Job security on the buy-side?
We all know that the buy side is the supposed "promised land" for those in the finance field, but what is the job security like at some of these buy side firms? In this economy it is much harder to jump from firm to firm so job security seems to become increasingly important. Who cares if you're making bank if you will be unemployed in two years?
From what I understand, hedge funds seem to be the most risky path to take. Hedge funds fail all of the time and your job will be gone as well. They also seem to be the most performance based, so if you make a few bad trades in a row your job might be on the line. Of course though hedge funds do hold incredible earning potential.
PE seems much less risky although you still don't seem to have much job security. The opportunity to earn ridiculous amounts of money is also still possible.
For those on the buy-side, how secure do you feel with your jobs? Do you have a backup plan just in case? I know that people don't get into finance for job security, but it would definitely be something good to have.
Thoughts?
yeah .. i think your read on the buy side is basically accurate. Depending on the structure, PMs / analysts at hedge funds can be gone pretty quickly depending on their results, or as a result of the fund's performance.
Movement between funds is pretty difficult at the higher levels unless you have a good track record (P&L responsibility)
PE is somewhat similar but tied to a longer fundraising cycle for the fund - bad performance leads to less capital committed to your next fund - similar effects to hedge funds but on a longer time scale which presumably gives you some options to switch gigs.
Don't forget that the transferable skill-set in hedge funds is limited compared to PE - in PE you can usually switch to sell-side /corporate positions or corp. dev. as the corp fin. skillset is relatively more transferable than the equity / credit research skillset that you develop at hedge funds.
Long only / retail funds are actually pretty decent - good pay and the asset base usually reacts on a slower timescale than hedge funds - also a chance that as an analyst you will just get rolled over to an analyst position supporting a different strategy.
Job security on the buyside, like any other industry, is only there if you're good. I agree with long only funds, the PM's there are less likely to style drift and lose faith of their clients. So their AUM and livelihood is more secure.
Job security on the buy-side is highly dependent upon the capital composition of your AUM. If your investors have monthly liquidity, no real loyalty, and are short term focused you could be truly screwed. A few months of under-performance could lead to large withdrawals, a collapse in fee revenue, and an ax over the analyst's heads. On the opposite end of the spectrum, there are several funds where the PM's have made enough money it is essentially a family office. In these instances as long as the fund doesn't totally blow up there is a lot of safety. Most funds are somewhere in the middle. It seems that pension money is stable due to the ridiculous due diligence process and longer commits. Family office and and seeds from former PM's seem to be sticky due to relationships as well. FoF assets seem to be kind of mobile.
Its not government work where you can can sleep for a few hours every afternoon and punch in an 8 hour day from 9-5. You have to perform and there are risks beyond your control. That being said things are much uglier on the sell-side. I read a new article about layoffs at the banks every day.
And some of these funds are converting into family offices to avoid the new SEC HF registration requirements. Such are the cases of Soros, Shumway, Drukenmiller and also Icahn on the PE side. Renaissance Tech can certainly return money and become a FO as well if Simons wanted to. According to your assessment, what other HF or PE funds out there are also big enough to be family offices? I wonder how many more of these funds will also go for the family office route.
Henry Sweica's converting too (Highbridge founder)
Does the buy-side have the automatic promotion as in the sell-side?
There is very little job security in the hedge fund industry until you have many years of performance attributable to you. I manage money at a large hedge fund and feel the pressure of my job on every bad trade or on every bad day, week, or month....there are about a million smart people who would be happy to take your job so its always a chase. One huge misconception I see amongst young people is that the pressure/stress gets better the higher up you go...in reality it gets much much worse until you are really at the top which takes many many years. However, the upside is enormous relative to anything else if you succeed and I enjoy working in a job that is intense.
HF's will be interesting to watch going forward. Many small shops are creating a compliance division to attract client funds and FoF's, maybe that'll promote job security?
How does job security compare in VC?
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