Australian AM - Small/Unknown Shop

Hi all,

I recently had my final interview with the MD for an Investment Analyst role at small/unknown long-only AM firm which I thought went well (to be honest...seems like most AM shops here in Australia [and particularly Melbourne] are small boutiques anyway). It's a small shop with probably 3-4 investment guys, been around for 20+ years and mainly does SMAs (discretionary portfolios) for HNW clients. If I had to guess, AUM is under AUD$500m, probably somewhere in the $200m+ range.

My background is final year B.Commerce from target, with decent grades (below average extracurriculars) and no prior internships, so considering my CV the fact that this firm is willing to look at me is something that I'm extremely lucky to have. This would be my first full-time job out of university.

I recently came across BlackHat's post from 2014 titled "AM Vs HF: The Business Of Our Business". I'm mindful of the fact that this is probably more US centric, but below is his response to being asked on his thoughts of working at a small/unknown fund for someone starting out:

Small/unknown funds I know very little about. I would imagine these places have single strategy, small AUMs and not a lot of exposure to management. Probably a ton of responsibility though, but very hard for recruiting purposes to move on when nobody knows your firm and you're investing in obscure small caps or something.

After speaking to the MD today, I found out that the fund mainly focuses on their small/micro caps strategy as their edge (something I'm interested in too) and was told that it was actually the top performing fund in the country over the past year for that strategy (and has also performed well against benchmark for the past ~5 years so a bit of track record there). PM has prior BB sellside ER experience (top-rated analyst) and has been in the industry for a long time, so I'm sure there's lots to learn from him. However, the response received from BH makes me question the decision of starting out in a no-name fund (would probably still take the offer if given though!). Would like to eventually work at a HF/top AM, so logic tells me the obvious route would be: no-name AM (this role) -> better AM -> better AM-> etc. and then eventually HF/top AM.

Obviously, there's not straightforward answer to this, but would appreciate any thoughts on a graduate starting out at a no-name fund. Would also love to hear from those who may know what kind of comp to expect going in, cheers!

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Comments (9)

  • Trader in S&T - Comm
Apr 28, 2021 - 4:51am

I would take the traditional path if you had other offers but if this is your only option it sounds like it fits you well.  Did you discuss pay?  I am wondering why they would hire a no-experience graduate rather than someone with two years experience in ER or IBD etc unless they were trying to hire someone for not much money.

Apr 28, 2021 - 5:52am

By traditional path, do you mean structured recruiting for top AMs or IB? Potentially might have an internship opportunity with a boutique/no-name corporate advisory firm (~6 guys, 1+ yr firm, mostly ECM deals on the lower end but was told they have strong deal flow for 2021), but this offer won't be full-time and I'm not sure if I would fit (more in terms for IB)/recruit well for BB IB or ER after that. Think my interests ultimately lie with equities.

Haven't discussed pay yet with the AM, but have an inkling that its around the AUD$55-65k range (including super - similar to 401k for Americans - so take home pay would be around $50-60k less tax). I would imagine that this is probably on the lower end of the Street comp that may answer your question.

Also, I think recruiting may be less standardised here than in US so a bit of leeway in terms of hiring a fresh graduate. They hired another guy who had a similar profile to me (fresh grad) a year or two ago so I suppose they're more after someone with demonstrable passion/interest in investing and are willing to train them up.

How do you think the comp stacks up?

  • Trader in S&T - Comm
Apr 28, 2021 - 7:42am

Yeah by traditional path i meant IB, ER, trading -> HF, but it seems like that probably isn't an option at this point so i think if you're offered this you should take it.  I do think the comp seems low (i started in Syd so im familiar with a lot of the starting salaries) but experience trumps all. It seems like you like what this company does and if you're good at what you do i have no doubt your comp will rise where you are or you can leverage the experience you get here to go somewhere else.  The smaller team size means you'll probably get a lot of responsibility quickly if you show your talent. 

I read your other response so i'll come back on that as well... even if you're offered this role for post graduation, still try to recruit for the summer vacation jobs at all the investment banks (just say on your application you're going to do an honours year), its free optionality and if you're offered one of these as well then you can have a think about that.

May 13, 2021 - 2:56am

Hey mate, reviving this thread with new info.

Have a contact at a BB (UBS/Macquarie/GS) that just informed me there was an opening for ER. Just wanted to hear your thoughts on the two options: AM at the same "no-name" boutique from the original post or BB ER?

Comp wise: BB is 50% higher, but is in Sydney compared to the AM in Melbourne (will have to move and leave behind gf/mates/family and also have to rent [staying with parents at the moment])

Team wise: Only met the guys at the AM, who all seem nice and switched on. At the BB, I've only been told that the lead analyst is not great, but the other analysts are alright/good to work for (haven't met them before). 

Sector wise: will being assigned to a sector help or hinder my chances at moving to a BS firm (good boutique or big AM) about 2 years out from now?

This contact at the BB has helped me immensely in preparing/recruiting advice and everything in between so I feel indebted to them. However, have verbally told the AM shop that I will take the offer if given one so I'm really in between a rock and a hard place.

Appreciate any thoughts you may have, cheers!

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  • Trader in S&T - Comm
May 13, 2021 - 4:22am

Feel free to PM me the specific bank and i might be able to give more specific advice.

If your goal is to be at a hedge fund than the ER role at any of those is great. Our research guys are in constant communication with funds etc discussing the market and the good ones get offers from funds all the time. 

Regarding sector etc, getting the role as an equity researcher is much harder than changing sectors. So even if the sector isn't your top choice, suck it up.  The skills as a researcher early in your career are more important than the actual sector you're in.  A good friend of mine was an ER at one of those banks in Sydney in tech, and is now at a different bank overseas in industrials.

Given the BB ER job isn't a sure thing, continue with the AM for now but keep the recruitment process up... if you get that offer than you get to make the tough choice.  At the end of the day you've got to look out for yourself, so if you have to burn a little bridge at some point by leaving than that's what you'll have to do.  If they're a decent human being they'll see you're doing what's best for your career and understand.

If you get the ER role I wouldn't be so caught up in moving in 2 years, this isn't IB with a strict 2 year analyst program then recruitment to PE, HF etc.  The way you'll go from ER to a fund is that you'll get good at your job (hopefully) and you'll be noticed by people when your research reports are constantly on point, you're impressing people at presentations etc.  

  • Intern in IB-M&A
Apr 28, 2021 - 6:33am

are you graduating at the end of this year or are you going to grad school

- will you have opportunity to do another internship for summer?

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