Longevity of Hedge fund career: how long do people last in this industry?

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For someone who makes it into a Hedge fund analyst job (any strategy) either out of undergrad or from IB/PE or post-MBA, how long do people last typically in the industry? Do people have 40 year careers in this typically (become PM by the end, either at same firm or another firm)? What if you're not good enough to make PM eventually--then what happens? Do people typically not have 40 year careers in a HF capacity?

Comments (42)

Mar 3, 2019

Bump

Mar 12, 2019

Just hypothesizing, but I suspect that the majority of people fall into two buckets at each end:
1. <5 years - either they don't have the intellectual chops to make it or they decided the don't like the industry / want to pursue something else

  1. 10+ years kinda the opposite of the above. Work their way up to eventually becoming a PM / starting their own shop.

A 40 year investing career would be pretty rare. for one it's an incredibly challenging industry and what worked in 1980 probably doesn't work now. Even for those that have the ability (and luck) to make it longer term, a lot guys probably retire early as well

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Mar 13, 2019

Can't generalize across strategies.

No one has a 40 year career - the industry barely existed 40 years ago.

You can have a long-stable career with more P/E like, less liquid, and less competitive strategies (credit, mortgages, etc).

Public markets is a crap shoot - a lot will depend on your luck in finding good PMs/jobs. @M_As_In_Mancy this isn't rocket science, no one is leaving b/c they're too dumb , though some might decide they're not interested enough to work as hard as it takes. A bunch of people with top pedigrees joined Blue Ridge, Eton Park, Tourbillon, bla bla bla take your pick just in time for the "prestige" funds to blow up and leave them jobless.

Mar 21, 2019

why is credit and mortgages less competitive?

Mar 24, 2019

blue ridge relaunched as slate path... ~5 yards i think
edit: im wrong^ but some senior ppl at blue ridge moved to slate

fewer funds and less liquid market.. like 40% of funds are equity

http://docs.preqin.com/reports/Preqin-Special-Repo...

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Mar 31, 2019

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Mar 20, 2019

Avg tenure at multi-mgr (non-survivorship adjusted): 2-4y [the real average for analysts is closer to 1-2y]

To the person above who suggested sub 5y is indicative of lack of intellectual chops or motivation - you're way off mark. PM (and fund) performance are arguably far more crucial than a jr employee's performance. And given the tight drawdown limits at such funds, intellectual rigor from a jr employee will almost never be a determining factor. The interview process at such funds are both extensive and challenging - you can be confident that most people who have a seat at the big funds possess the intellectual rigor and work ethic.

Will also say this, it is embarrassingly common for an analyst to be stopped out less than a year after joining a multi-mgr. There's no love loss at these funds, the entire team gets canned. Less common at single mgr, but it also still happens (i.e founder decides to turn fund into a family office, fires the analysts hired 3 months ago).

The buyside isn't the panacea for wealth that it once supposedly was. If you're still walking this path, you have to be partly delusional, partly confident, while maintaining a healthy dose of humility fortified from accumulating battle scars. And most definitely, one has to have a love for markets/ investing. To you, the 'average tenure' is largely irrelevant, because deep inside you're convinced you're an outlier among outliers. You truly have to believe you're the next George Soros/ Warren Buffett. That is, until the market gets you...

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Mar 13, 2019

Listen to @Macro Arbitrage.

He gets it.

Mar 31, 2019

i lasted 7 months at a multi manager. was told by head of strats at goldman to meet one of his idols who was hired by same multi-manager. he was fired in three months...

Mar 21, 2019
Macro Arbitrage:

And most definitely, one has to have a love for markets/ investing. To you, the 'average tenure' is largely irrelevant, because deep inside you're convinced you're an outlier among outliers. You truly have to believe you're the next George Soros/ Warren Buffett. That is, until the market gets you...

This...this right here is everything in HF/Investing and capital markets in general.

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Mar 22, 2019

Where be the panacea for wealth now? Startups and tech?

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Mar 21, 2019

People might get annoyed with me saying this, but I think working as a programmer at one of the big quant funds (citadel or two sigma) is the best route to a lengthy career. Its really not hard to make 500k at citadel as a programmer, and if you study for 6 months for the interview, youre basically guaranteed to pass. You probably wont end up making 7 figures, but youll have great income with good outside career options. The traditional path as an analyst is more difficult and honestly has less expected value.

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Mar 23, 2019

You probably need to set expectations of "not that hard." The average programmer at Citadel doesn't have a longevity of more than 3 years and the overwhelming majority don't make $500k. If you subset it to only quant programmers in the front office in an alpha generating role, you have a very small number of people, most with substantial experience, and they still don't have median tenures >3 years. Most of those people have advanced degrees as well and aren't coming out of undergrad.

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Apr 24, 2019

Agreed.

To put it into perspective, something like 40% RenTech's quants have one or more PHDs in advanced degrees such as Physics, Math, Statistics, Comp Sci, Various Engineering subsets, etc.

This isn't a "how does a $10 increase in XYZ impact the financial statements" level of prep (which I'm not talking down to at all.... but you definitely need some perspective).

Mar 23, 2019

Not sure what typical is, probably on the shorter end.

But I do think it's the wrong industry to be asking that question. Hedge fund investing is unique in that there is no need for someone who is only good/decent. The people/firms who are the very best usually have highly scalable strategies, and all the money goes to them. It's the reason Carl Icahn can run $20b and many smart guys I know can't raise $10m.

