I'll try to make this as brief as possible so bear with me. I've been an avid reader on this site for some time now but have never posted before. First, some information about my background. I've been working in various m/o roles for the past few years hoping to transition into the f/o (like everyone else in m/o). I've worked for top-tier firms GS, JPM,etc. but unfortunatley I haven't been successful in making the jump. I've recently been offered a great spot on the buy-side at a top-tier hedge fund (think Bridgewater, Och-Ziff, DE Shaw) and I like the people there a lot. I also have an opportunity to take a junior sales/sales assistant spot (with potential to lead to a sales role) with a middle market firm in the municipal bond department. The hedge fund m/o role pays more at least in the short term but I feel the long term potential is much greater in a f/o role. Interested in hearing your thoughts.
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always go FO. EOD
Care to expand? Does everyone else here agree?
Ultimately, I think it depends on what your particular circumstances are. Do you have a family? Are you seriously in debt? What do you want to be when you grow up?
Unless you're doing truly back office stuff (think fund accounting, fund admin, custody), middle office generally doesn't pay poorly and offers reasonably good opportunities for pay advancement and professional growth (compared to life in general not finance). It's a career in the same way that going in as a marketing analyst at a major corporation is a career. It may take you twenty years, but it's not unreasonable for a COO or chief marketer of a large fund to make 7 digits late in his/her career.
Given your options set, I personally would go to the fund middle office and keep on interviewing for FO positions if you're dead set on getting out of it.
If you're going to try for a sales role, at least get something better than muni bonds at a small bank. It's a really, really sleepy part of finance and isn't the place that requires a ton of brain power. Yes, it's technically a front office role (to the extent that sales is FO) but your primary customers won't be hedge funds and sophisticated mutual funds who you can pitch interesting trading ideas to. Rather, they'll largely be insurance companies, large pensions, and maybe high net worth individuals who won't require anything more sophisticated than a 10 page research report and ratings from the three agencies.
But again, this all depends on what you want to do with your FO position. Care to elaborate?
Pennteller, I appreciate your insight. It's a fair question and one that I'm having a hard time with at the moment. To answer a few of your questions, I am recently married, no kids (although they may not be too far off - much to the dismay of many people on this board), and I have no debt. I am late 20's and feel like this could be my last shot at a f/o opportunity. Granted, muni bond sales for a middle market firm isn't the same as trading CDO's at Goldman Sachs but it could be my chance to get my foot in the door. In addition, I am pretty friendly with some of the senior level guys on the desk who could potentially serve as mentors. I'm an outgoing person and have always envisoined myself in a more sales oriented role but given what has been happening across the street these days I'm wondering if S&T is really as glamorous as my counterparts in m/o make it out to be. The buyside job is at a great spot and I really like the people/culture there. My only concern is the growth potential.
Apologies for the lengthy reply but I would love to hear some more of your thoughts.
You said yourself that this could be your only shot at a FO role. Take it and never look back. MO blows man. There definitely are exceptions, but the norm is that MO sucks. The hours can be just as bad as FO, but your doing even more of bs work and you don't get compensated as much as FO, nor get the respect you should deserve.
FO hands down. A no-brainer.
FO for sure...
Revolution, I agree. The work is definitely not as interesting in m/o and the hours can be just as bad if not worse (especially when compared to many of the sales guys I know who are strict 7:30-5). I'm curious if anyone knows the answer to the following; Is the comp in muni s&t generally lower than other products such as equity/credit derivatives? What about compared to other types of vanilla products like commercial paper or cash equities? I know a number of vp/director level sales and traders in some other product areas who were pulling in 400-600K total comp (granted this was a few years ago when times were much, much better). Is this realistic in the muni world or are we talking about a significant haircut here?
Any info would be appreciated.
anybody?
Look, you seem to have made up your mind already. I'd say disregard anything anyone else says on this (including me).
I only question the decision because I don't think of sales as a real front office position. And before every institutional sales guy here tears me a new one here, I'd just like to point out that this comes from the perspective of a buysider who screens his calls because sales guys keep on pitching me ideas I can't or don't want to use. IT seems like a pretty crappy existence, spending the time on the phone getting your issues shot down by skeptical investors.
I guess here's the reason why I'm skeptical. I'd rather interview a smart risk or treasury analyst for analyst positions at my fund (and have) than an institutional equity sales guy. The way I see it, sales guys don't ever really build up any sort of solid skillset. The most analysis they do is printing out something from bloomberg or relaying a data sheet from a trader. Whenever I've asked a sales guy to help me understand a product, they always refer me to a trader who actually works with the product or forward on some research put together by someone else. This is true of virtually every product area I've encountered (with the caveat that the more complex the product area, the more the salesperson has to know).
I don't think it's so much a critique of public finance as it is an acknowledgement of where a broker dealer's margins tend to be made. Things like cash equities, commercial paper, and munis are relatively less profitable areas of financial services. Why? Because the markets are transparent, because the instruments are easily understood, because the players are well known, because the service itself is relatively interchangeable. The bid-ask spreads you capture as a broker in each buy and sell is incredibly small (a couple basis points in many cases). Comp, as a result, is weaker.
Why are things like CDOs, MBS, and exotic options more profitable for a bank? The markets are relatively illiquid, so execution by your broker dealer matters a lot more. If I own an MBS instrument, better execution by my broker could be the difference between getting 100 cents on the dollar and 95 cents on a position I sell. That's 5% I need to make up through pure performance. Anteing up for a good execution broker is just smarter in those cases. If my potential loss is 3 bps, I'm much less likely to care.
