Asset Management Lateral to Hedge Fund

Group72's picture
Rank: Senior Chimp | 19

Hi Everyone,

Recently signed as a 1st year research associate at a large asset manager (think Fidelity/MFS/T Rowe) and was curious what anyones thoughts/suggestions were in terms of lateraling from out in a year or two to do a top MBA/join a hedge fund?

I know the typical route is from banking - however I was curious if anyone had an experiance from an Asset Management point of view. I also was curious about compensation at these large mutual funds? Would you think on average they make more than what would be made in other fields ?

Thanks for your help!

Comments (23)

Nov 20, 2016

Curious about this for smaller value investing mutual funds (e.g. Harris Associates, Dodge & Cox, Tweedy Browne, Third Avenue)

Nov 21, 2016


Best Response
Nov 22, 2016

I think you'll need to do some more thinking about this and narrow down what it is you actually want before anyone can give you a substantive response.

It's really hard to answer questions like can AM lateral into HF because the path to HF is often idiosyncratic, and HF is just simply too broad of a description. Like could you go from traditional AM research into Quant HF trading? Probably not. Could you potentially lateral from AM into activist or equity L/S? Maybe. But even then it requires that your skillset is a good fit for HF.

What kind of hedge fund do you want to join? Do you know what it really is like to invest at a hedge fund as an analyst? Why is hedge fund or MBA more appealing to you than Asset Management research? Why do you want to get into a top MBA program? What would you bring to the table for either of those roles? You're going to have to earn it, so maybe with some more information we can provide some anecdotal information...

    • 2
Nov 22, 2016

Thanks for the feedback, I should've added some additional colour! Over my undergrad, I interned as an IB analyst, Hedge Fund Analyst, and long only (smaller mutual fund). I really enjoyed the L/S hedge fund experience as it was much more concentrated and I found the investing boundaries were much larger- which I found interestimg. With that said, the thought process for me was the get into a top recognized name (as me ruined above), get the experience, brand , and understand the. Process from top PM's and then leverage that experience to try and get into a hedge fund/break into a great MBA which will ideally set me up well for a fundamental L/S hedge fund.

Thanks for the help saaxyman!

Nov 27, 2016

The most traditional exit opps from broad AM are into something similar within AM like covering an asset class, groups of companies, or portfolios for that asset manager. Outside of AM, doing research or forecasting at banks or lateraling into research at a mutual fund are the most common that I see.

HF's tend to be very narrow minded about how they recruit. They'll go after the usual Investment Banking analyst, PE associate, or other HF analysts. This isn't to say it's impossible, just not the traditional path. Doing a top MBA is more likely since MBA candidates come from all walks of life.

In terms of compensation at large mutual funds, it's so variable. AUM and performance are the two most overriding factors. If you've been identified internally or externally as a star, then you might get paid extra to stay. The WSO comp database has some good stats on this.

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Nov 27, 2016

you should have at least an interview before dreaming.

but since you do seem to have an idea about what you're getting yourself into / have read enough the answer is basically "yes and don't overthink it"

    • 1
Nov 27, 2016

Thanks for your comment - of course I'm no expert but I do have read some books though about investing and financial markets to have a basic idea. Usually I'm not the one who overthinks three times before I do something, but in terms of career starting point I care a little more about stuff like "prestige" (although I hate to use this term) and exit opps (too), because they seem to be pretty important to most of the guys here.

Since you're a HF analyst yourself, would your firm hire kids from BB AM (given they have experience with the asset class and markets your firm deals with)?

Nov 27, 2016

You are not going to find all the funds on the link. They do a lot of stuff incl alternatives in-house. Being that big can be a disadvantage though. First, to certain extent some of the managers are shielded from bad performance by their distribution network (via private bank and fund platforms all over the world) and brand name. Second, they are quite active in managing money for institutionals. From what I have seen, many pension funds still have stupid alternatives and traditionals, specialist and non-specialist, domestic and foreign markets, and even minority-owned and mature funds divide. There is less emphasis on alpha generation for traditional mandates, and more of providing exposure/relative outperformance and other factors such as being on good terms with consultants, strong infrastructure, op risks, legal stuff, distinct mandate, fee structure, etc, etc.

