What does a successful career at a fundamental L/S SM HF (tiger cubs, etc) look like?
I've seen a ton recently on this forum about how SM HF's are no longer the place to be and that they are simply unable to compete with the pod shops anymore. According to many on this forum, It seems as if they lack the infrastructure, data access, newsflow, and edge that the pods have. The path to success at a pod shop is fairly straight-forward. After becoming an analyst, if you perform well (and get lucky), you will eventually reach PM. Once PM, you can earn anywhere between 300k - 10m+ per year.
However, I continue to see top talent on LinkedIn doing the original 2+2 and going to top SM HF's. That being said, I am wondering what a successful career at a SM HF looks like nowadays. I know that Viking is still a top SM and some of their PM's become stupid rich and many of them leave to launch their own fund.
Does anyone have any insight or argument as to why top talent should still choose a SM HF as opposed to one of the big pod shops?
Thanks fellas
viking is essentially a pod, makes no sense to use that as an example of SM outcomes
Fair point
ive been doing this probably as long as you’ve been alive…and have hired/fired many 2+2 people…9x / 10, the scrappy fmr i-banking / sellside guy ends up being the better analyst. no one in this biz cares if u come from helman friedman or gs or db. we just want hungry, smart, proactive, trustworthy guys. the pe guys tend to have weird habits… anyway, you’re implicitly assuming 2+2 folks…whose only insight comes from what, this site (?)… are experts on the hedge fund industry, and that they’re top notch. top notch does not mean getting a job at gs and then helman friedman / cruising along… maybe the answer to your question is they feel comfortable going with status quo and don’t fully understand the industry, or don’t really know what they’re playing for goals wise…what they want. please don’t use where 2+2 pe people recruiting as a proxy for which hfs are best…
to answer your question, i know many successful people who spent their careers at single manager funds, but u should consider a few things. 1. they all joined early and were made partners day 1 or very early on… 2. they control a small sliver of the economics and their pm has the rest… 3. its a hard comparison given single-manager has no real risk model, but on a rough comparative basis, they get paid a lot, a lot less per $ of alpha pnl generated, 4. they’ve never managed risk/not pm. so the outcome of working at a sizeable single manager fund is you become a senior analyst where only job is research, you don’t manage risk… maybe you clip lsd / msd millions to do research as a senior guy… which is a great outcome compared to vast majority of finance careers. if you join a single manager at launch and it scales that’s different. there’s also a greed aspect… probably not fun when you have good year but buddy at platform making 10x as much with hit rate much lower than yours
ive only worked at the platforms and have been sr pm for quite a while…if i look at folks i’ve mentored or worked with over the years, there are several extreme, home run, outsized, right-tail outcomes…multi-generational wealth generated in a very short period of time. that is what most folks are playing for… and that isn’t possible in the single manager model…a 35 year old can’t make $30m in a 1 yr in single manager model
hf is for people looking for right tail events… if not looking for that…dont bother with hfs. if u are, max odds of doing that by going to shop that best positions u…those funds…as u may guess…are the platforms
Thank you very much for this. I am surprised to learn that the majority of the top performers you have hired have come straight from IB. Didn’t know it was so common to go straight from IB to a pod
Sorry for the spam. But also, when pods look to recruit from banking, do you think they focus more on trying to hire from a product group (M&A, RX) or a coverage group (TMT, HC, FIG, etc)?
it doesn’t really make a difference, but many of those ive hired have sector overlap with my coverage.
again, just want smart guys…don’t care where from…the most successful guy that i hired almost 15 yrs ago came from one of the consulting firms…just a brilliant guy…he got it immediately…and is probably richer than me now!
