Looking for some input for those who work within small firms. I just had an interview for a very small AM firm (AUM < 300m), with only a handful of employees in the NY office. The position is entry level/junior, and since there’s no support staff, I’m afraid a lot of it will be administrative - although I was also told there is potential to be involved in all aspects of the fund. I feel I’m overqualified for the role, and it would definitely mean a pay cut, but I’m not working in finance right now, and also think this would be a nice springboard for me. Anyone have any pros/cons about working in a start-up/small fund?
Just did a 6 month internship at an extremely small fund and it was capped off by an offer that I just accepted. Pros: -Extremely close contact with senior management -Excellent advancement opportunities within the firm if your bosses like you -Possibility of designing your own job -Virtually no red-tape in companies this size - this was a big deal from me, I was coming from a huge firm previously with plenty of bureaucracy. If your bosses like you and you want to go two days over your prescribed vacation time, they probably won’t care. Ditto for lots of other little crap. Cons: -Your pay, prestige, and benefits will likely take an enormous hit. Just the way it is :((( -Extremely close contact w/senior mgmt. You’d better like them, and they’d better be good at what they do - your reputation and resume depend on it. -You will definitely get stuck with some admin crap. It’s unlikely that you’ll be serving as a full-time secretary, but if the senior guys offer to spring for lunch or need a filing cabinet reorganized and you’re low on the totem pole, yes, you might be asked to place an order or organize some files. Expect to have your ego bruised if you’re used to a 1:1 secretary to profit-center-employee ratio. For me, I am certain it was worth the move I made, given where I came from and where I want to go, but it’s definitely a move with plenty of risk. However (just like riskier investments), there’s plenty of reward if the move works out. If you’ve got any specific questions as relates to a small firm, I’m happy to answer given my (limited) experience.
I’ve never worked at a really small fund before because I’ve valued the prestige and security that typically come with larger firms. However there was a time while I was on the sell-side when I was faced with a number of smaller buyside opportunities, and also have several friends working at smaller firms. I agree with supersadface’s assessment and would also advise you to do your diligence on the people leading the fund and where things may be headed. If they’re a bunch of former bigwigs that recently spun off to start their own shop, it might not matter that they’re small right now. However, technically just about anyone can start a fund and you’re talking about a firm that’s quite tiny. On top of that, you’ll want to be clear about the role you’re looking for; if the firm doesn’t have administrative staff, you’ll probably have to do a lot of the menial work as you suspect. I realize I haven’t gone into too many specifics about everything *I’d* do, but that comes down to knowing yourself, the hiring landscape, and what types of responsibilities matter most to you. Bottom line is, when in doubt, ask the tough questions. You want to know the facts upfront before committing…otherwise you’ll probably end up leaving within a few months anyway.
I agree with everything super said. I started at a $200M hedge fund two years ago that is now over $500M organically. It’s been a leveraged opportunity in that it sling shotted my career forward a couple of levels. The boss trusts me to get things done, and I’ve become the go to guy in a way that I would never have working at a large firm. I basically have unlimited responsibility short of making final buy and sell decisions on the portfolio. Of course, if the fund had flopped, there would have been no downside support for me no matter who good of a job I did, unlike at a large firm where you could just switch teams if you are good. The trade off is that my future career trajectory is uncertain, and I make less than I could elsewhere. Also, few people have heard of this firm (boss keeps it intentionally low profile), so it is not like working at a large brand name hedge fund that has option value in terms of jumping to new opportunities. I also feel pretty isloated here a lot of the time as I have no peers, and nothing to benchmark myself against. This might not seem like a big deal, but it matters to me as I have only a small network in finance, having no MBA and having come from a non-target school. Sometimes I wish I were able to meet more people that do this work for a living so that I could learn from them, but that’s part of the trade of working on a small team. I have struggled to evaluate the future pay off of this sort of opportunity at times, including on this forum with some previous posts, but ultimately I concluded that this is the right opportunity for me as I am young and debt free and can take the risk – if it works, there is a chance I could be running my own book by the time I am 30 or in my early 30s at least. If it fails, I will have to accept the fact that I made less money here than I could of elsewhere (but still a good living – nothing to cry about) and have to “start over” at another firm. To me, that is a trade going in my favor, but everyone’s situation is different.
Wow, thanks for all the great input. Right now I’m working in a very secure, but non-finance job. I have a Master’s with a concentration in Finance, but more based on the public side. I’m a L2 candidate. The position entails monitoring the portfolio and reporting to investors. They’re nearing the end of their investment cycle, and for the next phase will be mostly working on attaining new investments. I think this is both a potentially great learning opportunity and exciting time to be involved in such a firm, but is also the riskiest time - b/c if they can’t find any new business, there goes my position. To supersadface: You mentioned a great potential for growth. That seems kind of counter-intuitive for a small firm, since I wouldn’t think there is much room to expand positions with such limited resources. Could you expand on that? To numi: Thanks for your input. I want to ask the tough questions, but I don’t want them to think I’d bail or don’t really want the position, since they already mentioned I may be overqualified. I really just want to get in to AM, and am definitely willing to do the grunt work for a bit.