The more analytically complex an instrument is, the more likely a buy sider is to rely on the recommendations of his sales guy. As an equity guy, I mostly ignore recommendations of mine.
From a professional development perspective, I'd have to imagine that the more analytically complex an instrument is, the more likely you are to develop the skills and perspective necessary to move into other areas of finance.
Again, I don't want to bust up on your goals. If you feel this is your shot and it's what you want to do for the long term, then by all means take it. But ask a lot of questions about the experience you'd get there and genuinely see if it fits into what your long term goals are. Make a decision based on THAT, not the inane ramblings of one guy on a message board.
You've been working in MO all this time waiting for an FO offer and when it appears you question it? I guess it's natural.. but take that shit!
It's not like the hours in S&T are a lot worse than MO.. and the drop in pay will only be for the 1st year or two. After that it's up to you what you want to make.
Best of all, the FO experience opens you up to a whole new set of opportunities if you leave the firm.
Fair enough. What is your opinion about muni sales? Is this a decent spot. I know there is a tendency by some to look down on roles in public finance. Is this because the pay is generally lower than other product areas?
Pennteller, thanks again for providing some great advice. Your posts are a lot more helpful than the typical FO>MO>BO comments I see all the time on these boards. By no means is my mind made up. It's a difficult decision for me and I'm really struggling with it. It's probably a good thing I'm not a trader...
I've gone old-school and broken it down to a list of pros/cons for anyone who cares to read and provide feedback. If anyone can think of additional pros/cons to add to the list please feel free.
Pros (m/o): top-tier buyside fund, great culture/team, familiarity and demonstrated success with the position
Cons (m/o): growth potential is questionable
Pros (muni sales): F/O, better pay (long-term not short-term), more interesting work?, and could provide additional exit opportunities within the F/O
Cons sell-side (I'm tired of working for banks), smaller firm, lots of restructuring going on within the group, my level of success and ability to do this job is unknown
You never really answered my initial question. What is your goal in all this? What is your ideal career?
If the answer is "I want to make money," you'll probably do okay in middle office (perhaps even better over time than sales guys as I've seen a lot of those folks burn out over the years due to the pressure of hitting their numbers). Hell, some middle office guys made boatloads of money capitalizing off the outsourcing trend in hedge fund middle offices.
If the answer is "I want to be a bond trader," then you have something much more solid to go forward on.
No one here can provide that answer for you and it doesn't seem like anything you're analyzing is really taking that into account.
Unless you actually figure out what the plan is in the long term, every move you make, whether to front/middle/back office, will be a suboptimal one because you won't know why you're there to begin with.
Good point as usual. I guess the problem is like many people my age I don't really know what I want to be when I grow up. Obviously the money is a factor, if it wasn't I wouldn't be in finance in the first place. However, I really do enjoy following the markets and the fast-paced nature of the business.
You mentioned some middle office guys make "boatloads" of money outsourcing hedge fund m/o roles. That is partly what I'm afraid of. What if I am the one outsourced and not the one doing the outsourcing? I feel like F/O spots are more secure from this perspective therefore making them a safer long-term bet.
At the end of the day I just want to take the spot that is the best fit for my skill-set and therefore offers me the best opportunity to be successful. I am not delusional like some people on this board and do not need to become the next John Paulson in order to be happy with my life. That being said, I do want to provide a comfortable living for my family. Since "comfortable" is subjective and people on these boards love to talk numbers I'll define it as $300K+ (all-in)...this is nyc after all.
I'm a trader at a similar hedge fund to the ones you mention in London, and i'd say definitely take the FO role. A lot of MO guys join assuming they can progress, but just get stuck in a cupboard somewhere and forgot about - and honestly, there's only so many different non-FO roles you can have on your resume before you get pigeon-holed. Brand name counts for jack when you aren't doing what you want to do.
If you want the perspective of another FO guy at a hedge fund, I think PennTeller is giving you by far the best advice. Think about what you want to get out of it. If I were you, the sales role might feel like a big risk to me.
Sales guys can do well for themselves. I would say the same is true of MO (though to a lesser extent). To be totally honest, neither group tends to get super rich.
Would you actually regret taking the MO job? Would you always wonder about what could have been?
If you won't be able to look yourself in the mirror if you take the MO job, then obviously don't. I would be among the first to tell you this is, perhaps, too big a decision to really punt to a bunch of randos online about. However, I think it is far from obvious that you should knee jerk FO on this (without getting into the specific FO role in question). I think it unlikely you will be getting a FO role at the firms you mentioned in either case TBH.
What about my earlier comment regarding the outsourcing of hedge fund ops roles? Do you think this trend is likely to continue?
I agree with marked to market that the likelihood of this opportunity leading to a front office role at the fund is slim-to-none. I don't think they recruit many PM's out of the m/o.
Pennteller/marked to market - as you seem to both be in F/O roles on the buyside I'm curious as to your thoughts on the following; what are some of the best m/o roles on the buyside for someone who is not very quantitative (i.e. market risk management is probabley out of the question)?
How big of a difference are the two base salaries? Is the FO role a pay cut from your current salary?
I like what marked to market said, will you regret the MO job? You may enjoy it, make good money but will always be thinking "what could have been".
I look at it this way. You are still young, take a risk and go with the FO role. If you do not like it or aren't making the money you want go back to MO.
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