M&A Career or Run a Hedge Fund after B-School?

Discussion in 'Professional Trading' started by AriGold, Jul 25, 2007.

  1. AriGold


    I've got two questions, i'm going to ask them sequentially to save the owners of this website on bandwidth..

    #1. Alright this might sound like a dumb question but do all these hedge funds have high water marks built into their offering docs? Are there hedge funds that don't have them? I know it's easy to just shut down if you don't cover the mark the very next yr. Not getting paid is a pretty good incentive to walk. Which is a bad thing, but a reality nonetheless.

    What about just coming out ahead every year and not losing your LP's any money, is that too much to ask? Is it naïve to think that you could get LP's to agree to that?

    #2. My second question revolves around career.

    For better or for worse, I started working on the Street real early on in life. I started at Lehman Bros at 17yrs old cold calling 500 calls a day on two Rolm phones and weekends till 9pm, from coast to coast, I took the 7 a week after I turned 18yrs old and hustled opening accounts for senior brokers. In a period of 11yrs I worked a total of 3 firms. I went from a VP, SVP, Associate Director, Managing Director.. Anyhow, I kept my nose clean with my U4 and left the biz after I clashed with mgmt about my picking my own stocks all the time and the firm not covering them, and I also started to realize being on the broker train was going nowhere cuz all these firms were the same, not to mention the price of trades & margins were being squeezed thanks to the Internet, and finally, I didn't want to see myself like all those old guys putzing around without a clue. I also felt I had options because of my age. I'm not married and don't have kids, and being in my late 20's when I quit was an advantage.

    Needless to say, I never went to college. People just assumed I did. Only the HR lady & my boss(es) knew the deal.

    Well today I am in college. I went back to school and I'll be attending a top 3 business school. I know that Goldman Sachs, Lehman Brothers, UBS and Credit Suisse recruit on campus for IB jobs. One of my friends got a job in M&A w/Credit Suisse last yr. I could probably get a job with one of them OR use my degree towards doing what I liked doing best which was stock picking.

    During my time off, I paid my lawyers alotta lettuce to make offering docs and all the other paperwork that goes along with a brand new hedge fund a few yrs ago and took the series 65 exam too. I know this is only one part of a whole puzzle, but now with a business degree from a top b-school, it adds to credibility on your offering docs when you're out marketing a fund..am I right?

    What would you do? A career in M&A or taking a huge risk and run a hedge fund? (My personal trading performance is good, I haven't had much time to focus on it like I used to due to school, but I know how to trade/long/short/options and take losses when I have to..and of course my 11yrs experience trading for others.)

    The drawbacks I see in the hedge fund biz is market saturation, too many mgrs chasing the same margins, unless you go big, you might as well forget about it. You'll need at least a good $50-$100mm in LP assets to survive and pay your bills. But when it's good it's better than great. I can see that.

    The drawbacks I see in the M&A job would be long ass hours working like a mule and getting paid about the same as I was when I was a broker, unless of course I become some division head and get into a bonus pool. Am I right? Although I do enjoy working with clients and learning all about their biz, etc.

    Ultimately it's my call, I know that, but I'd like to hear some advice. Maybe cover some angles I haven't.

    I know I could go either way, or maybe neither.
  2. subban


    I am suprised after 17 years you gave up your retail equity book of business and went to college. I mean could'nt you of just sat on your ass and lived of the residuals from your business.
  3. Div_Arb


    plus you are nailing the top on the M&A cycle and the hedge fund craze. If I were you i would just go back to being a broker and calling your own shots. BOL..
  4. Exactly and I do not even understand the dilemna. Sounds like the guy has made enough money or has serious residual income where he can do whatever he wants on his own or with some partners. What's the point of dropping it all and going to school? You can always get a degree part time or online, even from some quality schools. NYU, by the way, has one of the best part time programs in the country.

    The guys who capitalized on the late 1990s via brokerage (nothing more than being a car salesman), just started their own firms or new ventures. You're taking like 2 steps back. Why?

    Even with your "broker" experience, you are not fooling anyone. It's just sales. Your age will be a handicapp. Your experience is also somewhat of a handicapp, as a new young college grad can be sculpted and molded.

    Seriously, I gotta wonder if this is a real post.
  5. AriGold


    >>Even with your "broker" experience, you are not fooling anyone. It's just sales. Your age will be a handicapp. Your experience is also somewhat of a handicapp, as a new young college grad can be sculpted and molded.<<

    I like that. That's the kind of response I'm looking for. Straight to the point.
    I know I'm not fooling anyone, maybe some people some of the time, but not all people all of the time, and yes I was basically a salesman. You're probably right, my age is likely to be a handicap. I'm no longer in my 20s. I am in my early 30s now. But it is what it is and I can't change that.

    While I was a broker, I was always intrigued about becoming an IB and eventually opening up my own boutique underwriting shop. I guess I thought about something along the lines of an H&Q or Robbie Stephens.
    Now I realize the liabilities there are huge for that kind of operation and the payback isn't as great anymore unless you got some major connection money behind you. Everyone is doing private equity or a hedge fund which makes alot more sense.

    My other option would go back into the corporate world maybe as a CFO or mgmt.

    You wonder why I didn't just keep my book and live off the residual income and go to school part time? I was in my 20s and my book was fairly aggressive. I didn't run any mutual funds or bonds in there where I made % off trailers and I didn't introduce anyone to outside fund mgrs for a % either. I kept everything liquid because the timing was right back then. You found new ideas all the time and you took massive positions and you traded. My clientele would get edgy if I didn't call them a few times a day. I had guys trading options in several different accounts who craved the action. Those option accounts alone gave me $35,000 in retail gross in one day, twice a month. But like everything it ends. Either the market goes cold or your clients blow up. I had a few that went on margin and blew themselves up, but no serious meltdowns that required legal action.

    My largest account in terms of size was $250mm, I gave it to one of my friends who promptly lost him to Schwab. I'm guessing there's a group within Schwab that actually does private client for alot less. I wouldn't be surprised.
  6. AriGold


    I never met anyone who I could trust enough or had the credit line to run a business venture with from the Street. It's unfortunate that everyone around me was a lush drunk after 1pm out here. They were all just 'getting by' and they were ok with that. I just kept meeting the wrong people.

    I didn't want to get a degree from some unaccredited bullshit school online and waste both my time and money. I need legit. It's important to me.

    Residual income? I put money in apartment buildings. Gives me time while I'm waiting on finishing up business school. It pays well, but it's not a career or even exciting. I don't plan on buying any more.