Joining A Startup Hedge Fund

What are people's thoughts about leaving an established "brand name" HF to go join startup hedge funds ($500mm - $1bn AUM launch so not a tiny startup). I understand that there's much more risk, but frankly, there are large hedge funds that seem risky and prone to shutting down as well. I'm in the credit space so thinking about York and CQS etc. in particular regarding their HF strategies. Has anyone made the jump to a startup hedge fund and back to an established HF if they were unhappy or the fund shuttered? How did people feel about their recruiting potential after leaving the brand name shop? The way I see potential tradeoffs, there are startups with good momentum and traction and then there are lots of big funds with poor performance over the years (like an Anchorage) that have been losing HF AUM en masse, but still have a "brand name".

Happy to hear people's thoughts on why they would/wouldn't make the jump to a startup launch, and from people who have and how it's turned out for them. 

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Comments (13)

  • Research Analyst in HF - Other
Apr 29, 2021 - 9:42pm

Is it typically for the founding/early analysts to get equity in startup funds? There's really no path to Partnership or getting into a "PM type seat" at my current setup given the structure/headcounts (unless someone senior leaves), and it's had its share of AUM outflows as well. I see these big credit HF behemoths blowing up, and so I think to myself how much more risk can there be at a startup as long as performance is above 0%. I'm cognizant of a situation where people start getting cut due to big outflows. I guess still worst case, recruiting out of like a York/Anchorage, you're a known quantity and that helps you despite the fact performance may have been dismal for the last 7 years etc.?

  • Research Analyst in HF - EquityHedge
Apr 29, 2021 - 9:52pm

"Is it typically for the founding/early analysts to get equity in startup funds?"

It depends from what I've seen.  If you're a Senior Analyst covering names/sectors that your PM can not or is not specialized in, yes, negotiate for equity. and will likely get it 

Junior Analysts or analysts that can not generate independent, well-thought-out ideas, no, unlikely to get equity.

Think about it from what value-add you have to the fund and if your skill-set/knowledge base can be easily replicated.  

Apr 13, 2021 - 2:26pm

I'm a complete novice in this, but I imagine there would be some consideration given to team size? If I was the first hire at a hedge fund other than the founder and we were managing 500M, I'd probably be more inclined to do it, especially if I could swing a percent of the P&L. Either way unless my math is garbage it seems like if you do a good job you end up with a huge bonus pool to split over very few people. 

I'm curious for the reasons more established people in HF's would say not to do this.

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