Mutual Fund to Hedge Fund?

alphamonkey's picture
Rank: Chimp | 6

I am a senior at Cornell and want to eventually be a PM, ive spoke with some hedge funds that have told me it is best to get in a training program as a jr analyst before going to a hedge fund.

That being said...If you start at a Calamos, Putnam, Janus, Fidelity, etc as a jr analyst...is it eventually possible to make the jump to a hedge fund?

Would you want to make that jump after you completed a 2-3yr training program? i.e. would you make more trying to climb your way up a mutual fund or take a leap to a hedge fund?

Comments (43)

Dec 26, 2007

It's tough to get in, but many undergrads who join Fidelity as an associate end up jumping to hedge funds after a few years. You are competing against MBAs, so you need to know your stuff cold and want it alot.

Dec 26, 2007

How well does Fidelity pay, what are the hours worked like?

Dec 26, 2007

I think fidelity & putnam pay about 75 all in on your first year and have 2-3 yr programs.

Dec 26, 2007

Far more former bankers/traders in the hedge fund world than mutual fund guys. If this is your only option, sure, you can do it, but you're going to have to network/work harder to go into the world of hedge funds.

Aug 13, 2008

Dosk: do you know how many undergrads banks take vs. how many undergrads top mutual funds take?

The mutual funds are insanely hard to get into and they have great exit ops.

dosk17:

Far more former bankers/traders in the hedge fund world than mutual fund guys. If this is your only option, sure, you can do it, but you're going to have to network/work harder to go into the world of hedge funds.

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Aug 13, 2008
aguy:

Dosk: do you know how many undergrads banks take vs. how many undergrads top mutual funds take?

The mutual funds are insanely hard to get into and they have great exit ops.

dosk17:

Far more former bankers/traders in the hedge fund world than mutual fund guys. If this is your only option, sure, you can do it, but you're going to have to network/work harder to go into the world of hedge funds.

I agree. Banks recruit a lot more than mutual funds.
But do you mind justifying the fact that fund managers generally have significant sell side experience?
Skeptical if there's a whole lot learning opportunities working for a mutual fund.

Dec 26, 2007

thanks for all your posts...so is there a signficant difference in pay for an analyst/pm at a hedge fund vs. mutual fund?

I realize traders and general partners at hedge funds make big money, but what about the pms and analysts??

Dec 27, 2007

I don't see why you'd want to start on the buy-side. Start on the sell-side, make contacts, make more money, have options, get training, and then make your move.

Dec 27, 2007

Can't the fact that there are more bankers/traders in the HF world be due in large part to the fact that there are many more of them than ER buysiders looking for positions? Why is it tougher for buysiders to get a HF position? Is it because they might not be located in NYC and are away from the action?

Dec 27, 2007

I'm not sure if your compensation figures for Fidelity are correct. The associate I know at Fidelity makes exactly the same amount as IBankers and his bonus increases faster than banking as the year progress. Also, I think the exit ops to hedge funds would be very good.

Dec 27, 2007

I don't see why'd you pay an associate the same money as on the sell-side when they don't run money - it's pittance and the bottom and bling at the top, so sell-side first makes the most sense.

Aug 13, 2008

I know two people who went to top buyside mutual funds as research associates out of undergrad. One is working at Wellington, and said he will be making somewhat more than a 1st yr banking analyst while working less hours. The other worked at fidelity for two years, again made more than a comparable banking analyst. He left after 2 years and went to a hedge fund. From what they told me, these jobs are harder to get than a banking analyst job. I think Fidelity only takes about 10 research associate interns per year, for example.

www.sharpeinvesting.com

Aug 13, 2008

Yea, although it's more like 5-8 per year, not 10.

mwgr5:

I know two people who went to top buyside mutual funds as research associates out of undergrad. One is working at Wellington, and said he will be making somewhat more than a 1st yr banking analyst while working less hours. The other worked at fidelity for two years, again made more than a comparable banking analyst. He left after 2 years and went to a hedge fund. From what they told me, these jobs are harder to get than a banking analyst job. I think Fidelity only takes about 10 research associate interns per year, for example.

www.sharpeinvesting.com

Aug 13, 2008

So if your looking to work for a fundamental hf. JPM or Fidelity? OTBE - no individual examples/outliers

Aug 13, 2008

if i could swing either, i'd pick fido hands down but thats just my opinion. you'd have to be in the actual equity research department at fidelity, though, not a support role.

