opinion on working at a startup hedge fund?

[quantquanta]

As of right now it doesn't have any AUM, but the 2 partners have ~20 years of running their own hedge fund, with AUM of 1B. Their returns annually were approx 15% until they shut down due to redemptions around 2009-2010. I'm okay with a low starting salary due to the potential for more and the chance to work in a revenue creating role (as opposed to back office). What would you do in my situation? My other choices would be market risk at big banks. I'm worried that if I were to work 2-3 years the the HF and they shut down or do well and get rid of me to hire someone more qualified (with IB experience). What are the exit opps if these two scenarios were to happen? Is it possible to go to market risk from a hedge fund experience?

 

[tjk]

If they were returning "15% annually for 20 years until 2009-2010" then why were there redemptions, and what have they been doing since then?

 

[quantquanta]

sorry i think it's more like 12% annually and the fund lost all outside investors around 07-08 because investors were freaking out about the financial crisis and the fund managed its own partners' money during the crisis until they decided to shut down in 09-10. this is why i'm not sure if i should work for this firm. if it was outperforming the broader market why were investors leaving? not really sure what they've been doing since but the partners are board of directors at some firms so maybe they've been busy with that

 

[BeepImaJeep]

The most common exit ops are similar roles or projects in different capacities. It's not very common to move from a risk role to a revenue generation role because very simply there fewer revenue generation roles than there are qualified applicants. You can just take a look at Linkedin profiles of portfolio managers at hedge funds and most of them actually do come from the traditional route. That being said, it doesn't mean the market risk position at the bank isn't worthwhile. There's a pretty big negative perception of it, but it seems to me to be a more stable, if unglamorous role.

The hedge fund position is variable and if I were you, I'd try to understand more about both the firm strategy and the role that you will be playing. A $1B AUM fund for 2 portfolio managers is MASSIVE for certain strategies by the way, and would indicate that they have had a lot of previous success to be able to get that sort of fundraising. It's not really possible you to verify the likelihood of success of a start-up fund (the vast majority of them won't succeed), but it is important to make sure that 1) this fund strategy is something that you would like to do long-term (it's not easy to move around between strategies) 2) the partners like you enough that they are willing to teach you about their business, and most importantly 3) you can go above and beyond the grunt work you are assigned to actually learn about their strategy.

*Getting kicked for an IB analyst should not be a concern. If the fund does well, they'll hire additional analysts, and you'll be familiar with their operational process so you'd teach them. If they don't think you are smart enough for revenue generation, they just stick you with grunt work and you won't see much career progression. If you can't or don't do the menial tasks well enough, of course you'd get fired, but that's true of most jobs.

Good luck.

 

[quantquanta]

The most common exit ops are similar roles or projects in different capacities. It's not very common to move from a risk role to a revenue generation role because very simply there fewer revenue generation roles than there are qualified applicants. You can just take a look at Linkedin profiles of portfolio managers at hedge funds and most of them actually do come from the traditional route. That being said, it doesn't mean the market risk position at the bank isn't worthwhile. There's a pretty big negative perception of it, but it seems to me to be a more stable, if unglamorous role.

The hedge fund position is variable and if I were you, I'd try to understand more about both the firm strategy and the role that you will be playing. A $1B AUM fund for 2 portfolio managers is MASSIVE for certain strategies by the way, and would indicate that they have had a lot of previous success to be able to get that sort of fundraising. It's not really possible you to verify the likelihood of success of a start-up fund (the vast majority of them won't succeed), but it is important to make sure that 1) this fund strategy is something that you would like to do long-term (it's not easy to move around between strategies) 2) the partners like you enough that they are willing to teach you about their business, and most importantly 3) you can go above and beyond the grunt work you are assigned to actually learn about their strategy.

*Getting kicked for an IB analyst should not be a concern. If the fund does well, they'll hire additional analysts, and you'll be familiar with their operational process so you'd teach them. If they don't think you are smart enough for revenue generation, they just stick you with grunt work and you won't see much career progression. If you can't or don't do the menial tasks well enough, of course you'd get fired, but that's true of most jobs.

Good luck.

very helpful thanks a lot