Life decisions...buy-side equity analyst

I spent two years at a large IB. I then joined a small, long only value fund (~350M when I joined) afterwards. Low turnover, concentrated book (high conviction, 2-3 ideas are invested in per year). Structure is 1 PM with 25 years experience, Senior Analyst with 10 years of experience, and me, with now 1+ year of buy-side exp. I have been trying to take as much responsibility as possible here as I learn how to be a better investor / add more value overall. Returns have been good (15-20% avg since I joined). Effectively it is me competing against the senior analyst and the PM to get ideas in the book (we all look at the same information, senior analyst usually has the drop / edge on me given his experience). My PM is somewhat happy with my performance (general research insights, adding conviction to move positions up in size) and I am glad to be part of a winning team.

He paid me decently (~$400K all in - but low as a % of what the fund earned). He also gave me a raise but mentioned that there was no path for me to advance long-term here. I struggle given the lack of career growth + feeling that the longer I stay here, the less marketable I will be. I think I like value investing, I like doing deep research into companies, business models, etc , but I hate the fact that my contributions are capped given the massive experience gap. That being said, I did want to get my feet wet and I basically got a direct line into how a value-oriented PM thinks / what he reads, etc. That being said, I am humble about how much I have left to learn...

Where should I look next? / What should my next moves be? I worry about the stability of a traditional multi-manager L/S (+ I prefer value investing...) , but also don't want to want to cap my career growth or go to business school. I am thinking about exiting the industry given the massive ego blow I experienced with my feedback / lack of a long-term path. Also debating whether to double down on my interests or exit. Also, wondering whether my skillset is marketable - should I be thinking about alternative paths?

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Comments (60)

Jan 15, 2020 - 11:21am

Maybe start looking at other funds? You have a solid background, so moving around should be no problem. Also looks at asset management firms too which are more stable

  • Analyst 2 in HF - EquityHedge
Jan 15, 2020 - 3:40am

Let me tell you that you are in a spot many of us are also in. The way the industry is heading is that if you wanna strike it big you have to be in the action swinging at it at one of the MMs. Unless you are at one of those mega tiger cub L/S fund with 1bn per analyst ratio or you work for ackman last year, no one is pulling in 1mm+ consistently as an analyst like they used to (imo). If you make 400k-500k year in and year out with limited downside and good stability that's as good as it is I think. LT, value-oriented public equity investing just doesn't warrant the same high level of fees and upside for allocators anymore.

  • Analyst 3+ in HF - EquityHedge
Jan 15, 2020 - 12:15pm

this is really odd. How did you get the read that he wants you to leave in a year? Not sure what's wrong with staying where you are for a 2 or 3 years and find your groove as an analyst.

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Most Helpful
  • Analyst 3+ in HF - Event
Jan 15, 2020 - 3:38pm

I think you are being very short sighted and unappreciative of your circumstances.

You are now 3 years out of school (assuming there wasn't anything before your 2 years in IB and no MBA in between buyside) working on the buyside with total comp of $400k which is very good for your age. What did you expect to be making at this point 3 years ago? What do you think you should be making that $400k makes you unhappy? Why do you think you should be paid as a % of P&L when you are not a senior analyst nor have direct P&L responsibilities?

You are effectively making half a million dollars a year doing two things: 1) learning, and 2) not fucking anything up. This is a very good risk / reward situation for you, and frankly I'm not sure why your PM is paying you so much for that. Unless the comp you're telling us is inflated...?

So far you mention you've made positive contributions to the research process that have been noted by your PM - i.e., adding to trade size. This is a very good thing that I feel like you are understating. You could just as easily be at a fund where your job is to build the models and shut the fuck up.

How do you know you are falling behind vs. your peers? You are very close to the investment process for your age. Why do you feel disappointed that your PM said your role (analyst) is not likely to change soon? Why should he promote you to senior analyst when you've been at your fund / only on the buyside (!) for a little more than a year? You couldn't expect anything like that until you've been there ~3 years and can then re-evaluate. Do you expect guidance for when you can be made a PM of some sort or manage a sleeve of the portfolio? That isn't likely to happen at a single manager shop in general, especially one focused on long-term value investing. Unless your senior analyst has zero desire to ever be in a position to swing his own bat with capital, then you're right it will be tough to advance with a 10 year career analyst in front of you. But 10 years in, more likely this analyst is getting to the point where he's looking for an opportunity to manage his own risk and take his shot. Who will be there to become the new senior when he does that? You will. It won't be you if you leave.

