Leaving an established hedge fund to join startup hedge fund

Hard to give advice without knowing specifics. FWIW solid chance I know both the fund you work at and the one you're considering. If you want you can PM me and we'll chat

you only grow when you're uncomfortable. Push harder on the base if they really are desperate. May also be a great opportunity to start a track record you can leverage later down the road.

hfmonkey85:

Most guys at the firm made 7 figures last year.

I don't have much to add, but just wondering how you know something like this. If they're as small as you say I doubt there would be much info about them. Did they just tell you that info?

I wouldn't call Boston a secondary market for the buyside? In fact, it seems like many of the best buyside gigs are in Boston

key thing you have not mentioned is that you essentially make a bet on the founder and his/her ability to drive performance/aum growth of the shop. you know him and the investment approach well? good. you don't? then it is a punt unless you get good insight on his previous career path. start-up shops come and go with founder's abilities.

From what you've shared I'd say it's worth thinking about seriously. You're also probably overestimating job security in your current seat.

Honestly, its all matters about how much you believe in yourself. If you confident in yourself and believe you will put up good numbers regardless of the firm then even if the firm implodes you will land on your feet. I think it is worth the risk. To me supreme confidence and betting on yourself is never a way you're going to lose.

My answer is purely based off how I feel everyone should live obviously I do not have the specifics about either situation.

Chat with your salespeople to get a sense of how good their firm is, or at least their perception by the street. As someone else said, you're ultimately making a bet on their senior team taking this firm to the next level, with you along for the ride if / when you get equity.

If big brokers are dedicating a lot of resources to cover them, you know that they're viewed positively and seen as having strong potential to grow into a big client.

A no-name fund could be good if they have potential. By the time they build a name that same assistant PM position would be way more competitive to secure.

know anything about the LP's?

Seems like a good risk/reward trade to me. Significant upside potential, bump in title, similar pay to start. Curious if the advice would differ if it was trading at bank to a startup fund instead?

The advice so far is pretty spot on. I have never worked at a HF, but this seems to me like a pretty great opportunity.

For PE/VC/HFs in general the path to riches seems to be:

1. Work at a big shop for a while
2. Get to a point where you've picked up good experience and where you think you can do better
3. Go somewhere else where you get more responsibility or strike out on your own
4. Profit (or lose)

Sounds to me like opportunities for advancement at your firm are limited. If you believe in yourself and your ability to invest, this seems like a good opportunity to test your mettle.

I'm sure you could always go back to your old company. For inspiration, Mitt Romney joined Bain Capital when he could've stayed at Bain as a consultant and had more career stability. At the time he had student loans to pay and a family to support. He hit it big. If you're ever going to take a risk do it when you're young, it;s harder to do when you're older and have real expenses...

From what I can tell you have no dependents so the advantages are you get more money + better title + bigger role and the downside is you might fail?

Even if you fail, you can easily explain that you transitioned from a prestigious HF to a growing HF for a bigger role and more money. I don't think anyone would question that choice.

Can you shop the offer to your current firm? Maybe they are willing to do something to retain you.

Hey OP - definitely an offer worth considering, and if you want to get to seven figures, you'll need to take some substantial risks eventually, probably.

That said, keep in mind (and there's statistics out there to back this up), that the vast majority of "top performing" funds fall out of the top quintile of performance within a couple years of ranking in the top quintile of returns - I'm talking something like 90+% of funds.

That's not to say anything other than: be cautious of whether your cowboy bosses are simply having a good year which will be followed by 2 years of lackluster returns, followed by redemptions and salary cuts.

Long-term, I can also say that I think hedge funds as an industry will come to be more dominated by economies of scale. You guys are all trading with the same algorithms, and there's not much in the way of proprietary developments there, from what I can tell. From what I can tell, "edge" in the future will derive from infrastructure and data investments, as well as proprietary deal sourcing. It stands to reason that huge managers with lots of capital to invest in themselves will be able to invest more heavily in, say, the next generation of computers than a sub $1bn shop.

That said, small and nimble can sometimes be the only way to make eye popping returns long run. I'm sure you're familiar with the iron law of costs - i.e. when you're so huge as these megafunds, you are too large to move nimbly, and capitalize on small-but-profitable arbitrage opportunities. The number of opportunities that can sustain 20+% returns dwindles significantly when you have to equitably assign billions and billions in investor capital to those funds.

At the end of the day, there is no right or wrong decision, simply a decision on where you sit on the risk/reward curve.

However, it seems like a great chance to swing the bat with so many of the pieces in place, and I personally think that people should swing the bat more than they do as often times there is huge asymmetry in life that people are to risk averse to extract

I've been in the industry for a long time now. I don't think the answer is as straightforward as others here are making it out to be. The thing you have to be really sure of is how good they are as investors. If you haven't already, you should get access to all of their investors letters and performance figures so that you can see how they have been driving their returns. Go through their book and ask them about their largest positions. Review their fund docs, ask them about their investor base, and don't let them give you a BS answer on that. If it turns out that the majority of their investors are FOFs, then know that there investors have little staying power and aum will shrink the minute things hit a rough patch. If they are backed by Swensen and other reputable endowments and foundations, their asset base is as stable as it can get for a hf. I can't emphasize this enough. If you have done all of this, then you should have some reasonable degree of confidence that this fund has staying power and invests in things that you believe to be good. If not, don't go. I've turned down offers in the past after doing this work. Assuming everything checks out, then you need to make sure that your role is changing in a way that will position you for the future. Maybe your role as an analyst is limited in some way currently and this provides you with additional scope. That's good. But an analyst to analyst lateral move downstream is not advisable simply because comp is better. If the economy turns next year or after (which we all know it will at some point), that carry won't mean anything. In addition, at a smaller fund, there's less cushion to support the investment team. Then what happens. You will be an analyst at a small no-name hf in a secondary market...not a position I would want to be in even if it meant making more dollars in the interim. But if everything above checks out and this is simply a small fund because they have been under the radar up to this point, then by all means take the offer. You could be onto something special.