Successful Career HF Partner: Eventual Net Worth?
Saw this posted in the PE forum, and thought it would be interesting to apply it to HFs. Obviously it would be highly volatile (even relative to PE), but on average, what would you estimate the total career earnings / net worth of a career HF partner at a large, reputable single manager fund (Tiger Global, Lone Pine, Baupost, etc) to be? Let's say you're a "regular" partner - you're not a founder, you're not the head of a major business unit / key person, and you joined the firm after it achieved significant AUM / recognition. You're not Chase Coleman / Stephen Mandel, but you've been successful enough to be minted as partner and not be canned. How much could you be worth when it's all said and done?
Credit goes to fastandcurious for the idea.
Based on absolutely nothing, I would guess something around mid-to-high 8 figures around age 55+ (assuming you're part of the 0.1% that make it that far).
It's not easy to get accurate numbers, but I know of several Partners and traders slightly below who bought fancy Manhattan apartments/penthouses in the range of $5-8 million a few years ago. They have stayed in some large HFs ($13+ bln) for 10 years.
It always depends, but my framework is that a hedge fund takes 4% of AUM in fees, assuming 2&20 and making performance targets, and run at a 50% profit margin. Therefore, a $100M fund has $2M in expenses or salaries. Making it unlikely the #2 person will make over $750k.
In a $5B fund, there's $100M in expenses but significantly more people. In this type of fund is guess a #4-10 person is making $1-5M.
Living paycheck to paycheck to owning stakes in pro sports teams and jets
Just looks at the Companies House fillings which usually post partners comp and the average number of partners. Then apply some skew (founder earns much more than everyone else usually) and here you are -- most partners are usually at 1-2M per year.
Unanswerable. There are ‘partners’ at $10b funds making 1m bc founder stingy and they don’t generate performance fees that year, and partners at 1b fund that make 10+ in a great year. I’d say market is 2-6, but plenty of guys have made 10+ in a great year at a generous performance paid fund and plenty of guys bounce between funds that are underwater or have a stingy boss so average 1.
This is nearly impossible to answer. The dispersion is so broad and uncorrelated to anything you think would be intuitive.
For example, people I know personally (and this tilts very heavily to exceptional good outcomes):
Murdering it, top non-founders in the business -- 99th percentile outcome:
- Two late 30s very senior partners at two different very large Tiger Cubs. These guys have each have a $15-20mm apartment, and a $10-15mm house in the Hamptons. They are fucking rich. They've each been at >$20bn Tiger Cubs with great performance for a dozen or more years and have risen to be one of a few stars at their repsective firms. ~$100mm net worth not unlikely.
- Early 40s, VERY senior partner at very sizable fund, played the political game exceptionally well. Net worth well over $100mm.
Crushing it: -- 95th percentile outcome.
- Early 30s, retired from HF business after getting fired. Was at large tiger cub, had monster 1-2 years where he had substantial pay days. Net worth $15mm. Very unique situation, so I hesitate to even include as an anecdote.
- Late-30s Sr. Partner at a $3bn fund, ~$10mm net worth.
- Mid-40s, has been around the block quite a bit, had a few monster years in the golden days of the business. Est. ~$20mm net worth.
Doing really well -- 85th percentile outcome.
- 30 year old Partner at a $5bn fund, he does fine currently but is on a good path if he can keep it up, $1.5-2.5mm a year. ~$2-3mm net worth. If he has staying power, he can probably make $2-3mm a year for next 5 years, with maybe a $3-5mm year in there somewhere. So would put him at ~$10-12mm net worth by mid-30s.
Doing fine, I guess -- 66th percentile outcome:
- Early 40s, works at a successful but under the radar sizable HF. Ostensibly seems to be murdering it; in reality he makes $1-2mm a year. Which is not very good for this point in your career, and particularly how this guy lives/spends. Net worth <$5mm.
Have had a tough go of it -- below 50th percentile:
- Early 30s senior Partner at a $1-2bn fund, net worth is $1mm or less. Combination of stingy boss and subpar fund performance.
Have failed:
- Late-30s, washed out of the business. <$1m net worth
- Mid-30s, washed out of the business. Substantially <$1m net worth
- Tons more anecdotes just like these guys
Again these anecdotes skew to the very successful outcomes.
There's a very very broad range of outcomes. There is no such thing as a typical HF Partner. And there is a HUGE survivorship bias in the sample set. There are partners at Tiger Global that are billionaires, there's probably partners at Glenview and Greenlight that have a net worth less than an MD at Jefferies.
This is why it is exceptionally dangerous as a young professional to make career decisions off of HF lore / anecdotes that get kicked around the street. Most likely they aren't true, if they are true they are probably grossly exagerated, and even still, they are not at all repeatable.
