Hedge funds vs Venture capital
Hedge funds invest in liquid markets and are marked every day, paying annually on the result. Venture capital invests in private companies and finds out whether it was right after a decade. Hedge fund cash is close to double venture at the bottom of the ladder and further ahead at the top. Venture makes the difference up only if the carry lands.
Both are investing jobs where the whole point is having a differentiated view. The difference is what happens next. One tells you within a quarter whether the view was worth having, and pays or does not pay accordingly. The other will not tell you for years, and pays you modestly in the meantime.
Side by side
| Hedge funds | Venture capital | |
|---|---|---|
| What you invest in | Liquid securities you can exit on any trading day. | Private companies you cannot exit at all until somebody buys them or they list. |
| How you are measured | Profit and loss, continuously, and the number is not open to interpretation. | Judgement and reputation, until a fund matures. Interim marks are largely a matter of opinion. |
| Day to day | Reading, modelling, and monitoring positions. Mostly desk work, mostly alone. | Meeting founders, sourcing, and building a network. Mostly conversations, mostly out of the office. |
| Tolerance for being wrong | Low. A sustained drawdown usually ends the seat at a multi-manager platform. | Structurally high. Most investments fail by design and nobody is fired for the ones that do. |
| How you get in | From banking, research or another fund, with a stock pitch that stands up. | From operating, product, consulting or banking, through a network built well before you needed it. |
| Bottom of the ladder (total, midpoint) | $175k (Junior Analyst) | $95k (Analyst) |
| Top of the ladder (total, midpoint) | $1.3m (Portfolio Manager) | $505k (Partner) |
| What the cash leaves out | Bonus is discretionary and tied to the book. A good year and a bad year at the same seat can differ by more than the entire base salary, and at multi-manager platforms a sustained drawdown usually ends the seat. Treat the upper end of each band as what a strong year looks like, not as an expectation. | Cash is the small half. Carry is long-dated and highly uncertain, a fund can take a decade to return capital, and most junior hires leave before any of theirs vests. Seed funds run small management fees and pay accordingly; growth funds pay closer to private equity. |
Pay figures are midpoints of aggregated, rounded bands. Full ladders: hedge funds and venture capital.
Which one to pick
Hedge funds
Take a hedge fund if you want a scoreboard and are willing to be judged by it. The compensation at a single level has the widest range in finance and it is earned quickly when it is earned.
Venture capital
Take venture if you would rather back people than price securities, and you can be patient about both the outcome and the money.
Other comparisons
For live application windows across every one of these, see the opportunity tracker.