HF Analyst 1- Need perspective

Not sure what I am searching for...perspective? a sanity check? slap in the face?

Here is the situation: 3 years of sell side and then moved to a different country to pursue other opportunities. Essentially wanted to get into a hedge fund, of which there are almost none in my home country. Found a job and started a year ago. The shop is a L/S fundamental started by a PM with an excellent background. Performance hasn't been great so raising money is challenging. Fund AUM is somewhere between $100-250M for reference. The team itself is great, all incredibly driven, nice, easy to work with, hours, etc. The experience I am getting is also fantastic. In a risk taking seat at a HF with a well respected PM. From my understanding the type of work I am doing is pretty rare for a first year (going into my second) analyst. 

The problem is of course the pay. I am getting paid way below market. Not 10%, more like 25% below market value for base with no prospect of a bonus in 2022 as of yet (founder has to pay himself back fees required to launch fund). I'm mid/late 20s with very little savings and living pay cheque to pay cheque. That being said its a small team and will remain such even if the PM can raise a lot more money so the upside is huge.

I know I am incredibly lucky to have this opportunity and there are folks who would take my seat for less. However it is frustrating seeing others make way more. Am I crazy for continuing to stay at the fund? Money is locked up for a couple more years so it won't shut down but I do worry about my own financial situation. Do I ride it out and collect another year of great experience and then jump ship if there's no more $$ raised? Do I leave now to get a higher pay cheque and some bonus certainty for a worse situation (culture, hours, quality of work)? Curious to hear what others would do on this forum.

Comments (10)

  • Analyst 1 in CorpFin
Jan 7, 2022 - 12:30pm

I think it's difficult to answer. The upside IS potentially something worth sticking around for, but it something only you can really determine as an "insider" regarding if it's worth it.

I wish you the best of luck in your dilemma, though.

  • Associate 2 in PE - Other
Jan 7, 2022 - 12:44pm

I don't think this is an incredibly unique or rare seat for someone with three years sell side experience. Sounds like you are at a mediocre tier start up HF that neither provided you with equity upside nor tied your "risk taking" component to P&L 

Jan 7, 2022 - 2:08pm

Start talking to recruiters and biz dev people at other funds

Do 2-3 years at your current fund and you're good to go

You don't owe your current fund shit

$100-200m AUM is not a real fund long term


Good luck

Most Helpful
  • Investment Analyst in HF - Event
Jan 7, 2022 - 2:56pm

Be clear-eyed about what you are trying to accomplish LT for your career with this experience. You were on the sell side before and wanted desperately to move to a HF. You got that foot in the door through this seat. When you go recruit for the next HF job, it will feel like a much lighter lift and you will have a broader opportunity set because you won't have to overcome the lack of relevant experience on your resume.

I don't know how bad it is because you're not quoting any numbers. If you're saying you get paid $100K salary with no bonus as a 27 year old, yes that is below market. But you're objectively doing just fine. You're also at a start-up fund where you presumably traded off current earnings for long-term upside and some other career objective (e.g. learning, experience, resume building). Just do an intellectually honest thesis check on if you're getting those non-monetary benefits by staying in this seat. Are you becoming a better investor? Are you becoming more marketable to a higher tier employer in the industry? Do a market check with recruiters to see if your reception is markedly different from when you were applying from the sell side.

If I had to guess, you're getting the sense from recruiters/friends/lame WSO threads that your peers are making 3-10x this year which makes you feel really salty and insecure. First off, discount the numbers you hear by 25-50% because people inflate their comp all the time, esp. ones that like to broadcast. They're telling you numbers that include significant deferred or non-cash comp that they know is dead money, or just straight up lying to pad their ego. People who are truly content with their jobs don't feel the need to boast to others to compensate for deep-seated unhappiness elsewhere.

So yes, this was a banner year for finance and your peers probably did make $300-700K on average in their late 20's. Maybe next year some of them will be unemployed. This is a long game. What are you doing today to make sure you're set up for $5-15M+ liquid in 10 years so that you can choose to walk away and do what makes you happy? That is the real game. Do not get down on yourself for "relative" underperformance in any given year. That's like chasing a benchmark in a bull market. Unless you are saying you make $40K in a tier 1 city and genuinely worry about paying the bills, I would not make money the primary decision driver at this point. You will have your shot at a standard $3-500K analyst seat if you choose to leave for a bigger institution in a couple years. But first think about if your current experience is building towards a bigger goal down the line, or if it is not helping you with that goal. Knowing the business doesn't generate enough cash flow to pay you, what value can you get out of this unique situation? Can you get a carve-out to build a track record? Can you get carry/partnership stake in the firm? Is the PM really teaching you valuable skills and connecting you to his/her network? These are the decision points.

Jan 7, 2022 - 3:33pm

It comes down to:

  1. Do you believe in the strategy and PM can make up the lackluster return
  2. Do you believe the PM is good at marketing (which is 100% unrelated to ability to generate alpha)
  3. Do you think the strategy is marketable

This should help you assess whether the upside is visible or not. It's still hard to assess but that's the key here because otherwise there is no upside and you will continue to be underpaid which warrants a move to another fund. 

Jan 9, 2022 - 1:39am

Excellent points above. 

I work in a slightly different space than you, but faced a similar dilemma this past year myself. I'm in LO and generally do fine, but know many who do considerably better than me within my industry, namely due to a considerably lackluster bonus structure despite maintaining strong performance. The shop I work for is very well known and has a reputation for paying at this level for people who just joined the firm even during very strong years, like 2020 and 2021. 

Why I'm staying:

1. I am energized by the people around me. They are incredible leaders and will teach me things that I genuinely don't know I could learn elsewhere. The firm's culture is solid and I truly enjoy my work. This is something that I personally discounted in taking my offer at my current company, which is why I mention it first. Having smart and trustable leaders matters. Unfortunately, it doesn't mean you get paid more, but makes for a killer work experience such that even if I can't make more at my current shop, I know I can depart somewhere else and do better if I put effort into finding a new seat. 

2. I have confidence in the strategies I am working on and that the company is prepared for the upcoming wave of consolidation coming in the industry. The team i work on now has had an excellent track record and is growing at an exponential pace in importance in the company. Additionally, with respect to the company I work at, we have engaged in M&A activity that will ensure the entrance into new areas as well as alleviate existing investment limitations.  

3. We have a killer distribution and marketing team and the teams I work with know how to message their ideas well. This is critical to the continued growth of my team. 

Try to engage in a similar exercise yourself. See if you can name a series of reasons why your existing fund has a good shot of growing, Ideally, you will hit all three of the points dickthesellsider mentions and probably a few more. I want to add and reiterate my above point the importance of the PM as a leader in addition to his investment skills. Good leaders are harder to come by than I personally thought (at least in LO) so getting that experience truly is worth it, even if you have to sacrifice compensation for right now. That said, don't work forever there if you're not making money. Be thoughtful about this and see what you can come up with.

Jan 9, 2022 - 10:55pm

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