. The blow up risk for the firms you mentioned are lower (relatively) than say a smaller HF but probably higher than a bigger fund, but you should be getting compensated for the risk you’re taking. And I think they are high profile enough where it shouldn’t be too hard to find a job after if it does.
FWIW coming from someone who works at a firm similar to your description.
Hi there - any chance you can share / DM some of the recruiters you've used to secure a role at some of these startups funds?
What is "KPIs" diligence? How exactly do you feel L/S is different than our MF PE job?
Happy to chat over dm if you prefer. I work for a large endowment. As I read this post I was fairly confident which firm this may be and then they're on your list. I know Kinetic, D1, Untitled, Avala, and XN. Haven't had any interactions with the other places you listed but PMs spinning out of top firms who can raise $1B is a good sign. As a junior investment professional all of these would be good places to start in the HF world. Yes there's blowup risk but a $1B+ launch isn't the same as joining a $200MM fund.
interested
Don't.
Care to elaborate why? Although not the optimal choice it is still a step towards what OP prefers as a career path
Just look around you. It's an absolute shit-show what's going on in the HF industry. I know, I know, you'll say well it's only a few funds that are blowing up. But that's not my point. The days of career longevity don't exist anymore in this industry. You're better off somewhere else (like PE) where you'll have more career stability, where you'll gain tangible skills that can apply to other companies (corp finance, startup, etc.) and don't have to worry about got sacked because either 1) you made a bad investment decision 2) your fund shut down. And in this high probability you won't make it in the HF industry, you don't have anywhere to go (there are no real exit ops). Also the pay to stress ratio sucks.
Also: if you're joining a L/S fund, good luck making it in the non-QE-free money world (which hasn't happened for over 10+ years). Hope you're a really good stock picker.
I work at a fund like one you mention above. I think it's a good opportunity and you should take it. Everybody is overblowing how badly this space is doing. Yes, there are some funds that have absolutely hit the shitter, no doubt about that. But there are also funds that are still riding on very good alpha on a 3 year, 5 year, 10 year basis, which is ultimately what a lot of their LPs care about. Most LPs are not idiots - they know drawdowns of this size are very bad, but they also know that most of these funds have proven to generate very good returns over the long run.
Joining a top launch is an opportunity very few people get to have. It can certainly be rewarding. Especially if the fund does well in the next few years. Given where everything is trading, there is probably some decent upside over the next few years... and a lot of LPs are willing to make this bet.
Career stability should be fine with this too - obviously nothing in the public markets can be as cushy as the private markets, but a fund raising $1bn+ clearly has a lot of backing from top LPs and the chances that it crumbles within 24 months is low. Negotiate some good comp for yourself and I think will feel rewarded.
thanks for the input. what would you say is a "good comp" package for someone joining one of these high profile launches out of 2+2?
600-800k
Sounds like long term capital haha!
I think the key decision point should be your view and chemistry with the PM and the early team in place. If you think that the PM is someone you can really learn from, have a strong relationship with, and will be your supporter for the rest of your career, I think this is a no-brainer given your interests. Also, I would drill down into if the PM can profitably short - this is the key skill set that will differentiate performance in this market environment. If the PM's game plan is to charge HF fees but is a closet LO, not gonna make it.
While Tiger, D1, Altimeter, et al have shat the bed, some L/S funds have really proven their value through this cycle. Even though many are still down YTD, there are many funds in this style bucket (Viking, Coatue, Empyrean, Soroban, etc) that are down much less than the S&P which is enough for LPs to see the value - especially if they were able to keep up during the bull market. One of the commonalities of funds that got wrecked is that they gave up shorting at the exact worst moment - i.e. capitulated to the bull market and got too greedy.
I think some people on this forum way overplay the career volatility of someone who already has banked 2+2 at top tier IB and PE on their resume. Your career is already so de-risked it's kind of laughable that people "worry" about the risk they are taking with any career move. You could probably just join Greenpeace for a couple years for giggles and then come back to PE and still be better off than 99% of population. Unless you just suck as a person and somehow tricked everyone who has hired and kept you thus far, your exit options will be numerous even though this particular venture doesn't pan out as expected. Don't be so risk-averse as to always be collecting optionality but never exercising them. If there is carry/profit-sharing involved and cash comp is in-line with market, I would take this opportunity and ride it out for 2-3 years then re-evaluate. VC, corporate/start-up, pod shops, and even returning to PE will be open options for you with some effort. Don't overthink the actual downside risk. Slightly increased volatility of career =/= actual impairment of career earnings potential. Especially with $1B+ launches with seasoned PMs.
Shit they're on to me
Lol same here. Imposter syndrome is real in MF PE
think the concern from OP and others is that it'll be hard to get back to the previous level of prestige / fund tier / whatever you want to call it, if the fund ends up blowing up / closing up shop. off a simple linkedin search, i see a few guys that went from top BB IBD > top MF PE > large fund launch that closed shop > middle market PE or no-name HF. probably the minority, but there are some
I don't know that someone exiting to mid-market PE or smaller HF is necessarily a bad career move or indicates lack of options.
Not everyone wants to be in MF PE, especially once you've done it. The personality traits that lead one to leave MF PE and join a new fund launch will often self-select not to go back to the MF environment anyways.
Long story short, this type of outcome is not a genuine perceived or real career risk. Actual risk would look something like - you blew up at the new fund launch, then unable to find another job anywhere else on the buyside. I can't think of one situation in my network where this happened to someone at the 4-6 year career stage. Admittedly, these new fund blowups are harder to navigate once you're 10+ yoe and cost close to $1M to hire.
any updated views on untitled investments?
Maxime placeat quasi exercitationem possimus consequatur laudantium. Sed eligendi sapiente laborum ut. A quia nam debitis sed dolorum et dolorem. Deleniti quod et deleniti ut.
Dolor voluptatem quisquam velit est voluptas. Voluptates expedita quod dicta fugit distinctio. Rem et impedit voluptate et quo nisi. Voluptatem esse ratione eos et est doloremque et. Aut quas molestias qui autem. Possimus autem laboriosam ex quia velit et accusamus. Qui sed debitis vel commodi sit hic rerum.
Aut sit delectus ullam. Quia sunt fugit occaecati ut ullam fugit sed. Atque placeat aspernatur est et nulla. Voluptas excepturi aperiam quasi nemo. Vel officia ipsam rerum voluptatem error corporis doloremque. Et repellat aut sed ipsam quos. Nulla adipisci aut quidem veritatis.
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...
Ipsa quo saepe laborum optio. Sunt magni perspiciatis doloremque ducimus qui et sunt. Laborum fugiat ea reprehenderit sint labore earum repellat. Dolore dolorem sed architecto eius sint voluptatem et repudiandae.
Ipsa molestias pariatur quidem magni soluta. Quidem rerum eos eaque consequatur. Et facilis perferendis quaerat est ad totam. Nisi velit qui accusamus mollitia aspernatur tenetur. Rerum quisquam quibusdam exercitationem sapiente fugiat et modi qui.