So Ken Griffin made the news a couple times this week with real estate purchases in London and New York..and to think he supposedly only started with $1 million of outside capital straight out of college
in contrast, a new fund launching today would require at least US$200mm to be considered viable, to pay for all the infrastructure and expenses, not to mention to have enough scale to attract institutional capital
but then there is this guy, who made $170mm with no LPs/outside capital: https://www.bloomberg.com/news/arti...ck-picker-who-wishes-his-edge-would-disappear
no doubt he's an outlier too, like KG, whose fund probably was in the small % which survived rounds of industry consolidation, investor withdrawals, market vol, etc
it just seems like there are 2 paths to making it big in this game:
(1) 'Traditional' path: Pedigree --> Institutional capital in hundreds of millions (nowadays) --> Make like 8-12% per annum, hopefully consistently to have staying power and collect on 2 & 20, 1.5 & 15
- Pros: if strategy is consistent, has even a tiny bit of alpha, fund manager gets to essentially clip a coupon & make bank
- Cons: Barriers to entry are huge today (the $200mm figure), which are available to maybe a dozen plus new entrants annually in all of Wall Street/ City of London. Of the 500 or so funds that launched last year, the average size is $50mm, skewed by the largest players, which means most of them are probably not even viable by industry standards, until they raise additional capital.
(2) 'Lone wolf' option: like David Webb per the BB article, where he managed to acquire a sizable but not outlandishly large nest egg by mid-thirties --> 20% per annum returns with 100% profits retained --> $170mm within 2 decades
- Pros: can ride out any short term vol, strategy drawdown, give full attention to markets instead of splitting it on: markets / firm's everyday matters / investor handholding
- Cons: pretty much no visibility on the street, no fall back options really
My guess is that unless/until the fundraising environment gets easier, probably option #2 would be the only route available to most in this game
Maybe that's the reason all the guys who made it big in hedge funds have already done so by the 2007-08 era, hardly any newcomers who joined them up there this past decade, to the same level of success at least
in contrast, a new fund launching today would require at least US$200mm to be considered viable, to pay for all the infrastructure and expenses, not to mention to have enough scale to attract institutional capital
but then there is this guy, who made $170mm with no LPs/outside capital: https://www.bloomberg.com/news/arti...ck-picker-who-wishes-his-edge-would-disappear
no doubt he's an outlier too, like KG, whose fund probably was in the small % which survived rounds of industry consolidation, investor withdrawals, market vol, etc
it just seems like there are 2 paths to making it big in this game:
(1) 'Traditional' path: Pedigree --> Institutional capital in hundreds of millions (nowadays) --> Make like 8-12% per annum, hopefully consistently to have staying power and collect on 2 & 20, 1.5 & 15
- Pros: if strategy is consistent, has even a tiny bit of alpha, fund manager gets to essentially clip a coupon & make bank
- Cons: Barriers to entry are huge today (the $200mm figure), which are available to maybe a dozen plus new entrants annually in all of Wall Street/ City of London. Of the 500 or so funds that launched last year, the average size is $50mm, skewed by the largest players, which means most of them are probably not even viable by industry standards, until they raise additional capital.
(2) 'Lone wolf' option: like David Webb per the BB article, where he managed to acquire a sizable but not outlandishly large nest egg by mid-thirties --> 20% per annum returns with 100% profits retained --> $170mm within 2 decades
- Pros: can ride out any short term vol, strategy drawdown, give full attention to markets instead of splitting it on: markets / firm's everyday matters / investor handholding
- Cons: pretty much no visibility on the street, no fall back options really
My guess is that unless/until the fundraising environment gets easier, probably option #2 would be the only route available to most in this game
Maybe that's the reason all the guys who made it big in hedge funds have already done so by the 2007-08 era, hardly any newcomers who joined them up there this past decade, to the same level of success at least
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