Would echo the above in terms of right tails for the most part and the larger upside events being at the pods. Everyone has heard of some insane guarantees for talent and the MMs have more capital than seats filled so it simply just results in higher comp. The SM pieces about being a partner and making lsd/msd millions is probably spot on too. Everyone remembers Melvin and a lot of those analysts were pulling in 7-figures in what was "technically" considered an SM, but they also managed $20bn at peak and most SMs are not that
I think it honestly just depends. In what the above guy wrote you can find some pretty solid SM gigs that pay pretty great money that's on the right side of the normal distribution curve with a better WLB + slightly different investment style. Platforms are notorious (at least in equities) for churning fairly high amounts of talent, paying top notch to the top decile of performers, and stylistically being "fast $." It's inherently a different style/game than what a good chunk of the SMs do but it's also entirely pure alpha so the thought is you're grinding out some % of a return that's levered and you're managing risk extremely tight. Not a whole lot of flexibility in the risk model but that's the point and some people are really top notch at that
I actually don't think the comp is too distinctly different but law of large numbers favors the platforms - if you're 30 and 1 of 3 investors on a $3bn book and you guys make 1%, the team's comp is > $4m total (being conservative). PM might take > 50% of that but it leaves a seven-figure pay-day for you on doing a 1% net return, which is making money but probably a soft year for the platforms (equity guys wanna be in that 3-5% return range)
Last thing I'll say is a lot of those 2+2 folks just care about prestige end of the day. I don't know how else to explain it but if you went to Yale --> GS --> H&F, the natural route after that would be Viking or whatever. It's pretty meaningless and prestige/name brand are pretty unimportant in public equities (imo) and I think if anyone tells you it matters which fund you are at, they're probably insecure about their returns/performance. The funnel to which a Viking PM can actually go run their own capital one day is probably less than that of the % of platform PMs that could spin-out and start their own shop. Viking has one CIO and every few years they spin out. That single CIO was also probably 1 of ~50+ analysts (in aggregate of all analysts hired from analyst --> CIO) who was good enough to climb the ranks after a decade+ of crushing it
I think the idea that one could be called a "top SM" and have a year down > 30% is laughable. It is clinically why this forum has tilted towards the platforms over SMs (and rightfully so) because this site has a ton of prestige hungry folks on here trying to "tier" the SMs as if that matters
Agree with everything you said. I have seen many people make the jump from a SM HF to a pod shop, but I don’t recall seeing anyone go from a pod to a SM. Is it possible to make this switch? Or do SM’s prefer to hire people that don’t come from another hf?
Pod --> SM probably doesn't happen because the pod style is honestly entirely its own beast and is pretty different from how most SMs invest/trade. Also by virtue of how many seats there are generally there's just a lower supply of available SM seats so naturally there's fewer folks getting into those roles regardless
I think there's definitely some hfs out there that prefer to hire folks with no prior investing experience perhaps as to mold them or teach them from the ground up. Thought being if you've never done public mkts before there's really no job like it and so therefore going in w/ no pre-conceived notions about how stocks trade or how to appropriately invest in public mkts enables you to build that process from scratch. I'd also just say it largely depends on the PM - some guys probably are specific in wanting to hire exclusively from their own background (MBAs love hiring MBAs, a guy who did research will want to probably hire a guy in research) but I don't think there's a one size fits all for SM hiring
Did melvin really manage $20B at its peak? thats higher than publicly available records & what i've heard
Think it was close to $18bn
i didn’t read the entire thing so maybe you addressed, but impt distinction & q to ask urself - “what am i playing for”? for me it was call option upside/chance to be that star pm we talked about in someone else’s post/right tail events…that meant once ive mastered the analyst level, then manage risk asap/get perf attribution/payout…bc i understood thats how u get paid. i have so many friends that worked at reputable single manager funds and got totally screwed on comp…for the right person it’s an amazing career and has to be right cio
the stories u hear of pod guys going from snr analyst with carveout to spinning out as pm and doing 150+ pnl year 1 are very, very real…i had the exact experience. someone that grows up in the risk model knows it better than the guy joining from a different type of fund.
i wrote about this in more detail on another thread but being a pm at one of the bigger platforms really is an amazing opportunity…1 good year can literally change your life, your kids, parents, wife, future grandkids etc lives forever…just can’t think of a career where u have young pm’s making more than James harden one year…then blowing up a few years later…then playing musical chairs and making it rain!!
Very good pts
Have heard horror stories at SMs... impossible to nail down whose PNL is whose... etc.
Question for you would be: what % of PMs do you think across the platforms actually make "life-changing" $ (and what would you constitute as such?) Can an SM guy learn the platform model? My bet would be the top 10% or maybe slightly more are crushing it to the level I'd deem earning "life-changing" comp... but maybe that's too low given the number of anecdotes you hear about crazy big guarantees at the pods
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