Should I join a tiny (2-man $12 mm) start up HF?

First off some background about myself. I'm an international student at a non-target in Australia (pretty much no-name for ROW), about to graduate in Dec 2019 and have registered for CFA Level 1 in the same period. I had 1 ER internship at a fund in my country and although it helped build my investing philosophy, it's a frontier market so I did not learn a whole lot on the technical side. Recently, I won a small ER competition and was offered an internship at a fundamental HF (I did not really know how small it was back then). Tbh, I really enjoyed the internship and the work culture there, which is extremely lax compared to what I've read about NY, London, etc. on wso. The PM has worked at a few large asset managers and hedge funds, with lots of experience in equity investing in EU and US (to me it seems so).

However, I discovered the fund's aum is only around $12m though and given the 1.x - 10 structure, I know that I will be severely underpaid. Money is not really a problem for me, because even this low salary will be a massive amount where I'm from. And as much as I love my country, public equity investing there is extremely underdeveloped (insider trading is rampant, corporate governance = 0), someone in my position would be able to make a lot of money in the long run, but learning potential is very limited. My end goal is to move back there after 5 - 10 years working abroad, or to Singapore/HK working at an Asian LS equity shop that has exposure to my country's market.

That being said, I would like to know if accepting a position at a fund this small would prevent me from getting jobs at bigger ones? I haven't started salary negotiation yet, but I can feel the PM wants to speak with me about this in the next few days. Is there anything I can leverage to get higher pay?

Comments (9)

Aug 14, 2019

Hard to make decisions in a vacuum. What is your next best alternative?

Aug 14, 2019

Tbh, not a whole lot. I haven't got any FT offer so I was planning to continue networking and applying for sell-side shops. Australia is a very small market and not as open to outsiders as the US or Singapore, so opportunities for internationals like me are rare, but they do exist. Worst case scenario, I'll go back to my country, get the charter and do a top tier MBA/MFin after getting enough experience.

Aug 28, 2019

Get paid enough to live and try to get some equity, IMO 2020.

Aug 28, 2019

with such a small AUM, they need to perform like rock stars (not impossible...but difficult) to pay you. So, it would be fair for you to ask what has been their career track record for the past 5 years...and why do they think they will be successful. Pretend you are a potential investor and really dig into their value proposition. why invest in this firm vs another in the same space (their competitors)?

just google it...you're welcome

Aug 28, 2019

If you believe you can make an impact, and can get in writing a relationship between your performance and a cut of the P/L, go for it.
Hiding out in a bigger firm and hoping to get a taste of others performance is a coward's move. Bet on yourself, and if you bust you can at least own your failure instead of be frustrated by someone else's.
They can lever 12M to ~70M easily, so find out what % they are returning and do the math to get to a reasonable number to ask them.

Array

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Sep 3, 2019

Have trouble believing the numbers can add up to paying you anything above subsistence. Let's say they're rock stars and can make 20%/year. With $12M AUM they're pulling in 120k in management fees and 240k in performance fees. Subtract 120k in various overhead expenses (commissions, rent, back office outsourcing). and you're left with just the performance fees. The PM will take at 2/3 of the bonus pool, so you're left with 80k.

And this is the best case scenario. The moderate bad case scenario is you hit a drawdown of 1 std and the LPs pull their money. It's a heads you lose, tails you lose scenario. I would shoot for almost anything other than this job. The fund simply doesn't have enough runway to establish itself.

Sep 4, 2019

if the PM is a rockstar and trying to make a name for themselves...at these levels of AUM (12mm), its not impossible to make 40% using leverage and getting lucky a few times....so 480k performance fee is possible. Still doubt the analyst would make more than 100k in that scenario...its all on the PM trading skills really...what does the new analyst have to offer?

just google it...you're welcome

Sep 5, 2019

I would have some pretty large doubts working for anyone that reports a 40% yoy return, because he who makes 40% could easily lose 20% the next year. Clients tend not to tolerate double digit drawdowns very well. The goal in running a hedge fund is to continue running a hedge fund. Hitting a massive drawdown, and having clients redeem means you don't make any more fees ever again.

Anyway, the point is the upside is 100k, the average case scenario is mid five figures, and the downside is being fired next year. Doesn't seem like a good value proposition to me.

Sep 4, 2019
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