Seeking Advice: Lateral from a $3B fam office to local MM firm? RE veterans, please throw your two cents.

 

I am a third-year analyst at a family office seeking advice on lateraling. We invest in core/core-plus assets around the country and AUM is north of $3B. Due to their permanent capital, the family (see IC) makes a lot of investment decisions based on the qualitative features of an asset (see trophy asset) rather than the returns analyses. Recently, things have gotten quite political at the office, which has resulted in high turnover and a huge drop in productivity. I don't see this going away soon and think it may be time to leave.

I landed an offer from a smaller, opportunistic shop that primarily deals with local assets. Management is very smart and has a track record of producing outsized returns. The team is lean and has an AUM of $200MM. I think this is an excellent learning opportunity.

The answer seems obvious but I can't bring myself to give up some aspects of the current job. We have had meetings with the likes of Sam Zell and have been pitched high profile institutional deals (both RE and non-RE). The smaller platform will not offer the opportunity to participate in meetings like these. 

My long term goal is to either:

A.) Go off on my own

B.) Work my way up to head of investments/transactions or portfolio manager at an existing shop.

I know what I have to do to bring myself closer to this goal but am looking to WSO veterans. Can the industry veterans give some insight here? Appreciate it. 

Comments (24)

 
  • Associate 2 in VC
Aug 22, 2020 - 7:56am

Not in RE, but thought I'd throw my opinion into the ring here...

I think you should go to the MM shop. Seems like a great learning opportunity where 1) you'll learn the skills to eventually go out on your own or 2) you might end up as head of investments at the firm. Option 2/B isn't possible in any case at the FO since the final say is decided by someone in the family who's directing the capital. And it seems like you already know that you'll learn more at the MM shop if you decide to strike out on your own at some point.

You might be tempted to stay because of various high-profile investors you're meeting with, and you might think you could build up a rolodex/network of billionaire investors for when you decide to become your own man. But the reality is, at this stage, these guys won't remember who you are, much less commit capital to you (still true even if you stay a while in the FO - it's rare even for FO CIOs to start up their own funds/practices). Trust me, I've been there. The big wigs might look at you if you've got some phenomenal track record or some unique differentiating factor, but it's clear you won't get either of these things in your current role.

 
Aug 22, 2020 - 4:12pm

From what you say, it sounds like taking the new job makes sense. If you are at a firm that is increasingly 'toxic', I would GTFO and you have that opportunity. Only caution point is making sure the firm is solvent and able to keep paying you if COVID/recession gets worse. Hopefully they would not extend an offer if not true, but weirder things have happened. Of course, your current firm could make budget cuts also, thus be sure to weigh the relative risk. 

Still, I really don't see any downsides except one..... You should hopefully be getting some bump in title/role and even pay. Now, if you have been promoted recently at your current firm, then ignore this point. Personally, I see this as a negoitation point. This should a move for advancement, not just a lateral at this stage of your career. 

 
Aug 22, 2020 - 10:02pm

Pathway to being a principal or faster promotion is a legit reason to take the offer. You should try for some "title" upgrade, even if just bolting "senior" to whatever you are now. It will make the "story" of your resume/linkedin better. If they have issue with this, it's not a deal killer to be sure, but is reasonable ask.

 

If you are willing to take a pay cut, that means you either really hate your current job and/or really, really like this new firm. Either way, you probably need to take it since that is how much you want it. If your gut says to take it, take it. I really don't think the "size" of the AUM is something to think about very seriously. $3B is legit, but hardly "mega" or that big of a deal. $200m is pretty small (assuming all equity?), but if they are new, that could help them be well positioned to grow into a downturn as less "legacy" assets. So, it's not a fair comparison, they could be over a billion soon (or flame out, I mean, I have I no idea). 

 
Aug 24, 2020 - 9:42am

Do you know if the new company has hired and promoted analysts in the past?  These smaller shops run lean and I've heard of a few shops that cycle through analysts with no real intention of promoting them due to pay constraints.  Most of the time the analyst leaves for their MBA or for other opportunities.   On the other hand, I know a few guys who started with smaller shops like this and now they're handling their own deals start to finish and making decent money on participation.  It's a risk that's hard to weigh but definitely worth digging into a little more.     

 
  • Manager in Consulting
Aug 24, 2020 - 3:11pm

What do you mean by deal flow is high?  Are you underwriting deals all day or does the firm actually execute and buy deals?!!?  Many groups blow smoke and look at deals but don't buy, they become the joke amongst brokers or a last resort.  Very important for you in the current environment to really understand how the firm raises equity!  $200M in AUM is not much money, that's about $50-80M in equity.  Do you know how COVID has impacted this group and what's there acquisition plan over the next year?  Do you understand there return requirements and are you building out new shit or do they have tools to execute already?  Do the founders come from a large institutional shop or are they syndicators?  If you can, ask industry guys you know that can give you the low down.  Small shops can be a disaster if you join the wrong one.  Also, the fact that your pay is going down and not up is somewhat of a concern to me.  If you can hold out, I strongly recommend you find a strong shop that's well capitalized or at least $1B plus in AUM.  Many family offices and syndicators buy based on qualitative factors....if you are getting paid stay until you find a higher paying firm unless it's a toxic culture!

 
Aug 26, 2020 - 10:53pm

It is simple.

 

If you can prove that you can move up in your current role, then stay there.  DO NOT take a lateral position to a smaller shop, as mentioned above, get any sort of title bump.  You will be fighting to impliment systems and processes what you won't ever be able to.

 

But, even..do not do that.  You want to move to the smaller shop when you are VP level.  Anything below and people do not really listen or respect your experience.  $200mm AUM is not great, dont' do it

 

Happy to talk about this further, if you have further questions.

 
Aug 28, 2020 - 10:05am

I think the more you describe this job and firm, the less attractive it seems. If you 'lateral' to a lower tier firm, it is scored like a demotion, the fact you are not getting a pay increase (something standard for lateral moves), is also a strike (not that people know that). Can you clarify if the $200 AUM refers to equity raised (how I initially took it), or total gross assets (i.e. after any leverage employed). There is a huge difference at that level. 

 
Aug 30, 2020 - 1:24pm
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