At slightly longer than one year you have barely gotten to the point where you "groove" with their investment style and you certainly are far from being a seasoned analyst. Have one of your ideas blown up and you had to deal with it? Have one of your PMs / Sr. analyst's ideas blown up and you had to deal with it / observe how they deal with it? Have you made recommendations to your PM that he didn't think were right, but then turned out as you estimated and reviewed the situation with him? Vise versa? You are at a value shop that makes

Jan 15, 2020 - 3:46pm

Seriously, what do you expect? Most megafund PE associates are not making 400k per year their first year and they're probably working twice as many hours as you. So what you aren't going to move up? You're one year into the buyside you have plenty of career left. Why not stay and keep learning? You can't possibly know that much after one year of direct investing. You haven't even seen a full life cycle for your fund's strategy given the horizon is 2-3 years. If your comp can remain at that level and you aren't at a big risk of being fired, why would you want to leave? A few years making 400k+ and you could save a ton of money which would give you flexibility to take time off, go to business school or do something else entirely.

Frankly, I do not understand the greed here. 400k+ is a good pay day even for quants at funds with PhDs. Unless you are in a decision making role, there are tons of mathematical geniuses at two sigma and citadel making 250k-400k. I would consider yourself extremely lucky if everything you are saying is correct.

Jan 15, 2020 - 5:08pm

1) If the fund is long only, the actual return is going to be much more driven by the market return vs alpha. Unless you're taking very concentrated bets in low beta name so I don't understand how you can know what the fund return will be for 2020. When you cited 15%, was that 15% in excess of the fund's long only benchmark? If so, fair enough.

2) In the near term that is fine then. There's not much reason to be worried about that. In fact, I would appreciate the honesty from your PM. Lots of people in this industry who would be dishonest and say there's room for you to move up to get more work out of you. Personally this would make me want to stay at that firm more. At least in the short term. If you are getting a good say in the investment process, why not stay and try to build a track record? If you stay for 5 years and can attribute a consistent track record to yourself then you will likely be able to get senior analyst interviews at other long only shops and some hedge funds fairly easily I would assume.

3) Again, you're one year in I wouldn't worry abt that right now.

4) Don't know who these people are that are becoming PMs at that age. Maybe a few in their late 20s but that would probably be at one of the MM pods where your risk of blowing up and getting fired is 75%+. Lots of people would prefer to have a stable gig at a long only shop making 500k vs high risk high reward role at a MM where maybe you'll make 1m+ but more likely you'll make just your base salary and be fired.

5) In one year you really haven't seen much. I'm sure it feels like a lot, which is fine.

6) Yeah. I know people 8 years in who are not "senior" analysts. Although different shops have different titles so it's hard to say.

If you spend another two years there and you still are not being given any more responsibility despite stellar performance than you are now then maybe that's the point where you try to make a move. Otherwise the right call to me seems like you should stay put and try to be proactive about idea generation/research. If you do good research and have a good hit rate, it's in your PMs best interest to give you more PnL responsibility. Keep track of recommendations that you make that don't make it in the portfolio

Jan 24, 2020 - 1:07am

Dude, you're clearly a smart kid but damn you dont even know what you dont know. You've basically worked 1.5 years in a massive bull market. You might think you've "seen all these situations" but you're no where close. If you ask any experienced investment profession they will typically say man its crazy how little I knew for the first 3-5 years when I thought I knew a lot. Also, no serious LPs are allowing someone with like 5 years of work experience run a book. Maybe in a MM setup but these are extremely rare situations so its a horrible bench mark.

I guarentee youre gonna reflect back on this in the future and realize how silly you were being.

  • Research Associate in HF - Event
Jan 15, 2020 - 9:50pm

This is an odd stream of consciousness. Sounds like you think you're getting fired after next year but the actual words spoken were ambiguous.

