Do I take the safe bet after grad?

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Hey monkeys,

So I’m wrapping up my finally year in university and have been proposed with two very interesting opportunities.

Start my own fund or take a $250k all-in comp ball-park range.

A little primer. I’ve been very blessed to work with some very high net worth individuals and have been mentored by a lot of them in other stuff. In my past 2 years I’ve worked as a prop trader under a large desk and have been given real-risk and a small book in addition to the main book. I’ve notched a name for myself and a lot of these mentors have interest in raising me capital and deploying in some interesting spaces where I have a discernible edge.

My question is, what risks am I overstating/understating in starting a small fund (Most infra is already set up) $50m and what are some risks down the line?

Comments (39)

 
Sep 30, 2019 - 2:01pm

I think that you should work for a fund for a little bit before starting your own. The risks are obvious: you don’t know what you don’t know yet. Sometimes in order to be the best you can be and avoid huge mistakes that can wipe out your fund immediately, you need to learn from really solid fund managers. Especially since you’re so young. Work for someone else for a few years then go out on your own.

Caveat: this is advice for if you’re fundamental-specific investing and not really trading. I don’t know anything about trading as that’s a quant game where experience matters less.

 
Sep 30, 2019 - 2:11pm

Hey mate,

Appreciate the response. The truth is, my role for the past 2 years has been more of a full time role than an actual intern experience. I know this doesn’t qualify as enough of an experience to be practical but it’s just I think my edge is just definable over a short horizon ~ 2-3 years max. I think I just want to optimize for max EV in this case. I hear you though, it’s been eating away at me for a while haha.

 
Sep 30, 2019 - 9:22pm

Gotcha. If you’re confident about it then go for it. Worst case scenario is it doesn’t work out, and there’s plenty of funds or banks who would hire you after that. Risk-Reward is better in this case as you’re young and confident.

I worked for a family office in Dallas all throughout college and now am at an IB in NYC. I’ve learned a ton in my IB experience that’s going to serve me well when I transition into my HF role in the spring. That’s my personal plan but in your case hey if you have the opportunity to do what you love go for it and don’t let anyone like me to tell you otherwise. I’m probably just a little older than you so what do I know.

 
Funniest
Sep 30, 2019 - 2:12pm

Whoever is offering a kid fresh out of school $50M is definitely room temp IQ. Take their money and give the fund a shot. I can assure you being known as the guy that fucked up a $50M fund will get you a lot further in life than being a cog that worked for someone else for 2 years.

 
Oct 1, 2019 - 10:47pm

This happens more often than you might think. I met a professor who told me that about one student will come to him every year or two with the intention to start his/her own fund. Now, these are typically much smaller than 50 MM AUM (my understanding was usually < 5MM), but these kids typically do pretty well. You have to be a true savant to find yourself in this position. All I am trying to say is to assume the people providing the capital are low IQ is a bad blanket statement. The prof I am referring to invested in a number of these kids and helped them through the start up process, and is definitely in the red overall.

 
Oct 4, 2019 - 11:08am

m_1:

room temp IQ

I'm going to use this phrase for the rest of my life. m_1 Shit my future sons are going to hear this, generations of lhamil13's will hear it. I've got a mentally handicapped sister. Have always been looking for a way to call people dumb but not say retarded.

Also PSA, the word retarded makes special people sad. Use it less in your day to day. I'll buy you a beer.

 
Sep 30, 2019 - 4:23pm

How in God's name is someone letting you manage $50M? No offense, but Jesus......

I just scrolled through this quickly, but what is the 'edge' you're referring to above? If this is real my mind is truly blown, but in all seriousness congratulations if this is real. This is a complete home run (if real).

Can you walk me through some of your strat (serious)?

 
Oct 1, 2019 - 1:00am

I've spent a good amount of time trading full-time for the last two years, on-top of school. I follow all markets and have just found baseline inefficiencies. I'm a quantitative trader so a lot of my strats are based more on quant strats in undervalued/overvalued areas and some proprietary metrics/algos I use.

It's real, I've been very lucky to be in my spot with the people around me pushing me on. Feel free to PM.

 
Sep 30, 2019 - 4:33pm

Take the money and run. No reason not to...

Even if you fall flat on your face, your investors are gonna pull everything before you lose it all (unless you do some really dumb shit). You're gonna learn a lot in the process and if all goes well, you'll see tremendous upside.

Go for it

 
Most Helpful
Oct 1, 2019 - 9:02am

Success is pretty obvious. Even though you say you only believe your strategy will be useful for a few years, if you are worth anything, you will figure out a way to do something new. You will have opportunities to either increase your capital base with your existing investors, and potentially expand to their broader network.

Failure is less obvious, but if you have an opportunity out of undergrad for a $250k all-in package, then its clear that you are already doing well. That trend will not stop, so I would think you can tap that network, explain that you went off on your own and use that experience to interview as an even more compelling candidate. You can always go off on your own - if you just enjoy thinking about the world (most investors do), you will find something else you want to go after. It might still be in finance/investment world, or maybe its recycling chicken guts to make biofuel...who knows. B school is always an option. What I can say is that the friends of mine that went off on their own after school, both that had failure and success, are all doing very well now because you have to be a lot smarter to even think about going off on your own than to keep the safe path going. People that have done well always find a way to continue doing well...it rarely just stops. That being said, sometimes it takes some time to get back on your feet after failure, but motivated people can't stay still for long.

Take the opportunity and bet on yourself...you'll be happy you did.

 
Oct 1, 2019 - 1:21am

Setup the fund, structure it as a traditional 2/20, make sure you have a long lockup period on the capital, say that you're a super long only as part of your thesis, invest all $50M into index funds, earn 100k a year as the management fee doing nothing, after 10 years boast a better return than most HF over the same time horizon, get a job as a PM at insert massive HF name.

Jokes aside, if you actually have people willing to back you up to $50M and you're confident that you can make some money with it, go for it, as people have said, even if you lose some of it, that's a way more unique story for your next role than the kid coming out of 2 years of banking. Plus there's way more upside.

 
Oct 20, 2019 - 5:06pm

Hey man just in case you end up taking the 250K offer, can you toss the 50M my way?

thots & prayers
 
Oct 24, 2019 - 9:54pm

legitimately can not understand those who are saying to take the $250k... other than a personal low risk tolerance what rationale could you possibly have? What’s crazier is that some of these guys have the HF tag next to their name... smh...

Congrats man. And btw, it is not as unusual as people on this thread are making it out to be. Off the top of my head I know a handful of under 30 year olds that own their own track records and many many more that are calling shots but don’t own the ultimate track record... can think of a few under 25 that are doing so... you are definitely in elite company but it’s not as insane as some people are making it out to be

Btw- your upside tail goal shouldn’t be being the next arbalet, it should be being the next ken griffin

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