I am in no position to comment on their business in general (and I am sure they do have strong funds), but some of their regional emerging market equity funds that I looked at are a complete joke. One-two analysts to cover two dozen countries, and the result is they are invested in the same blue-chip markets and the same blue-chip companies that everyone else is invested into. I'd be sceptical about their capacities in emerging and especially frontier market equities.

Nov 27, 2016

Thanks for your comment - I understand that AM is more about beta and exposure rather than alpha, but from what I've seen they do manage their portfolios actively by picking stocks, using both top-down and bottom-up approach; and that's what I'd like to learn too, in order to gain knowledge and experience to work for a L/S HF.

I do note that most people here advice to start out in IBD if the goal is L/S HF, but I still sort of struggle to understand, because IB analysts pitch and execute deals basically all day long (sry for the generalization here, no disrespect!), which is IMO even further away from alpha generation. AM people on the other hand analyze investment ideas and manage portfolios - why shouldn't that be a more suitable foundation for L/S HFs, since HF do exactly that on a daily basis (of course with more sophisticated techniques)?

Nov 27, 2016

Hi SpaceMarine, Dece is right - but in fact, at entry-level, AM (at least in London) is much more competitive than IBD to get into - this is due to very low headcount figures across the board (and more firms choosing to utilise effective cheap labour through "apprenticeships" rather than developing their own graduates). To give you an idea of the figures here, we're talking about 800 or so FT IBD analysts (in BB/MM) joining each year, compared with about 40 or so in AM.

Another of the reasons why AM - HF path is not really discussed is due to the work-life balance of people working in the AM side of the business - many of the analysts and PMs have very long periods of tenure (15-20 years +) at a fund manager, and typically work 7/8-6. Add to this the 'partnership' model that several firms offer, in which pay increases with tenure (and fund AUM), you have a very powerful incentive for people not to jump ship.

Think about what it is that you really want - the security of a long-term career in AM (not guaranteed, but highly possible), or one (HF) that exposes you to considerably higher risk (albeit one with a possibly higher payoff). The roles themselves will be largely the same. If you enjoy life at an AM, it is (in many cases) easier to progress to a PM position (though it will take years), and then decide to move to a HF later on (Man Group and Odey Asset Management frequently poach PMs from the large fund management houses).

One of the options you might want to consider, which you haven't mentioned (and which would be worthwhile, given AM SA headcount is low, and FT conversion even lower - JPM AM took 2 graduates from a class of about 20 interns a couple of years back), is ER - you may not be involved in pitching stocks right off the bat, but you will be exposed to an industry expert, constantly considering investments from many different angles, and have considerable interaction with the buy-side (you will be on the phone to HFs and long-only shops a lot of the time). This will enable you to build up a network, at the same time as developing analytical skillset. Although not exactly analogous to the work you would be doing at an AM, it is close enough - and much closer than IBD. And don't underestimate the value of having weekends to yourself!

PM me if you'd like any advice on what to read to make you stand out in interviews.

Good luck!

    • 1
Nov 27, 2016

To my knowledge, many large funds prefer IB candidates, who are essentially used because they can build models and put in long hours etc., and aren't really used for their investing ability (at least in the beginning). Differently, many smaller investment management firms (and when I say smaller I still mean highly-regarded firms often with billions in AUM) will regularly avoid hiring IB analysts and instead prefer analysts from ER/AM.

An extremely general "rule of thumb" that I've heard can often be quite accurate, is many mutual funds etc. prefer analysts from AM/ER whereas hedge funds prefer analysts from S&T and IB.

This info comes from my conversations with a prominent portfolio manager in NYC.

Nov 27, 2016

'An extremely general "rule of thumb" that I've heard can often be quite accurate, is many mutual funds etc. prefer analysts from AM/ER whereas hedge funds prefer analysts from S&T and IB.'

At least you put a disclaimer there.

Nov 27, 2016

Seems to be true in many cases based on my conversations with a few people

Nov 27, 2016


Nov 27, 2016

it's on a fund-by-fund basis, but I'd hazard that Consumer is looked favorably upon - I'd say of sectors, it's the one that best sets one up to be a generalist given the other sectors it intertwines with peripherally.

Nov 27, 2016

Personally I think conglomerates sets ups best because it's diversified SOTP by its very nature. This answer is almost cheating but it is what it is.

In terms of who has the best street cred I like Capital but I don't think it really matters.

Nov 27, 2016