The only advice I can give to get on a path to hedge fund riches is that you want to optimize for performance, duration, and scale. You want to be at a fund with very low investment staff turnover, with very good performance, and large AUM (idealy $10bn or more). Large AUM solves a lot of problems, it greatly extends the funds half life in the event you do hit a rough patch. It also usually means the founder(s) are already really rich and aren't still in "get rich mode" themselves, so are more loose handed with comp in big years. Not surprsingly, these seats are exceptionally hard to get. They never fire people, they get paid tons of money, and so its also very seldom that a seat opens up.
Very helpful. I would've expected your "95th percentile" outcomes to have been higher. Don't get me wrong - $10mm-$20mm by your late 30s / early 40s is a lot of money/financial success no matter which way you look at it, but I would've expected someone that has lasted at a large fund for 20 years to have a higher net worth, especially at the 95th percentile. Thanks for your input.
You don't seem to understand that lasting 20 years in this industry in a fund of any size is already 99% exceptional.
Ditto what MM PE said.
Keep in mind in order to have a $20mm net worth, that means you probably earned a cumulative headline figure closer to $50mm. Take out taxes and living expenses, and maybe add in some compounding and you get to $20mm or so net worth.
You likely didn't make shit (relatively speaking) for you first 5 years post-UG. So we're really talking about more like $50mm across 15 years, or an average of ~$3mm a year. In the HF business that usually looks more like two or so monster years, where maybe you had $10mm paydays getting you $20mm, maybe 4 years with mediocre performance where you just got $1mm / year, getting you to $24mm, with the remaining $26mm across 9 years (~$3m a year). This would be a fast tracked career at a sizeable fund, where you had the good fortune of also being in the right sector, in the right style, being able to survive for 15-20 years in this field, consistently putting up numbers both personally and as a fund to warrant a baseline comp of $3m, bad comp of $1m, and good comp of $10m.
That is a remarkable career.
How do you know these net worth numbers?
I have a sense of the funds and the people you are talking about. $10mm net worth by mid-30s is not an 85% percentile outcome, it's a 99%+. There are like 5 - 10 guys on the Street that work at the 3 - 5 funds you are talking about that maybe pulled in that kind of dough consistently.
Not sure which anecdote you're talking about. I said a $10mm net worth in late-30s is 95th percentile. I said a early-30s $2-3mm net worth is 85th percentile.
You didn't answer my question.
You project $10mm for your 85th percentile data point - don't think I need to explain NPV.
Doing really well -- 85th percentile outcome.
- 30 year old Partner at a $5bn fund, he does fine currently but is on a good path if he can keep it up, $1.5-2.5mm a year. ~$2-3mm net worth. If he has staying power, he can probably make $2-3mm a year for next 5 years, with maybe a $3-5mm year in there somewhere. So would put him at ~$10-12mm net worth by mid-30s.
Please do explain NPV to me. Because this debate has absolutely nothing to do with NPV. NPV has to do with time value of money, percentile ranks have to do with statistical distributions. The fact that you don't understand this explains why you are so confused.
It also explains why you are so butt hurt by my finger the air math. Clearly you're substantially subordinate to the 85th/95th percentile stats I put up, and you're indignant.
For the benefit of the prospective monkeys out there that haven't yet taken freshman statistics or finance 101, I'll explain.
A 30 year old with a $2-3m net worth is in the (entirely made-up, mind you) 85th percentile. Which means that out of 1,000 contestants, 10 have done better than the bottom 840. So there's 10 people that have achieved that 85th percentile outcome. Out of those 10 players, a subset will go on to get to the $10mm net worth prize by the age of 35. Those graduating to that net worth would roughly be at the 95th percentile. It's no coincidence that my 95th percentile bucket includes early- to mid-30s people with a $10-15mm net worth.
Which is why I said that the 30 year old with a $2-3mm net worth (85th percentile) is on a good track, and IF he continues to outperform and the stars line up in his favor, he can proceed to a ~$10mm net worth 5 years out when he's 35 years old (95th percentile). I no point said that $10mm by 35 is an 85th percentile outcome. I didn't think this needed to be spelled out, but I guess I was mistaken.
As much as I enjoy this pseudo-Investment Bank rankings banter, I'm going to have to bow out at this point. Hopefully this provided some useful and concrete data points. I should have expected that that either some 16 year old or a butt hurt 32 year old would go to town with the pencil fucking to sooth their chapped buttock.
Just to be clear for all the prospective hf’ers who don’t know - there are like 10? funds with >$10bn in aum (excl macro and credit)
I’d argue that the top percentile mentioned is more accurately top.1% of HF world but that is an irrelevant argument
Yes exactly. On top of that, look at the turnover at some of these places that supposedly don't turn over, typically mid-level guys. You can literally probably count fingers on a couple of hands the guys that have really risen at these funds and made real $. Even if it's 10 people at each fund and there's 10 funds that's 100 people in the entire world over the last decade. Your odds are probably as good playing the lottery, starting a company, etc. The guys that made fk you money made it because they helped build businesses.
thanks for the anecdotes. What are the guys that washed out up to?
