RIA: Is this a viable option for an ER analyst who hopes to enter into AM firms and HF?
I hope to start in Equity Research soon and was looking at a few ways the career itself would branch out after several years of experience. I was looking through Asset Management in the forums and I came across RIA (Registered Investment Advisory firms). Most of these firms are founded by older guys (40+) who were successful in pwm and built up a client base at a BB. They left the firm and then started their own RIA after signing a non-compete agreement for a couple of years. Most of the clients for the pwm senior at the BB would be willing to follow him.
Do any ER analysts or people looking to make it into HFs and AM firms go work for the RIAs? Is the comp and lifestyle competitive?
I'm looking through some of these and they mostly strike me as "boring" mutual funds. But it looks like it might be valuable. Any advice or insight into this?
A hedge fund is a type of investment vehicle and does not, technically, refer to the management company. The most common structure for a hedge fund is a limited partnership (LP) with the management company serving as the general partner (GP). RIA refers to a registration status of a company that gives investment advice and manages investor assets, not the legal structure of the funds it manages. Broadly speaking, anyone who receives payment for managing funds needs to register as an RIA, unless they only have accredited clients in which case they are exempt though some still choose to register. An RIA may manage a number of types of vehicles including mutual funds, hedge funds, and managed accounts. If you go to most fund websites you will see that they refer to themselves as hedge fund sponsors or advisers, not as "hedge funds." The adviser to a hedge fund or pool of assets (MFs, CEFs, etc.) may or may not be an RIA. Equity Research Analysts are often hired by RIAs, comp and lifestyle will depend on numerous factors such as AUM, performance, place on the totem pole, etc.
Thanks for the insight. But I thought RIA's were an entirely different type of investment vehicle compared to the standard Mutual Fund and Hedge Fund--both of which charge a fee for joining and for performance. From what I can tell from what poster kingtut--(unable to post the link b/c I'm a new user; but search: "Insight into RIA") had to say, they charge a lower fee and the former pwm advisors who formed the partnership in the first place eat up the lion's share of assets.
Doesn't his answer indicate that MF's and HFs are a different breed altogether and that there is less strategizing on investments in the RIA?
Doubtful anyone will want to hire an equity analyst in that construct. Even if they do, it's not really a revenue generating position so the upside is limited even if they do.
This seems a lot more in line with what I read in the other thread I mentioned above. But I was wondering: how is it arranged? Most hedge funds charge the standard 2 and 20, while most mutual funds ~1 for AUM only without performance fees. Do they charge less than this with no performance fees?
Since most AM guys don't want to head down the RIA road, I'm going to go ahead and assume there's mostly just passive investing involved in RIAs and no aggressive strategizing going on. In that case, are the partners who put the fund together really the only ones making off with the lion's share of the profits, while the CIO and other guys make a good living not doing much compared to other AM guys at their point in career?
On your question of how RIAs charge, the one I work for charges a fee starting at 1% and it decreases after certain AUM thresholds. We don't receive any performance fees. Another RIA I worked at charged similarly. The work isn't glamorous and the pay is far from IB, but the hours are great and I'm making way more than the national median (I that's not saying much). I don't have any desire to work at a hedge fund or go into sell-side ER, but if you do, I wouldn't recommend the RIA route. The depth of analysis, even at a shop that picks individual stocks like mine, isn't as deep as what you'd need to do to be a viable HF or ER analyst.
agree w/DF. if your end goal is to be sourcing ideas for a portfolio and/or being a PM, do NOT go the RIA route. if you have the option of going IB versus being an analyst at a RIA, go IB. PWM (which is what all RIAs are) is not looked upon favorably by mutual funds and hedge funds.
do not do this, it is a bad idea.
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