Aug 19, 2008

at the mo. Still a decent gig if you can get in at the ground floor imo.

Wellington would probably be better at the mo but their research analysts are career. ie they don't promote to PMs.

Aug 19, 2008

youre not gonna move to pershing square being a fi analyst.

in general terms: ofc you can move. look where all the fidelity / schroders guys move to

Aug 19, 2008

Thanks for the reply. Sorry for the stupid question, ofc?

Aug 19, 2008

ofc its possible to move, I would say you made the right choice, stick it out there for a while and then go out there and look

Aug 19, 2008

...mid cap mega fund?
isn't that an oxymoron?

happy to give advice; no asking for referrals please

Aug 19, 2008
matayo:

...mid cap mega fund?

isn't that an oxymoron?

Mutual fund

Aug 19, 2008

I was under the assumption it was mega fund, also slightly confused by the mid-cap. Forget my comment then as I have no clue what the path from a mutual fund would look like

Aug 19, 2008

are you talking about a threadneedle, schroders, henderson, M&G sort of place? if the answer is yes, then I see no issues in moving

Aug 19, 2008

My opinion is you should've taken the hedge fund position if you eventually want to be at a hedge fund. At 25 you're supposed to be taking these big risks. If you're too risk averse to do it now, are you really going to go when you're 32 with a kid on the way?

Either way, it's ok because you may actually prefer the extra bit of security working at larger MF. Moves can be made, but I would imagine you'd have to be able to learn how to think more like fast money if you'll succeed in HF interviews. Credit analysis is always the same, it's just a matter of putting a trade together that appeals more to HF than MF using that analysis.

Pershing is an equity fund. You have a bunch of work to do to understand the HF world imo.

Aug 19, 2008

So you want to work at Pershing Square, and yet you don't know the difference between a hedge fund/mutual fund.

Wow.

Aug 19, 2008

I presume you tried negotiating and got stonewalled?

Aug 19, 2008

have you thought about the fact that you can completely revamp your lifestyle upon moving to N America? do you live an extravagant lifestyle? will you make enough to continue some semblance of this lifestyle in America? another thing to consider is your cost of living. I know a guy who works in healthcare in Singapore and makes substantially more than an equivalent position stateside, but it's because of the cost of living. don't think about it in terms of dollars, think about it in terms of lifestyle and purchasing power

if you're talking about a pay cut from something like 300k to 80k, I'd pass, but if it's like 200k to 150k or something like that, I'd do it. I realize those salaries are low for HF, but you get the idea. all of this assumes there's vertical mobility at this new fund, where you can get progressively more responsibility, profit sharing (if the fund has a good year), more pay, etc. if the fund operates as a one in one out, where you only move up if a senior analyst leaves, I'd hesitate. I mention vertical mobility because in terms of exit opps, you will be anchored to your new comp (everyone asks what your comp at your last job was), and therefore your exit opps will have lower comp than if you stayed in Asia.

Aug 19, 2008

Something doesn't add up here, the pay range from Asia vs. NA is usually 2x favored for NA, unless you're in HK/Singapore at an international and not a local firm, and then it's still favored for NA by 1.15-1.5x.

If you have a lot of responsibility you should not be comp'd this way. Unless you're getting 500k+ as a 2nd year at a 2nd tier mutual fund in Asia, you need to demand at least close to equal pay.

I'm quite familiar with most small team billion dollar value shops, the fee structure is very transparent. Even with 1.5%, that's $15mm in fees, and even in NYC the rent takes at most 500k for a small team. My fund makes LPs pay for data costs, so all you really have left is travel. What's he going to do with $10+mm for a team of 4-6?

At most you should be willing to take a 1 year hit but you need to get back to the same take home (after taxes) as your current job.

Finally, what does boutique mean to you? I haven't heard that term attributed to a HF. Btw, next door to our fund is a 1 year old $300mm value shop, they have a small team as well and pays a 250k base to all analysts. Feel free to PM with ranges but I would talk with the PM a bit on what is going on here. If he's not the type to share then trust me it's not worth it to take the offer.

Aug 19, 2008

I think we need some more details, what city? What's the role? What's the offer?

Aug 19, 2008

Some details on the offer:

75k, 50% bonus. Toronto based. Buy side analyst role in the fund, global equities, no sector limitations. Great reputation, *amazing* global institutional clients - I mean best in the world. Part of a team smaller than 5 people on a fund in the ~$3B range. I currently make 110k + 60% in Hong Kong.

