Would you take a pay cut to move to the buy-side?

Would you take a 20%-25% base paycut (I am going from ASO-1 level) to move to a really good role, with a nice team and good learning opportunities at a long-only AM?

I really like the opportunity, the team, the manager as well as the firm. Since this is a long only, I also see that future opportunities might not be that easy to come by (given the turnover) so i don't want to whine about the money BUT at the same time, I dont want to be taking a step backward in my career.

Comments (3)

Oct 31, 2017

My first piece of advice would be to not jump at the first opportunity that comes up to move to the buy-side, if this is the first opportunity that has come up.

Some people try to rationalize the move with what you are saying, i.e. good role, team, company, etc., but the fact of the matter is, will you be happy with this decision 6 months from now making 25% less money?

If you 100% know that you want to be on the buy-side, you just have to keep this goal in mind as you will be making less money (and presumed to be in a more junior role).

What do you do now and how do you know that as time goes on your won't be able to at least lateral into a buy-side role?

Best Response
Oct 31, 2017

I would ask myself a couple of questions.

First, do you have a family (wife & kids) to support financially? If so you may need to discuss taking a pay cut with them first. Also, if you have large student loans or any other major financial liabilities (like a mortgage), you may need to factor this into your budget. If you have no major financial obligations I would consider taking the cut. Generally if you are a good stock picker you will get paid in this business. The downside is if you're not, you don't add much else to the fund. This is very different from ER where the best analysts are often experts in their names and sectors but poor stockpickers. You can still add lots of value in ER without being a good stock picker.

Secondly, do you actually want to move from sell-side ER to a buy-side position? If you actually want to pick stocks and be judged on your ability to generate alpha (God I hate that term!) then I would make the move.

Thirdly, what is the performance, track record, and trend in AUM of this fund? Fees, and AUM, are under massive pressure in the business today and that ultimately impacts comp. The guys I know who are happy on the buy-side are guys who just love to pick stocks and would do this job for half the current pay. The guys who are unhappy are the ones who grumble about how much money average people made in this business 10-15 years ago when fees were high and ETFs an unheard of concept.

Finally, and most importantly, do you buy into the investment approach of the fund? There is no point, for example, in joining a deep value long-only fund if you like focusing on event-driven short-term investing.

Mar 24, 2019