Hedge fund after one year of IBD

Has anyone made the jump after one year and would like to comment on some of the things one should consider? Any advice on recruiting for immediate start positions? I talked to all the well known headhunters including Dynamics / SearchOne, and I'm planning on starting to network on my own through my undergrad's alumni network and cold emails.

I'm also curious as to whether the pay cut for only having one year of IBD experience is quite significant versus joining a HF post the 2 year stint. If the differential exists, does it go away pretty quickly?

I know the HF world is full of variability, but hoping to get someone's insight here.

 

Always hard to generalize, but most shops would consider you an investment at the beginning either way. That is, after 1 year banking or 2 or 5, you're still going to need to be trained and will take time to develop as a good analyst. So the career progression (and pay trajectory) are likely to be pretty similar no matter when you start. You don't exactly have negotiating leverage as an entry level hire, so pay history is irrelevant; whether you make more or less in your first couple years is also not very meaningful as compared to the longer-term opportunity.

Unless you feel like your modeling skills and stamina still need work, there's not a lot of downside to trying to leave early.

 

Would strongly recommend getting out after a year as long as it doesn't compromise quality of exit. The downside of banking is you are just wasting time. Whether you have 1 or 10 years banking experience you are nearly equally useful to a hf. After one year your modeling should be in very solid shape and your learning curve slows a lot.

Comp is irrelevant, you will not have a structural pay disadvantage vs leaving after 2 years, in your third year of work. Depending on shop you may get paid less than someone win 2yrs experience. Even if they paid you nothing in your first year at the hf it would be worth it because you are actually learning something and not wasting Time.

 

Very common, and not hard to do if you don't feel you need a second year to become more mature and less retarded, whichever comes first. Honestly I'd recommend getting out after one year if you can. Usually works best if you work at a smaller shop that places well like BX, LAZ, GHL

I hate victims who respect their executioners
 

Thanks so much for the advice to everyone who has responded.

BlackHat:

Very common, and not hard to do if you don't feel you need a second year to become more mature and less retarded, whichever comes first. Honestly I'd recommend getting out after one year if you can. Usually works best if you work at a smaller shop that places well like BX, LAZ, GHL

Is it because they have better access to headhunters? I've been interviewing through headhunters for this current recruiting season, and they have almost entirely given me 2014 start opportunities. Do I just need to be more patient and wait for the immediate start spots to spring up, or is it a really good idea to network as much as I can and have the "do it on my own" mindset? (I'm not at one of those shops, but I am in a BB M&A group)

 
leveredarb:

Funds Tend to hire elite boutiques analysts after one year over BB analysts as there is the general perception that at a bb in your first year you only spread comps and format all day.

Didn't get this perception when recruiting... Surely at an MM you won't have considerably more responsibilities after a year than at a BB, it's too short a time frame?

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
 
Best Response
SonnyZH:
leveredarb:

Funds Tend to hire elite boutiques analysts after one year over BB analysts as there is the general perception that at a bb in your first year you only spread comps and format all day.

Didn't get this perception when recruiting... Surely at an MM you won't have considerably more responsibilities after a year than at a BB, it's too short a time frame?

EVR / GHL / LAZ are not MM shops. And I would definitely say that the work that boutique analysts get is considerably better on average than the work at BBs. Even just the fact that you avoid the useless capital markets work is enough to guarantee a better workstream.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

Work, more? Than, in, IBD?

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
 
saints2009:
I meant how does your pay and bonus increase the more years of work experience you get at a hedge fund?
Again, this is a general question. It's safe to assume that it gets bigger and becomes more tied to performance. But it really differs from fund to fund.
 

HF pay - base tends to move up like it would anywhere else in finance. If you make money, you get bigger bonuses. As you "age", you should be taking on more responsibility and having more influence over the firm's returns, or your own P&L. If you do well then, your bonuses can be very large. If you fair poorly, then you can make less than a 2nd year IB analyst.

Recruiters - may start after your first year of IB, but certainly after your second or 3rd year. I don't know of any IB'ers that were 3rd year associates (maybe 5 to 6 years total) that made the switch. By that point, the switch to a HF may be very tough.

 

why dont you recmomend moving after a year gametheory? i heard learning curve in banking just flattens after a year anyways. and the advnatage of staying a 2nd yr is to have more deals to talk about - but given the crappy markets, that's marginalized as well?

 

Come on, that's not true.  If you really could learn all there was to learn in one year of banking then I guess every 2nd and 3rd year analyst might as well be a seasoned veteran and jump straight to the MD role.  There is plenty to learn about banking in 2, 5, 7, 15 years.  Especially coming from an industry group.  Bigger, more structured PE and HF recruit a year in advance because they want to get a jump start on the best talent but give you the full two years to experience banking before moving to the buyside.  They assume you'll have at least 2 years when you start. 

