I have offers from both large and mid-sized hedge funds. How should I choose?

By August 11, 2016Job Search

First, congrats! Your hard work has paid off.

Compensation is the first factor. Larger hedge funds typically have higher base comp, but hours tend to be longer too. Hours at large funds like Citadel and Point72 are comparable to banking hours.

The more significant difference is the bonus. Bonuses at larger funds fall into a fixed range as a percentage of your base. Bonuses at smaller funds will be less at the beginning. However, if the smaller fund performs well and AUM grows at a nice clip over the next 3-5 years, your career trajectory is accelerated and you’ll likely getting equity in the fund. Getting equity is what will make your wealth.

Simply put, large funds offer a stable path and a great learning environment. To gauge whether you should pick a smaller fund,
think about your fit with the team and the investment process:

Team – Do you like the people at the small fund? Is everybody on the same wavelength as you in terms of work ethic and personality? Do you like the portfolio manager and believe in his/her skills?

Investment process – Do you like the way the team invests? Does the fund focus on value investing while you like growth investments? Does the fund do short-term trades while you like to buy and hold?

Besides compensation, culture, and investment process, think about the location as well. If the funds are all in the same city, then it’s not an issue.

All else being equal, I recommend going with the larger fund if you are early on in your career and you are not in love with any of the smaller funds right now. Going to a brand name fund will keep your door open to smaller funds down the road.

Author Kelvin Jiang, CFA

Kelvin Jiang has a decade of investment experience in public equities, private equity, distressed debt, and leveraged finance. His journey spans across Calamos Investments, Thornburg Investment Management, CHS Capital, and J.P. Morgan. Throughout his career, Kelvin has screened and interviewed candidates extensively for the buy side. Kelvin earned an M.B.A. from the Kellogg School of Management and graduated magna cum laude from Columbia University. He is a CFA Charterholder. In his spare time, Kelvin is an avid commentator on NBA trade rumors and Oscar-worthy performances.

More posts by Kelvin Jiang, CFA

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