Thoughts on Diameter, Farallon?

Anyone have any insights into Diameter & Farallon. I know Diameter is credit focused, but how active are they in the distressed/event driven space? Any equity stuff or pure credit? $5-6bn AUM I think

I know Farallon runs a bunch of different strategies from distressed to L/S to risk arb, but it's not a MM right? Also it's in SF. 11 figure AUM-

Would appreciate any info on comp (@ junior levels + how it scales at a more senior role) and investment strategy/style

Comments (45)

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  • Research Analyst in HF - Other
May 14, 2021 - 2:22am

Both are solid shops. Diameter has absolutely crushed it performance-wise since inception. It's grown from $1bn to $6bn total ($1bn drawdown fund) within 4 years. Culture is tough i've heard. You work a ton, and you're also underpaid. But great name and experience to have on the resume. Lots of churn at the junior levels it seems. They're like your typical credit hedge fund. They run market neutral and so have a ton of CDS and shorts which you won't find in most traditional distressed shops. They trade much more than your typical distressed shop. They go from performing and IG all the way to distressed/RX situations, but they will be in the large cap public situations, not like that mid market loan to own crap that SVP and other funds with locked up drawdown structures play in. This is a proper hedge fund, not like your typical sleepy distressed shop.

Farallon I know less about but culture is also a bit weird I've heard. No insight into comp and internal promotion within the firm. I think they do focus a lot on distressed and merger arb vs traditional L/S equity, kind of like DK and a lot of event-driven shops setups.

  • Analyst 2 in IB-M&A
May 14, 2021 - 7:21am

In my analyst class, the MM loan to own crap at SVP and Oaktree SS was much more sought after than places more focused on trading like Diameter or Anchorage, but to each their own...

  • Research Analyst in HF - Other
May 14, 2021 - 2:44pm

Exactly - I'm not trying to say one is better than the other at all. People prefer different things. "crap" and "sleepy" wasn't meant to be derogatory haha. Although if SVP is interesting to you, I'm not sure why you wouldn't want to just do traditional PE. Higher return targets and pretty similar work. 

  • Principal in HF - Event
May 14, 2021 - 2:56pm

This is ironic because the true HF types are generally much better seats, certainly at the mid and senior levels at least. The loan to own shops are essentially MM private equity, with rigid team structures, heavy diligence / investment cmte processes, and less flexibility in terms of mandate. As a junior you're generally the model/memo monkey on a large deal team with less input into shaping the trade thesis or driving a restructuring process, and less ability to point to a direct P&L contribution. At a HF, analysts pitch ideas directly to PMs and take much more ownership of positions. As a result, comp and responsibility can scale much faster at a HF, where it's not uncommon to see high 6 figures or even 7 figures of comp within 3-5 years if you perform well. To be clear, I'm talking about the larger credit HFs that have the mandate to invest across the credit spectrum in public markets. AUM is very important in credit given absolute returns are much lower than their equity counterparts. 

  • Investment Analyst in HF - Event
May 14, 2021 - 10:01pm

In my analyst class, the MM loan to own crap at SVP and Oaktree SS was much more sought after than places more focused on trading like Diameter or Anchorage, but to each their own...

This is generally because most IB analysts looking for bayside have no real intention of thinking like an investor. If you focused on making money and thinking outside the box, Diameter et al is the best seat where you can try yourself. The reality is most banking monkeys are just trained to work long hours and do whatever is asked. So the PE style approach is what feels comfortable and thus sought after, longer runway to hide and not being tested on your risk taking talent.

  • Analyst 1 in HF - Other
May 14, 2021 - 8:44am

Echo this. Diameter is more akin to what a real HF is due to the nature of the guy who runs it (can do some quick research to see who/why that is) + the nimble nature of the capital. They play the whole universe and it allows for good flexibility in opportunity sets when you think about making money. Surprised to hear the comment on underpaid, know a few analysts there who seem very happy and taken care of.

  • Intern in PE - LBOs
May 14, 2021 - 8:57am

Could you provide a range -- anyone doing 7 figs? Also any insights into Farallon?

May 14, 2021 - 11:30am

Farallon strategies are all run separately under different teams, so you will most likely end up working on just 1 strategy. role is a 2-3 year trial period like most jr analyst programs, then good performers get to stay on and start managing small sleeves of capital. still, most of capital for each strategy is managed by the heads of their respective groups

not much to add on pay. market rate for first 2-3 years (350k+), but unsure about comp after that

May 14, 2021 - 1:40pm

they don't hire out of undergrad, unless it started happening this year. not sure who you're referencing in terms of the 1-2 kids a year.

most SM HFs just pay you whatever IBD would pay you if you join from undergrad. similarly, you'd get roughly the same as PE if you're coming out of banking. upside is pretty capped until you're 4+ years out of school

May 16, 2021 - 4:09pm

lr28

Farallon strategies are all run separately under different teams, so you will most likely end up working on just 1 strategy. role is a 2-3 year trial period like most jr analyst programs, then good performers get to stay on and start managing small sleeves of capital. still, most of capital for each strategy is managed by the heads of their respective groups

not much to add on pay. market rate for first 2-3 years (350k+), but unsure about comp after that

Do you know what's the market rate for first year in these shops transitioning from a banking program? 

  • Analyst 1 in IB - Restr
May 17, 2021 - 12:49pm

Do you know comp at like the MD or senior analyst level in a solid year (for Farallon)? Is this like $3mm+?

  • Associate 2 in HF - Event
May 14, 2021 - 4:28pm

Diameter culture is horrendous. Would avoid.

Farallon is historically a great firm. Rougher performance in recent years (like most in the space), but still a solid place to learn, especially if you want to do credit on the west coast. 

  • Associate 2 in HF - Event
May 14, 2021 - 4:43pm

You get yelled at if your credit trades down 3 points. You're constantly hounded on every detail of every position you cover. The hours are long and terrible. Vacations get blown up. Comp is mediocre (especially relative to fund performance). 

  • Intern in PE - LBOs
May 14, 2021 - 4:41pm

Have a legit shot at working there FT after college, and more than anything, I'm trying to learn. My ultimate goal is L/S at a top SM, and right now I'm debating between MF PE & a few HFs (All of them are at least $2bn. Farallon not necessarily included right now, but I know I have a solid shot at getting an offer there -- connection. Farallon would be the best on the list). Do you think MF PE would have an edge over an HF like Farallon (out of school) in terms of top L/S SM exits after 2 years? I would either shoot to be on Farallon's L/S or risk arb team. Location not a big issue to me, although it is worth mentioning that most of the top L/S shops are in NYC. Thanks!

  • Anonymous Monkey's picture
  • Anonymous Monkey
  • Rank: Chimp
May 16, 2021 - 8:30am

To try to provide some more helpful info, I believe I have a friend who was one of the first analysts at Diameter. Overall, he seems happy and well-compesated. Work sounds interesting. Obv not perfect place and sometimes it sounds like culture can be a bit tougher/sharper as common in hedge fund industry. Overall, sounds like a good place. 
 

Farallon, I met while in college. They offered a case study competition with the winning group getting a trip to SF to present in front of their IC. Seemed like nice people who loved investing. At the time they did not want to recruit right out of undergrad but seemed like they were preparing to do so one day.

I hope this helps 

Jul 8, 2021 - 5:06pm

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