Ask your PM on Friday to clarify what he meant including potentially asking him for the courtesy to give you head's up of [1-3] months prior to the end of your "program" (if that's how he's thinking about this). Be very gracious for your bonus and experience, and start being proactive about working on a side plan for the skill gaps you are lacking that made you create this thread.

Jan 15, 2020 - 10:26pm

He's a small fish in a big pond, from what you said about your eagerness to learn you have a place in the industry don't be discouraged you just have to find it. What you didn't do for him isn't what you won't do for another shop.

Jan 16, 2020 - 11:00am

When there's no path its time to leave. You have a very straightforward case to join other funds and should have no problem landing interviews. They will all understand because they've all seen the guy at the top who doesn't want to share the playing field with others.

Jan 18, 2020 - 6:15am

"maybe Longer term L/S with more opportunistic shorts"
Trust me, you don't wanna be at those funds. They are a dying breed. I expect there to be

Array
Jan 17, 2020 - 12:22pm

Late to the game - but sounds like your PM is just a nice guy and giving you a heads up. While you may good/smart, he probably realizes he doesn't need you long-term given the size of the fund, turnover of investments and his ability + senior analyst. You're an added cost to him that may not outweigh the benefits to him. Or he could just be letting you know that you're essentially capped now - so don't expect higher comp. Nothing wrong with that and you shouldn't take it personally.

I am on sellside ER, so I don't have experience on the buyside. But most of the people I talk with are at the multi-manager pods. I will just say that if you are fretting over something like this then the multi-manager pods may not be for you. They are extremely stressful with a lot of constraints and high turnover.

Jan 17, 2020 - 2:11pm

Blows my mind that you are not satisfied w/ your role after 1 year and making $400k. Small shop so I'm assuming you get exposed to everything which might not be the case at a bigger firm where you get silo'd into A or B. Stay until you feel you aren't learning, then move on.

According to you, you've only gone through the conviction/idea cycle 2 or 3 times. Obviously there's more to your life / story, but seems like you could easily stay for 2/3 more years. At that point you could talk about some real experience under your belt, and probably move to a solid senior analyst role or junior PM-type role.

edit: really, if you are good at your job and you add value, after some time it probably wouldn't be out of place to ask for some carry / bonus structure tied to performance

  • Research Analyst in AM - Equities
Jan 17, 2020 - 10:52pm

That kind of comp doesn't even pass the common sense test. Say your fund is getting 100 bps which is likely not that high these days, but in any case $3.5mil in rev. Give or take 40% for admin costs leaves about $2mil for comp. The pm will take most of that, pay the senior analyst enough to keep them around and pay you the remainder. It's very hard to believe that remainder is $400k.

The long only fund I work for is 4-5x the aum with the same size investment team. I have a similar amount of experience, had a good year and make a fraction of that amount.

All in all, who cares if there is no room for advancement? You're bound to get more ideas in the book over time and at the rate you are getting paid right now you'll have a pretty good life staying right where you are.

  • Analyst 3+ in HF - EquityHedge
Jan 22, 2020 - 5:01pm

sounds like a sector specific fund. Do you like the sector? If yes, stay. If not, that would actually be a plausible reason to leave.

  • Associate 1 in PE - Growth
Apr 10, 2021 - 5:57am

have heard from ppl in the industry that the really good long only shops like SCGE/abdiel still get close to 2 and 20 with a hurdle rate

Jan 22, 2020 - 12:55pm

You're getting 400K 3 yrs out of school? Investment bankers are not being compensated fairly then. I work hard and I deserve my white ferrari from miami vice

What concert costs 45 cents? 50 Cent feat. Nickelback.

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Jan 23, 2020 - 8:24pm

Yea, this is a crazy thread. Lots of good advice / perspective.

I'm on the are you serious train. You make 400k at a good shop. If you're there for another year or two you'll have even more experience to leverage into another role.

Overall just seems like crazy level of entitlement and/or lack of understanding how the real world works.

Also - the size of the bonus pool is irrelevant. You're paid mkt rate for a post ib analyst, if anything you're comped high.

