HF is obviously a high risk career path, especially pod shops. Presumably there are a number of current or ex-pod shop people here who have some regret about choosing this route. With the benefit of your hindsight, it would be great to get your views on:
- Why do you regret going into a pod shop - e.g. comp, WLB, repetitiveness of the job, constant stress, lack of transferable skills / exit opps, etc.?
- If performance was an issue - what has been bad luck vs. your own fault?
- Do you think your personality was aligned to the pod shop hedge fund world? What are the key characteristics required for success?
- How did you exit the industry, or, if you're still in it, what have you got planned for your future?
- Would you recommend pod shops / the HF industry for someone in IB who is considering HF vs. PE but prefers more intellectual work and strongly dislikes deal processes?
- If you could go back in time, which career path would you have taken instead and why?
Thank you
Cons: yacht gets too big, too many friends out for money, get audited by irs bc too much income/net worth. Not sure others
Key characteristics for success:
Love markets/stocks, enough to make this your life for a while, patient and able to really dig into things; be it boilerplate comments or whatever you really need to have the willingness to go the extra mile and sift through things, competitive, good work ethic.
Typically the people who perform well genuinely really like markets, its not for people who need an alternative exit to PE tbh. The key question is what do you do in your spare time when not on the desk? Are you looking at stocks and trying to form and investment process, practising modelling and forming your own views?
Based on my experience of several years at a pod
Why do you regret going into a pod shop - e.g. comp, WLB, repetitiveness of the job, constant stress, lack of transferable skills / exit opps, etc.?
If performance was an issue - what has been bad luck vs. your own fault?
Do you think your personality was aligned to the pod shop hedge fund world? What are the key characteristics required for success?
How did you exit the industry, or, if you're still in it, what have you got planned for your future?
Would you recommend pod shops / the HF industry for someone in IB who is considering HF vs. PE but prefers more intellectual work and strongly dislikes deal processes?
If you could go back in time, which career path would you have taken instead and why?
1. I don't regret it at all. From a financial POV, it's changed my life and is probably the single best career choice I made. For the right person it's an amazing opportunity. The stress can be high at first but I've reached a point where it's totally manageable. If you want to eat what you kill, not deal with politics, and have a chance to make millions in your 20s and potentially 10s of millions in your 30s, I don't really think there's another career option that lets you do that, not where your boss decides the outcome. It's not repetitive because narratives are always changing. The only exit I have my eyes on is starting my own fund, setting up a family office one day, or buying a SMB or something
2. both. just bounce back / learn from your mistakes. that's all. think of it as a game - play the game within the constraints of the rules (risk model) and you will be just fine.
3. Yes. I want to be a risk taker. I want to eat what I kill. I'd rather have a seat where I can make $5-10m+ one year and $300k the next vs steadily clipping $500k-2m at a single manager firm. I like to gamble but I know how to properly size risk. I don't mesh with politics - this was an aspect of PE that killed me. I like betting on myself. I want to be incredibly rich
4. I should be a PM in a few years. I plan on staying until my track record is strong enough to raise my own fund
5. Yes. We do really deep fundamental work, much deeper than the single manager funds I've seen.
6. I would still choose podshop
Look I think if you want to be a money maker, really like betting on yourself, and want to make as much $ as possible, yeah it's the best seat for that type of person
Interesting perspective vs mine above. Though I do think making 5M+ is impossible unless you’re a PM…curious how you found the stress/WLB manageable, that’s one of the top reasons others leave
I'm more of a senior analyst (I guess some would consider sub-PM) w/ portfolio carve on our team. The most I've made is 5m but my allocation and take rate went up after last year. Without getting too specific...$750-1bn sleeve x HSD return x HSD take rate = $5-10m and I'm not a PM. I split the economics on my sleeve 60/40 (moving closer to 50/50 after big year last year) with my PM. I've worked with him for years now and know he's made over $15-20m more than once. I've heard of senior analysts / sub-PMs making $7-10m in big years
If I can keep up performance I'll probably start my own team soon. On the stress, maybe part of it is I don't have kids yet and can manage the down years pretty easily (wife makes $400-500k so even if I get small bonus, I'm more than okay). I've also saved and invested all of my bonuses / I live entirely on my + wife base, such that I'm almost at a point where I could stop working. I won't because I'm getting to a point where my comp can really inflect. I'm on the west coast so my hours fit my lifestyle more (5am - 4pm or so). Idk I really just think of this biz as a game, I love to compete, and I've been here long enough that I know both my coverage + the risk model inside out. With the time I can definitely confirm the stress comes down. Maybe that changes when I start my own team and have kids. But for now, this feels good.
Thanks, super helpful perspective. You mentioned that you do deep fundamental work. Do you think this is specific to your fund or would you say that all the big pod shops are engaged in deep fundamental work at the end of the day, to the extent you are aware ofc.
Thanks again.
Most pods will be doing deep fundamental work. What's different is overlaying the sentiment and catalyst driven style on top to maximize the alpha curve. A pod and SM L/S fund will likely have the same 18-24 month thesis, but the pod will be trying to actively trade the thesis around the signposts along the event path, while the SM fund will just hold through. If the stock was a long and the thesis plays out, the SM fund will likely have higher absolute returns through the hold, while the pod's will have lower absolute returns but higher risk-adjusted returns, as they would have better been able to avoid the swings
+1 super helpful. LI is littered with MM associates/analysts that have bounced around a few seats, presumably having been blown out / pushed out. What are some of the reasons ppl don't succeed in the seat? Some here say the chances of getting blown out is exaggerated and that reality is that it doesn't happen as often as ppl make it seem - curious what you think
Is the % really higher than the # of ex-IB/PE/SM folks who end up in random corporate/VC jobs? I see maybe 20% of ex-PE associates from even the top MFs end up leaving the industry and it’s roughly the same for MM juniors. Think ultimately many people leave or bounce around for similar reasons as in any other subset of high finance - from pushed out/bad performance to bad culture/realised it’s not for them. When I was at a pod everyone whose PM blew up ended up receiving at least one offer from another PM at the same firm, but some chose to leave for a team at a different platform which can be for a myriad of reasons (coverage/responsibility/PM personality fit etc).
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