Are HFs still worth it?
Lots of talk on the 'dying' HF industry. My read is that it's still a great career and it's not truly dying but that the crazy high pay is gone. Seems like it's more a 'do it if you like public equities and the pay is nice-to-have'. Thoughts?
Post to block glitch
I like to believe given that the information edge has become practically meaningless, you need to have some sort of analytical and/or strategic advantage to sustainably thrive in the long run. For example, you can become more involved in a niche (but structurally sustainable) strategy or join a shop that interdisciplinarily combines finance with other fields like law, CS, etc. HF industry is here to stay as long as there are (institutional) investors with a higher than average risk appetite or who need to diversify their portfolios; the question should be if you can survive.
This is definitely an interesting take. I guess it's kind of like how there are hedge funds out there that actually invest in litigation proceedings, wherein the main skillset is actually legal due diligence - something that retail investors would be hard pressed to do. Developing a niche seems necessary, eh?
Yeah, I liked it when Greenblatt said this in his book when he described how his in-laws bought antiques at prices far below the true value: "that doesn't mean their knowledge of art and antiques doesn't help them to make money, but many people can acquire that same knowledge. Their edge comes from taking this knowledge and applying it in places off the beaten path. While these places are tougher to find, once found, less competition from other informed collectors creates an opportunity for them to find inefficiently priced bargains."
It's like pursuing a career as a pro athlete. It's super exciting and if you're really good you get rich. But only 1% of those that try really make it big and/or for an entire 30-year career.
HFs will definitely survive, but Citadel or MLP survive while firing 20-30% of their PMs every year.
If you can land a seat at Tiger Global or Viking.. that might be the sweet spot.. you won't be Federer but you get paid Andy Roddick-level and get a front row seat to all the fun.
Andy Roddick offended rn
Didn’t some kid at Viking—who’s been named on here before—get like a $20-30mm bonus? That doesn’t sound like Roddick money to me.
Heard of the term called outliers?
I'm sure there was. Point is, your odds of being like that guy are very very slim.
But your point didn’t make sense, since the probability of being that guy whilst at Tiger or Viking is even higher than at Citadel. Much harder seat to get since both pay and lifestyle is better.
What you don't seem to get is, getting into Viking is like getting into the Yankees. Extremely unlikely. And then, not everyone gets paid $20-30m at Viking, not even close. You need to play like A-Rod to make that much money.
The fascination of junior people on WSO with outlier comp #s is quite something. You don't make career decisions assuming you're going to be the outlier, period.
Mhm, work in quant and most hires are at senior Google dev's level of pay. This is true at a lot of top funds, incl. the likes of Rentech etc.
Still good but tiny compared to the original team/executives.
If you're any good, yeah.
On average, no. For the top 10%, totally.
HFs will always exist in a variety of capacities; however, just like any industry as its maturing its becoming less fragmented and large firms are consolidating assets.
If you're at a large established firm then your assessment is likely correct. However, the days of working at random HFs and having career longevity are over. You're incorrect is just assuming its still a good career just not as high paying. It can be a good career in the right seat - whereas in the past it was more of a good career in any seat. There is career volatility with massive uncertainty of being able to get another job of your current one does not work out. This is relatively unique to the HF space (or long only) vs other high earning career tracks. Pretty easy to go from making very good money to being unemployed and without a job for over a year, if you even get another one at all.
I think either you love public markets and the thrill of competing or you don't. If you're worried about comp, long term progression or industry longevity you're probably not suited to the HF career path. The issue in this business is that there is nowhere to hide and if you can't find a way to generate returns there isn't really any future for you. The frustrating part is that you can enjoy the job but not be very good at it!
Exactly. No one got into pro basketball to make money or for prestige. They got into it because they loved the game.
Look at Anthony Edwards tho (but I get what you're saying)
Damn...this hit too close to home for me
I think this is generally the right answer. I think of it as the following combinations. Lack of passion + lack of talent = don’t bother. Passion + lack of talent = maybe you get your foot in the door at the junior level, but are found useless pretty quickly before getting into seats with big paydays. Lack of passion + strong talent = can string together a few nice years but then probably burn out. Passion + strong talent = longevity and $$. And these are not uniformly distributed combinations.
I will say that I disagree with the notion that there’s no place to hide — a lot of the industry provides 0 value on a risk-adjusted basis vs benchmarks or their relevant “style factors”, so you could argue that most of the industry is in fact hiding and clipping their coupons (until the music stops)
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