Leaving SM?
Hi all -
Currently an analyst at a SM HF (7-8 years total work exp., 4-5 years buy-side, 1-2 years PE / 3-4 years HF); things are good and I'm one of the earlier guys at the fund.
I love what I do - but have a deep desire to become a PM and actively manage risk (def don't want to be a career analyst regardless of comp). Does anyone have experience, or thoughts/considerations regarding making a jump to a firm like a Maven Investment Partners / Quad Capital / First New York to make the analyst to PM jump? I get that these are more "prop trading" type firms where you manage internal capital as opposed to going to a MM fund, but just curious if anyone has experience going this route as opposed to sticking around at a SM and waiting for the analyst to PM promotion or even going to a MM to manage a book.
Thanks in advance.
It's so different in terms of "investment" philosophy (It's an insult to the word investing to call First New York ppl investors). So you have to be sure that's the framework you want to operate under while you managing the capital allocated to you. Just know the risk framework imposed on you is nothing you have seen at SM HF. Same goes for MM.
lmao get off your high horse. "insult to the word investing" is some real clown shit
Wait, I forgot this is the HF forum, not the AM forum
Why are you considering Maven, Quad etc ahead of the large MMs?
I’ve spoke to a number of business development people at some of the MM (citadel, Millennium, etc), and I was told that I’d likely come in as a senior associate (at most of these places) based on my years of experience as opposed to an analyst (my current role). It’s my understanding that analysts begin to manage risk in carve-outs at MM, but the time for senior associate progression to analyst progression can be variable (and on average takes 5-7 years)? Perhaps some of my facts and figures are wrong here given that I’ve never worked at a MM, but I also figured that MM seats would likely be more competitive to earn than that of a Quad / Maven, etc (given that there are lots of eyes on MM and not as much on prop trading firms?)
My 2c: only Citadel keeps such a structured hierarchy of associate, analyst, etc. And even for them, the 5-7yrs you mention sounds like way too long for someone with your experience. If Citadel biz dev told you that then that's that, but ultimately if a PM likes your sector expertise and wants to hire you as an analyst, it's his call.
Last point, I've seen PMs that blew up at large MMs resurface at FNY, Shay and such, but the reverse move is very uncommon (but not impossible). This is important, given that the average AUM allocation at a MM is >10x what you get at a prop shop. The financial rewards and the resources at your disposal at MMs (including corporate & sell-side access, the ability to build a team, etc) are in a different league in my opinion.
Thanks for the great feedback. Point totally heard about MM having a ton more resources regarding capital to manage, sell-side access, infrastructure, and more.
When you allude to the fact that MM funds can give you a significant amount of capital to manage (more so than these prop trading / investment firms), can you give me a ballpark on the delta? Would it be fair to say a MM will start you off with an average of 200mm, as compared to 20mm at a FNY/Quad, etc? I can prob estimate MM will give you significantly more capital on day one than 200mm, but just throwing out some numbers here to try to quantify
It all depends on your experience and I am not super well-versed on props, but yes, a relatively junior PM at a MM that's not Citadel would get $200-300m and 20-30m at a prop. An experienced PM with solid track record would be $1bn ish at a P72 or MLP but maybe only $100m at a prop shop.
Great, thanks for the color here. One last question: you mentioned in your previous post that it’s uncommon (but not impossible) to move from a prop shop to a MM. I suppose, like everything, this boils down to track record (most importantly), the specific hiring needs of the fund, etc? Assuming this thesis would be similar in nature if moving to a SM (but probably harder, since I’m assuming that SM are harder to get into than MM)?
Is that 200-300M pre leverage? Reading around it sounds like most places give 100M to start, is Citadel more liberal with newer PMs?
Citadel is more liberal with everyone and gives out the biggest books by far.
