Should I start my career in a small hedge fund?

[WilfredChai]

Hi all,

I would like to have some professional career advice as I am worrying I do a wrong choice for my career path.

I am a PhD student in computer science in machine learning field in NTU, one of universities in Singapore. I am expected to submit my thesis mid of next year. I have been studying CQF and left one final project to receive the certificate.

Few months ago, I have met a hedge fund manager in networking and manage to have him to be my mentor for my career path in hedge fund. I am currently working as a part time intern in his company. He is a hedge fund manager with S$20 million AUM and 10+% annual return. The office he is working now is a branch office in Singapore started last year from his head quarter which is at the other country and have ~S$200 million AUM. He have told me that he is currently have 2 other quantitative researcher and he will only be hiring 3 quantitative researchers in total in future.

During the discussion regarding my career opportunity in his company, he has mentioned that if I keep performing as now, I am able to be one of his quantitative researcher. However, the starting salary which his company can afford is S$60000 a year with 10% increment a year. He have mentioned that working in his company can have faster career progression and higher bonuses.

Currently I am thinking whether I should just join this company after I submit my thesis without considering applying for other quantitative hedge fund or I should open for other opportunities too. From my knowledge, the starting salary is quite low compared to average salary of entry level quantitative researcher.

I have heard that some people mentioned that working in small company can learn more as we need to do the work in all aspects other than specific work in large company. I also heard that after working in a fund, it is hard to move to the other fund as the strategies used in different companies are generally different. I am wondering whether it is worth to work with these low salary for potential good experience and good future career progression and am also worrying that if I choose wrongly now, it will be hard for me to move to the other better company in future, spending a lot of time without learning much and having very low salary in small fund and hence affect my future career.

Other than that, I am wondering whether it is hard to move to work in hedge fund in US in future after starting career in hedge fund in Singapore.

I wish to have some advice from experienced professionals here.

Thanks a million.

 

[financeguy]

The main benefit of working in a small hedge fund is the opportunity to own a part of it, i.e. get paid in shares. It doesn't sound like your deal would include any of that. The salary is quite low, especially considering the exchange rate to dollars is 1.40. I think you need to get a better idea of the career trajectory at that company, and understand how he plans on paying you. If you are only working for the S$20m carve out, that's just not throwing off enough revenue to pay you well even in the long run. If you are getting paid out of both the S$20m and S$200m pools, then there may be a bit more cash to go around in a good year. What might also be interesting is if he is planning to grow and raise more capital and you believe in his platform. But then it's again only interesting if you get to have some ownership stake in that growth over time. Mentorship is definitely important, as is learning a ton early on, but what you haven't mentioned is that your boss is brilliant and there's loads to learn from him personally. If that's the case then maybe it's worth sticking around for a bit and then move on later if you don't end up getting paid properly. But that's really only if this guy is special in some way. I don't know, as much as we shouldn't focus on salary in the first couple years, I generally believe a very low starting salary is an indicator of how they plan to pay you throughout. Absent some new information, I'd keep looking.

 

[WilfredChai]

Hi financeguy,

Thanks for your valuable advice.

He did mentioned that the bonus will depend on the profit. 10% of the profit will be divided by the number of team members and it will be the bonuses. I guess if there is 4 people in his team, I may expect S$50k if the annual return is 10%.

During the earlier time, after I met 2 times with him and presenting some analysis of my preliminary strategies, he mentioned to me that if I am going to find a good job in large fund to have good base salary and very less bonuses, then he will not be a good mentor for me. He said the only possibility that he will be my good mentor if and only if I wish to learn how to create and program strategies, trade and manage fund and eventually being partner in a hedge fund to have profit sharing which can be millions or billions. He did mention to me that I should be entrepreneurial type if I want to follow him. He did also mention that it may be possible that I take charge of the Singapore branch and he run another branch in other country in future. However, I just feel that he looks sincerely to train me to be a fund manager but I do not know whether I should fully believe what he said because I do not know whether his actual plan is really the plan he told me. I did ask him why he want to hire more people to split his own profit, he told me that he start having more and more meeting with outsiders and have less and less time to do the quantitative research and hence he need to find someone to replace his quantitative research role.

For the learning wise, he did told me how he trade the fund practically. He asked me to code for him both his and my strategy in to a platform for trading demo and will use the same platform for real trading too. He did bring me together when he went meeting some other fund managers, traders and brokers after the appointment which I show him some analysis results. Up to now, he did share with me a macro view of his perspective that how we should plan for our quantitative strategy and presented me one of his strategy. In mathematics wise, the model of the strategy is easy for me but how he use the model in the execution is the new thing I have learnt from him. In mathematics and programming wise, I did not learn much from him. I have learnt a bit regarding what we need to consider at the start of designing strategy. However I have only had my internship with him around 1 and 2 months and he may teach me more gradually.

I have asked him about whether he will expand his fund and whether the fund amount is the limitation. He told me that expanding fund is not a problem(I think the maximum the fund he can expand is the S$200 million) but he will only request more fund to manage from head quarter when he are more confident and has more strategies to use.

These are the information which I have from him during these internship period.

 

[financeguy]

Is the money all his or has he raised this money via outside investors?

 

[WilfredChai]

He said he is one of the partner of his company and in charge of managing fund. His another partner (I think is his boss) at head quarter is in charge of communication with investor. He also told me that the actual amount of charges of his company is 20% of the profit earned. 10% for his quantitative group and another 10% for his partner. He did mention that the fund is from a rich family.

 

[financeguy]

I would be a lot more excited by this opportunity if your boss/mentor were the founder and/or lead investor. It sounds as if a lot will be out of his power, and that his annual income isn't a boat load to aspire to.

 

[WilfredChai]

Thanks for your valuable advice, financeguy. I think I will think carefully or look for other opportunity before joining him.