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This is a great post.
as much as I think I am not that motivated by money, I wonder why I can’t just shut tf up and slave away so this can be me.
Interesting. For 85th percentile guy, he's losing half of his income to uncle sam -- how'd you get to $10-12mm NW by mid 30s? Also just curious, is it a L/S fund, and is the team lean?
Thanks for sharing your personal experiences/contacts. Quick follow up is where "PM" titles/seats at places like a Viking where it's technically an SM but there's full investment discretion for some capital. Would they fall under this 99th percentile construct, or since they're PMs by title it's a different story altogether.
Also - what do the folks that wash out of the business end up doing? I'm young enough that I haven't seen any wash outs in my hedge fund friend group, but I do worry/wonder what you end up doing transferable-skill-wise etc. <$1m net worth is really unfortunate post a HF career in 30s given compounding etc. and savings from banking+PE years.
Ex-Partner at Tiger Global, been there since 2004, owns a $12m Manhattan apartment. So probably worth 60-100m+
Why does net worth at 40 keep getting mentioned? I guess this is the age people in HFs die.
These days it's generally the age at which you have made it either as a senior guy somewhere without discretion (ie tigers) or you're recently or about to be made pm coming from single manager type places, and that's when the real dough starts to roll in IF you put up numbers.
Well, I will say for myself: if you really want to make money on trading for a house worth five to ten million, then I advise you to have a lot of patience and a strong desire.
People seem to think HF is a golden ticket to 9-figure net worth by 40 when in reality, the vast majority of people in the HF industry are still employees collecting a (very large) paycheck. $100mm net worth is achieved by equity, not paychecks / salary, whether it's in tech / startups or finance. It is extremely difficult to get to $100mm collecting a paycheck unless you're a professional athlete or c-suite.
I think net worth is highly correlated with how long ago one started in the industry. There are lots of people who joined from 1980-2008 when the industry was much less mature and made tons of money, and much fewer after 2013 or so. Also, virtually all the top end are fundamental or PE guys and not quants.
The quantitative variable with the strongest correlation with PE fund performance is vintage year.
Saying net worth is correlated to when people started isn’t all the useful, considering that those people have had more time to build wealth (compound their capital, etc).
You can be saying that it was easier to have great returns before (which I agree with), but you are going to be mixing up those two (returns and time). The funds that are still consistently returning 10+% with a good sharpe will still build wealth (and considering the amount of assets in HFs you could do very well), the issue is getting traction on starting a new fund (much more competition now). But to be clear it’s a different challenge than before (it used to be convincing people that HFs were a real thing).
It's not just about fund/personal returns , but the maturity of the company and industry. People got paid well for being there early on and being a key part of building up the business. Today there is much less to be built in most of these firms, and high returns are great for the partners but not necessarily for junior employees.
Depends on fund size, headcount, politics, lifestyle/spending habits and a slew of other things. For a large, reputable SM L/S shop, we're looking $15bn+ AUM + 10-20 IPs, so around a billion per head. A partner/PM, at Tiger Global, Lone Pine, Viking, Coatue, Eminence, Melvin, Whale Rock, D1, Elliott, Pershing Sq type fund probably makes $1-2mm in a bad year, $3-5mm in an average year, and $10mm+ in a homerun year like 2020. If you make partner/PM at age 33-34, and retire at age 63-64, that's 30 years in the seat. Perhaps every decade looks like 3 bad years, 5 average, 2 homerun, so ~$45mm pre-tax, maybe somewhere in the neighborhood of half that after expenses/taxes and PA returns, so $22mm. Triple that, add a decent amount more from PA, and you get maybe $60-70mm net worth, depends a lot on PA performance obviously and the number of banger years vs bad vs average. But sounds somewhat reasonable
Lol. Hedge funds are absolutely a young person’s game. Retiring at 50+ almost never happens, the only cases would be a founder / sr equity partner deciding to stick around. Realistically, the vast majority are out by 30s to 40s. They’ve either washed out or made enough money to walk away. Usually someone has made partner/PM by their mid to late 30s, and if they haven’t by then, they probably never will. Also, most founders these days are also doing so in their 30s or early 40s at latest. For everyone else, there’s so only so long one can be an analyst at a hedge fund, and you’ll generally be shown the door by late 30s or early 40s. Hedge funds would rather hire someone younger and hungrier to be an analyst then some old fossil. A 50 year old analyst working for a 35 year old PM also doesn’t really work for cultural reasons.
Fair enough. So call it $40-50mm. But that's for the best of the best funds that the OP was referring to. Does $1-2mm, $3-5, and 10+ in a bad, base, and homerun year, respectively, sound reasonable for PMs at the top funds?
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