(and yes, I was stonewalled. "Everyone takes a pay cut to work here." People seems to be willing to jump out of Goldman to enter this shop, so I'm not the only one tempted.)

It seems ridiculously low to me, but I know 2 other people who were placed into similar shops in Toronto who were offered *exactly* the same pay structure. Bonuses eventually get big and you get equity after a couple of years, but the starting point is painfully low. Am I crazy?

Aug 19, 2008

Tough one, certainly is a big pay cut, large enough to make you consider...not sure what cost of living is like in TO.

I'm the same way about value investing (love that stuff), so I don't think you're crazy. You certainly won't be in poverty on 75k, and you'll have made it into you're desired role - which is probably the biggest thing. Even if the comp doesn't improve after a year or two, you'll have actual experience at a value HF, which should open up other value shops at a more desirable comp level

Aug 19, 2008

for me it would come down to hours, and social networks in both cities (e.g. more friends/ family in Asia vs. Toronto). I think the comp is largely a long-term/short-term issue that will likely sort itself out.

Aug 19, 2008

That's too big a pay cut in my opinion. I would wait until you get a comparable offer if not better.

Aug 19, 2008

Given that you're competent enough to get this offer, I would keep looking.

I don't know the Toronto HF space at all but it's a clear insult. Even start-up HFs give more than this and you'll get carry+higher multiples of bonus. How did you arrive at an estimated 50% bonus? I don't know anyone who does this, it's always discretionary and has no estimate.

That's the entire point of working at a good fund with strong performance, is that you can make 2-4x your base or you can make 0.5x your base.

If the PM communicated the estimated bonus to you, I would decline on the spot.

Keep looking, there are countless of these. Check out U.S. funds and not Canadian ones going forward, even funds 10% of the AUM will pay you 3x better.

My main issue is not the numbers but what it implies for the kind of structure and mindset of the fund. Doesn't seem like they're going to give you good mentorship or upside either.

Aug 19, 2008

I got some clarification - bonuses are indeed discretionary based on analyst and fund performance. They tend to *average* 50% in the first year, but 100% in the first year is absolutely possible and usually happens for good analysts. So in the end I was totally wrong bonuses. If they're not at least 2x my base in a few years I'm doing something wrong.

The company spends a lot of money on education. Name a course I want to take, languages, week-long courses at HBS, they'll pay for it. There actually seems to be quite a bit of a mentorship focus.

Equity in the firm after 2 years.

Aug 19, 2008
arthurdayne:

I got some clarification - bonuses are indeed discretionary based on analyst and fund performance. They tend to *average* 50% in the first year, but 100% in the first year is absolutely possible and usually happens for good analysts. So in the end I was totally wrong bonuses. If they're not at least 2x my base in a few years I'm doing something wrong.

The company spends a lot of money on education. Name a course I want to take, languages, week-long courses at HBS, they'll pay for it. There actually seems to be quite a bit of a mentorship focus.

Equity in the firm after 2 years.

Take the job.

Aug 19, 2008
arthurdayne:

I got some clarification - bonuses are indeed discretionary based on analyst and fund performance. They tend to *average* 50% in the first year, but 100% in the first year is absolutely possible and usually happens for good analysts. So in the end I was totally wrong bonuses. If they're not at least 2x my base in a few years I'm doing something wrong.

The company spends a lot of money on education. Name a course I want to take, languages, week-long courses at HBS, they'll pay for it. There actually seems to be quite a bit of a mentorship focus.

Equity in the firm after 2 years.

That's still pretty shit salary and bonus for a $3B hedge fund with less than 5 people (I'd think you'd have a few more than 5 people but that's just based on what friends have told me at their HF jobs). Even if he's only getting 1% that's $30MM and he's paying an analyst a fraction of street, and a 200% bonus still only brings you to typical base salary levels of a 3rd year analyst.

My worry would be more along the lines of @"SanityCheck": if they guy's cheaping out like this now, he's probably not one to pay well in the future. It sounds like you're being sold on the place with the thoughts of people leaving GS for it, everyone takes pay cuts, etc. No one I know takes a pay cut to go into HF's or PE's unless they're starting one up themselves, and then it's typically only an initial pay cut until fees start building up.

By equity, do you mean you share in the P&L or you get a piece of the GP?

Aug 19, 2008
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Aug 19, 2008
Aug 19, 2008