Jan 24, 2020 - 11:27am

Very simple. I don't think you need to be freaking out about whether PM plans to cut you. If he didn't care about keeping you around, he wouldn't have paid you 400k. Yes I know it's a small % of the incentive fee your fund earned last year. But still, even people that take home 10mm personally will comp you 0 if they don't care about having you around. He wouldn't have bothered to give you 400k if that were really the case.

As for your options -

A) Go somewhere else if they will let you have more responsibility (being the lead analyst on pitching and covering names). You will almost certainly not make the same amount, and/or will have to put in a lot more hours at an MM to make the same amount. If you care more about responsibility than comp, then do this.

B) Stay at your current shop, keep making 250k (expected value?) or whatever, and learn from the work your PM/sr analyst do. Over time, apply that framework and pitch an entirely new name. See where that goes. If PM likes it he may pop it in the book. Organically you get more of that responsibility. And you keep getting fairly comped (even if not 400k which you know is more than fair for what you do) by a guy who sounds like a good dude and you get along with. Most people at that level in this industry are pricks. Grass is not greener if you landed with a PM that isn't a garbage human being.

Jan 25, 2020 - 11:21pm

To the author: Just curious, what do you do for fun? Do you do anything that you're proud of or that makes you happy outside of work?

I think you're a victim of your own ambition, and there are things outside of work that are making you upset, so you're looking for progress in your current career to compensate for it. You're in an investment role where you can do whatever you want, and you're making a lot of money (you really lucked out there) for your job.

My honest advice is that you use some of that money and hire a therapist and talk it out with him/her in regards to your ambition. I hope the therapist will help you realize in how good of a position your own, or if there are other things that are preventing you from being really happy with where you are.

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Feb 12, 2020 - 1:07pm

As a junior analyst, it is tempting to think about your pay in terms of your share of the pie, but it isn't realistic. You should think about it as your replacement value. Some PMs admit they pay people the minimum to make them not quit. Some PMs shun that practice and then do it anyway, because they're rational investors and their only responsibility is to think that way.

So if you're disappointed by your comp here's my advice:

1.) Check the market, pick a narrow criteria of your dream fund, share it with headhunter contacts and ask them not to send you anything else or to share your resume without asking

2.) Try to quantify the learning experience, stability of the fund, quality of the process and cohesiveness of the team. Quantify these in terms of dollar value. Would you rather make 1mm next year, doing a more frantic process, with a potentially asshole PM and have an expected tenure of 1.5 yrs + 6+ mos garden leave? If so, go to an MM

3.) Figure out where the dislocation is. Do you have a different perception of your value than your PM? If yes, are you correct? Since you've now checked the market to calibrate your expectations - pursue those better roles. If you've found that your replacement value is in line with your pay - evaluate whether you can increase you value in your current (not necessarily for you current PM, maybe to shop around at year

If you have a good learning experience in a marketable strategy with a well respected PM and good returns, you should think about the IRR of your learning opportunity in your current role - being close to the investment process you can absorb until you are an idea generator. It doesn't really matter if there's no path to partner at your current fund, as long as you're building senior analyst skillsets with transferable assets, you have plenty to learn and that will be monetizable somewhere, if not you're current fund.

No judgment and my post is meant to share the way I think about things. I'm not sure I've ever met an analyst who believes they were paid too much. Consider that 95% of your return-generating potential is enabled by the fact that your PM has credibility to gather and steward capital. You could be teen wonder boy responsible for 100% of PnL, but you still need capital and your PMs outsized take reflects his ability to provide that capital. You can get capital at an MM sure, You're payout would be higher and the capital would be more flighty with a tougher mandate. It's all efficient. If I were you, I would stay, but selectively shop. I'd also clarify what your PM meant and reflect on why he said it. Did you act displeased at 400k? That may have been him tempering your expectations. Does your PM have ambitions to grow beyond 350mm? If so, then it's more concerning that he said there's no path to more senior role. If not, then that's normal and not a reflection of you.

  • VP in ER
Jul 19, 2020 - 3:48pm

Dude, I don't understand why you are so greedy, do you have any ideas how many PMs are making less than you?

Jul 19, 2020 - 5:09pm

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