This is different from every industry I can think of. At any other job, if you're mediocre you are still adding some value. I can hire the best lawyer for $1,000/hr or a decent one for $500/hr. That's because the best guy only has 24 hours in a day, which makes room for the decent guy to come in and take some business at a lower fee.

But if I have $100m to give to a hedge fund, the very best fund has room for me, so I have no need for the fund that's only decent. Either I go with the very best or maybe I decide I don't like fees and I go with Vanguard. This is why passive has grown while most of the HF industry (except the very best) have struggled to stay open in recent years. I think the barbell distribution will continue to take shape.

So due to scalability, only the best firms stick around. Now how does this relate to your question. Well, the same concept trickles down to the people working at the firms. If you are a top PM, you can probably manage $10b as easily as you can manage $1b. Not always the case, but often enough. So the firm can push more assets your way and doesn't have any need for a decent performer.

Thus anyone planning to go into investing, especially liquid investing, should only plan on a long career if they plan to be an extreme outperformer. It's by definition a bad proposition for most people, and a good proposition only for someone who feels this irrepressible itch that this is the only field for them. That person also probably feels they will be an extreme outperformer. A mentality of "how long is the typical career" is a very different mentality from that.

This is less true for illiquid investing where the illiquid market will give partial rewards to those who do the work to acquire information, relationships, etc. For example a local RE investor can do alright just by virtue of elbow grease because his market is illiquid. But at a HF this doesn't apply.

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Mar 24, 2019

Yeah dude, I only need the best guy putting me in FANG. Tell us more.

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Mar 23, 2019

Bitter Prop Guy is a tired look. It's spring, maybe try on something new.

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Mar 24, 2019

Generally you have the following stages:

1) 3-6 months: are you able to deliver the quality of work at the speed required for your PM. If you're coming from a standard 2 year IB program, it's assumed you can do this and there should be no surprises. If you can't deliver error free work you will be shown the door.

2) 1-2 years: you understand how your PM works and you produce error free work that meets exactly what your PM wants. You can be relied upon to deliver what the PM wants.

3) 2-5 years: you start to develop your own ideas and your PM listens to your ideas and opinions on his ideas. If you can't do this you will either get shown the door because you don't add much value to idea generation or you leave on your own as comp doesn't increase.

4) 5-10 years: you start to get direct linkage to P&L and potential comp increases substantially. At this stage you are like a PM and you will be judged on your ideas.

I would say most guys crash out at stage 3 as they can't generate differentiated ideas. There is no room to be a career model monkey in the HF world. IF you can't generate ideas you exit the business.

Funniest
Mar 29, 2019

Generally I think people last longer if they don't cry at work.

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Mar 3, 2019

Lol some people just get more emotional than others...it's especially hard when your dealing a type-A boss

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Apr 1, 2019

Generally I think people last longer if they don't cry at work.

I am Holly R. Malin and I am working with a Custom Leather Jackets retailer which is known as The Leather Makers. It is a premium brand that provides Custom Leather Jackets at the reasonable price of market.

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Apr 1, 2019

Currently working at a HF and I can only imagine what would happen if even one of our interns were unleashed into a non-finance world corporate job. So I wouldn't worry about how long your HF career would be. I nearly jumped ship to a job in an industry I spent some time covering and got a raise in the process.

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Apr 21, 2019

Unleashed in a good way or a bad way?

Apr 11, 2019

You'll last longer if you smash a few BBG keyboards on bad days.

Apr 12, 2019

"If you are a top PM, you can probably manage $10b as easily as you can manage $1b. Not always the case, but often enough. So the firm can push more assets your way and doesn't have any need for a decent performer."

managing 10bn is definitely not often as easy as 1bn, and performance on absolute basis almost always suffers. i don't think superstar theory so neatly applies to this industry

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Apr 24, 2019

As a HF analyst you have the career lifespan of an NFL running back

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Mar 3, 2019

"According to the NFL Players Association the average career length is about 3.3 years. The NFL claims that the average career is about 6 years (for players who make a club's opening day roster in their rookie season). Players with at least one Pro Bowl appearance usually have the longest career of all NFL players."
* NFL: average career length | Statista

So not very long...

Apr 28, 2019

Here's my data point: 6 years this June. I feel like every day could be my last, if that gives you a hint at my quality of life, which you did not ask about.

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Apr 28, 2019

Why is that? You don't think you could get a seat with a multi manager?

Apr 28, 2019

Stressing about PnL.
Are multi managers more relaxed? I figure they would be just as likely to cut me off after a drawdown.

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Mar 20, 2019

I know this feeling all too well....

Apr 28, 2019

not to hijack the thread, but as a corollary, what is the half life of a PM? How long to people stay on the bull at the top of the pyramid?

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Apr 30, 2019

I feel like most people are employable in some analyst capacity until they are in their early 30s. If you have not made the leap to managing money by then, your career is going nowhere fast. Most of my friends were actually not able to make the leap. But by virtue of being in a high-paying finance job for 10+ years, they were able to exit the industry with a decent amount of savings. Now, fast forward another five years, most of them are still managing their savings on a full-time basis. It's certainly not for everyone.

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Apr 28, 2019

Is it more of an explicit age thing or a "you've had X numbers of years to stand out already"?

Mar 3, 2019
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Mar 29, 2019