BB S&T to What Type of Hedge Funds???
Long time lurker, first time poster. Can anyone with experience provide some information about what type of hedge funds a trader at a bulge bracket firm can exit into? So we have global macro, stat arb and a lot of the multistrat HFs, but is that it? How about FI arb or MBS arb? I've been working at a top tier BB for a year or so in an unspecified FI trading role and I've come to the realization over the past couple of months that a bank is not where the action is. I just want to see what other options are available before contemplating a shift. At the moment, I'm particularly interested in HFs. Prop trading is also okay but not an ideal choice in my opinion. Please help a fellow trader out.
HHs wont be helpful in moving unless you're interested in execution trading, if you are though then pretty much everything is open to you
this is absolutely not true - i have had hh's reach out about front office roles at some of the best hedge funds. the sky is the limit if you are the "right" kind of person for these funds - if you are a junior hire then what you've been doing at the bank doesn't matter all that much (for some of them, at least). not to say it's easy, but definitely less impossible than some might lead you to believe.
if you are a trader in rates/fx/em, global macro is a natural fit. you can get into some top shops as a non-execution trader, on the pm track. the general rule is, if you want to do macro then trading is a better path because macro emphasizes risk management over generating a perfect idea (there is no perfect idea in macro since there are so many moving parts, things change so quickly, can't develop super high conviction).
if you are a trader in regular credit...well you're kind of fucked unless it's some quant credit correlation thing where you might be able to go to some funds that have need for that kind of esoteric skill set. not a whole lot of demand for credit flow traders on the buyside in non-exec roles. if you want to be a true "front office" person on the pm track at a buyside credit shop, research/desk analysis is a better bet, because the idea generation guy matters more here imo than in macro.
if you are a trader in securitized, there are securitized credit funds...pine river, libremax, marathon. bunch of credit managers (like king street, cqs) and random multi strats and event driven (Third Point!!!) also hire securitized from time to time
if you are a trader in commodities (and many congratulations if you are still surviving at a bank!), there aren't a whole lot of sole commodity funds still out there...and it's questionable really how much capacity commod funds can absorb. best bet imo would be to try to get into a multi-manager platform.
hh's are ok. best is if you know somebody on the buyside that can pull you in. of course what the fuck do i know, i'm stuck here yelling mine/yours all day. if i were you though, i would stick it out for a few more years, try to get a shot at getting a book and running your own risk for a bit.
You can exit into whatever sort of fund is interested in the experience that you have acquired. "FI arb" and "MBS arb" funds are full of bank peeps, just to use your examples.
Then we've had very different experiences.
I agree that trading type strategies are likely open to you, but most likely only if you have that specific sort of background, ie: if you spent time on an FX/rates desk as a trader, and did well, you can probably move to a macro fund, but I'm not sure how much traction you'd get looking at a stat arb fund.
I think the main issue challenge is if you're looking at fundamentally focused HFs like L/S or distressed. Then you're up against bankers and ER guys. HHs will generally be hesitant to put you in front of those types of shops.
Guys thanks for all the advice. I'm in a rate derivs desk and I think I'll be getting my own book pretty soon. Is it wiser to wait until I can show some PnL or to try and network the hell out of here right now? Also, how are the exit opportunities in equities (there's a potential opening in equity derivs where I'm at)? Just to clarify, I think trading is a pretty fine job but times are tough right now especially in banks, with Volker and all the regulatory rubbish. Just hoping to go somewhere where I have more freedom to trade with less unnecessary restrictions.
As someone who's been in a bit longer than you, my 2 cents is to stick it out. Obviously look around (discreetly), but it's hard to get HHs to look at you with less than 3 years experience, and I would imagine impossible before having your own book. And if you're in a rates derivs your experience should be quite good for Macro funds, it's not like you're throwing away your time...
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