 

Sei99.  You also have to consider the fact that your group will almost certainly be pissed if you leave after a year.  When you leave early you throw a wrench in your group's staffing system and you rob your firm of your productive second year.  The first year is perceived as a learning year (which comes at great expense to the group and to the firm).  The second year is your year to produce.  Even if your paper contract lets you weasle out after a year, there is still a well-established implicit contract with your group/bank that you will do your duty and contribute for a second year.

 

While banks do work on the premise that an analyst becomes far more valuable in the 2nd and 3rd year, it is not a "great expense" to the group. Analyst total comp is a rounding error for MD bonuses in average to good years. If you have the opportunity to transfer and the HF doesn't care that you're leaving early, to hell with the IB. They work you like a dog and plan on burning you out, that's why it's a 2-3 year program. Justanotherbanker is right that you've likely damaged relationships at the IB, but the buyside is always the boss. If you become a client, they will still kiss your a$$. Any analyst that moves to a decent HF after one year must be pretty good so your total career shouldn't suffer. Besides, don't flatter yourself too much, analysts come and go and senior bankers have too much going on to obsess over someone leaving early.

 

When I said "great expense" I wasn't referring to an analyst's compensation.  I'm talking about the year's worth of extra time spent teaching, putting work under extra scrutiny, mentoring,  making you a known quantity to clients, of trying to keep you reasonably content.  Some MDs take it as a huge insult if you take all that and then leave without "paying your dues".  If you haven't received the mentorship benefits I listed above, then maybe leaving isn't going to be a big deal.

I agree with nrc_chicago that an analyst's compensation is relatively miniscule in the grand scheme of things.  Your MDs aren't going to care about that part (it's not their money anyway).  I also agree that "analysts come and go" and that analysts aren't anything special.  Even so, exiting after a year can pretty easily offend someone.  Some old school MDs consider quitting to violate a code and to be massively disrespectful.

One of my friends announced his departure at the end of his first year.  He announced his resignation to a very senior MD from his firm -- a guy who is usually pretty chill about things.  Apparently the MD completely flipped out (yelling, profanity, etc.).  Just a warning.

 

Okay, so some MDs may care - but do you want to be working for an MD that goes ape-sheet anyway? All the more reason to justify leaving. I do think that just leaving requires a good reason, but getting an offer that you really like from the buyside is good enough in my mind. After all, its all about your career and what it does for you, I-Banking is not some fraternity or brotherhood based on high ideals or shared suffering - it’s about the money and leveraging off of the level below you.

If they really wanted to keep you around for 2 years, they'd give you an employment contract. The problem is, then if they wanted to fire you, say you're burned out or just bad, you could always sue them over a violation in the contract. Then, when you get to court and they say, "he was lazy and incompetent" you retort, "I worked 110 hour weeks even when very sick, the MD swore at me, etc...." and the judge says, "it looks like the IB overworked you causing the burnout and poor performance, therefore you, analyst, get some compensation for unfair termination". Trust me; there are legal reasons that investment banks do not give employment contracts. You are employed at-will, and if the i-bank isn't willing to reciprocate the guarantee of 2 years, then you can't be expected to guarantee the same.

I am gainfully employed by an IB at a level higher than analyst and relatively content with my job. While losing analysts does suck, especially at off season times when its harder to replace them, I bear no ill will towards guys who leave - as long as they give 2 weeks and help transition their deals to another analyst.

 
nrc_chicago:

While losing analysts does suck, especially at off season times when its harder to replace them, I bear no ill will towards guys who leave - as long as they give 2 weeks and help transition their deals to another analyst.

Does everyone actually have time to give two weeks' notice? How about one week? I realize that giving more time's notice is more courteous, but there are some folks who have buy-side offers that stipulate a start date as soon as possible...and I'm thinking that having an extra week just to take care of personal things, relocate, etc. might be more useful than "sticking it out" for an extra week. Just wondering what people's thoughts are, and if the amount of notice really matters. (it's also worth considering that sometimes you're even asked to leave the same day you give notice, particularly if you're moving to a competitor)

​* http://www.linkedin.com/in/numicareerconsulting
 

Most likely they're not going to take your two weeks notice.  They'll give you one more paycheck, but by the time you walk back to your desk from informing your group, your computer access will be cut off and then you'll be escorted from the building.  Make sure you start taking your personal stuff out slowly over a couple weeks before you plan to drop the news.  Don't plan on having more than a half hour in the office after you tell the group.

 

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