The $100m myth is BS. It depends on level of experience and what fund. I doubt MLP starts anyone with less than $200-300m, while a smaller MM like Cinctive, Verition or Hudson Bay can well be starting untenured PMs at $25-50m. Depends on PM's experience and fund size. Applying a flat number to all situations makes no sense, and anyone that tells you otherwise doesn't know what they are talking aboit.
I’m reading that MLP have ~35B AUM and ~200 PMs, given that the mean is ~175M, is it really the case that people may start with more than that?
Like every MM, MLP levers its AUM anywhere from 5-10+x. Divide $200bn by 200 PMs, and you get the picture.
Would you rather bet $3 on a coinflip with a $3 payout or bet $6 on black on roulette w/ a $3 payout? You can talk all day about how you manage $6 vs $3 or how the coin guy made 100% return where roulette guy only made 50%. It’s a $3 payout either way and your expected return is less on roulette. Consider resources, overhead costs, quality of life and most importantly ability to perform in the mandate. Come to your own conclusion about where your best holistic expected return would be. For some people/strategies that’s MM some SM some propshops. And for some you have to strike out what’s available to you. We’d all love to manage $1bn with a 3yr lockup and 2% performance fees - it’s not realistic these days for most. So look at your opportunity set, but don’t be too fixated on the upside case. Probability weighted return among available opportunity set with a heavy dose of industry-scarce realism and humility is the best way to evaluate opps and is much easier said than done - we’re hedge fund guys, we all have a tendency to assume we’ll be the upside case. My biggest career regrets have been not evaluating jobs with the same level of objectivity and skepticism I evaluate stocks.
Are you better Just remember, the easier the AUM comes the harder it is to keep for the most part and is offset in workflow/QoL/fees. Don’t try to only maximize size of book and speed of size. You’ll pay for it in terms, stability and mandate/risk limits. Bigger AUM does not mean bigger probability weighted earnings.
On this note, would you be able to shed light on how much is the average AUM allocation to a PM at large MMs? Thanks!
Edit: Sorry please ignore, realised you already mentioned above.
Progression to analyst from senior associate is completely dependent on level of experience and ability to generate beta-neutral, factor-neutral alpha in the citadel model. That can take <1 year for many people who are good but you need to be honest with yourself about it.
If citadel biz dev said 5-7 years then that is that but that seems a little odd to me that they’d say that because that is too long for them to even give you a specific time frame.
Have you talked to some of the smaller MM like Verition or Centiva? Probably easier to get a book there than the big ones like MLP or Citadel. Of the prop firms you mentioned, seems Maven seems to have PMs with a fairly similar background to other MM. Does anyone have any insight into them? Are they more of a Tower Research or Squarepoint type of place?
If you’re good 3-4 years (possibly w/ a jump to a new fund as PM or a sleeve earlier). You can get an MM book when you’re ready to run one as soon as that is. That’s not just stock picking, but market-neutral portfolio management. If they don’t want you as a PM it’s because you didn’t talk like a market neutral PM and you need a little time to make those adjustments. You’re much better off spending a couple years at a big MM to absorb the tight risk management best practices and build relationships w/ sell side, mgmt and data providers that you won’t get at a prop shop. A lot is the same but a lot is different than SM approach and trying to come in with a slight modification of your current approach as a PM is asking to blow out quick.
Fwiw I have same thesis as you but I think you are early by like 5 yrs. Prop-y MM will be the next MM in terms of best seat in the house. Opportunities don’t exist at SM since those funds basically don’t create alpha and therefore cannot grow. A big reason why this is an interesting move is because prop MM funds actually do well and ergo can grow, but it’s a well kept secret. For now it’s still better if you are a traditional fundamental guy to go to a traditional MM but with the right opportunity this can be a good decision.
Trying to understand this comment...do you think that the "traditional" MM model is going to lose momentum in favor of the smaller prop shops or saying that MMs will continue to grow and attract assets/talent and thus, the smaller prop shops which have/ can adopt similar models will also become attractive?
I think he's saying MM > Prop > SF, as opposed to MM > SF > Prop.
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