Higher risk but also higher potential reward. I think a lot depends on how good the principals are and your supervisors (if they aren’t the same people). If they’re good, they’ll also be dealing with high quality people and you are likely to have a chance to interact with them. You’ll have the chance to learn a lot by being in direct contact with them. If they’re good, there’s also a better chance that AUM will ramp up quickly, and that is good for your prospects. If they’re not so good, then that’s a problem, small firms fail at a high rate. Early on in your career, it’s not the end of everything if your firm goes under, but obviously it is a setback that you’d rather not have to deal with.
This is a tangent question, but is it reasonable in these situations to ask if and how much of their own capital makes up the firm’s AUM?
BValGuy Wrote: ------------------------------------------------------- > This is a tangent question, but is it reasonable > in these situations to ask if and how much of > their own capital makes up the firm’s AUM? Yes – this was a major deciding factor in my case. It is absolutely reasonable.
PallasAthene Wrote: ------------------------------------------------------- > To supersadface: You mentioned a great potential > for growth. That seems kind of counter-intuitive > for a small firm, since I wouldn’t think there is > much room to expand positions with such limited > resources. Could you expand on that? As to ‘great potential for growth’: I meant that your job capacity (and potentially, comp) can very easily increase as your experience ramps up. Your boss and you will work very closely; this means he or she will know very quickly once you’re capable of handling a bigger workload or more significant tasks. Contrast this with a larger firm, where your MD might be watching 15 people and be doing formal reviews once a year. Compound this kind of ongoing review/workload increase over a few learning cycles (every few months) and your job responsibilities can easily skyrocket over your first year. As far as firm size growing, you’d better believe it. Let’s say you work for the “Crappy Company Fund”, ticker CRAPX, with $300mm AUM. The firm’s partners change the name to the “Small cap opportunities fund”, get a better ticker, and then WSJ profiles two of the managers. This, combined with a timely addition of your fund to the distribution platform offered through Charles Schwab means that suddenly AUM swells to $1B over 18 months. My example is extreme but not at all unrealistic if all those type of things happen together and feed on each other. Edit: and +1 to Bromion’s and the other post re: %age principals have in the fund. With a fund this small, you’d better make damned sure they ‘eat their own cooking’.
The other thing about a fund that with capital that is partially or largely owned by the principal is that it may allow you to do things that a fund with a smaller % of owned capital couldn’t do. Most funds are slaves to quarterly or yearly performance numbers. Long-term capital has many more available options. Just something to think about. I’d ask a lot of questions about lock up periods and the ownership structure.
Make sure to ask what their breakeven AUM level is and if/how long existing investor capital is locked up for.
I don’t think 300M is that tiny. That seems to be about the size of most HFs these days.
Just check how long it’s been small, if it’s not growing up since long then leave it, this can be gauged to some extent with employee count and work experience of new joinees. I worked in a small fund too and I agree to all the points bromian made. Just check on linkedin about who (qualification, work experience) joined and who left the firm in past few months or this year, and this should give the fair idea of where things might be heading, like in my firm… things became crappy there and I joined the exodus, and it was clear signal on linkedin that something must be really wrong there to cause this!
Interesting thread. I’m with a firm with <15 people in it. It’s quite different from working at e.g. a larger bank. You get an excellent overview of just about everything but you can’t really become an expert on any one topic because there isn’t any room for it. You’ll also see how the portfolio systems run at a much more basic level than you’d have thought possible if you had only worked at a bigger firm, for instance introducing a new currency may cause major difficulties of a sort you would not be able to dream up such difficulties even could exist if you had only worked at a big firm where the machinery (=BO, MO, accounting, IT) runs smoothly in the background w/o you having to think about it much. You’re also stuck with a lot of menial work such as clearing out the dish washer, filling up the coffee machine with fresh beans when it is empty, fixing the copier when there is a paper jam, etc. Edited: On the positive side also: there isn’t any lengthy dress code you’ll have to follow, it’s 'Casual Friday" every day unless you have to meet with someone external.
How do you keep from not getting screwed over on pay when your small firm gains more success? In other words, how do make sure you get your share of the extra profits when you don’t have ownership and you have poor exit opportunities to leverage due to working at a small firm?
^ If you are a valuable member of the small firm, and they want to keep you, they usually will make sure you are happy. Of course, if it’s not in your contract, they don’t have any obligation to give you any more.
You both have a point IARdude and iteracom. In my case: I’m happy simply to have a job, but as you say I could easily “get screwed over on pay” should management decide that’s what they’d want to do.