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Many threads have been created over the years concerning which group is best, what exit opps are from each group, etc.

While strength of groups change with the tides, i.e UBS healthcare left for Jefferies, I’m only going to comment GENERALLY and on my OWN experiences at a mid-tier Bulge Bracket bank, so if you disagree, you're probably right so feel free to share your own experiences at your shop.

Now, if you’re at an elite boutique or mid-market, it’s going to totally depend on your shop and what that particular shop is good at. Example: Qatalyst and Allen obviously have their own niches that they’re known for and you’ll just need to do a search on that yourself.

With that said, hopefully this thread helps to answer a few of the repeated threads about what group to pick.

To begin with, at any BB that has product groups, your first pick should probably be M&A. from MS to UBS, M&A is usually going to provide you with the best exit ops and for the most part, it’s relatively safe from downsizing unless you suck. On the downside, M&A groups are usually among the sweatshop groups, if not THE most sweatshop group. But then again, if you can’t handle hard work, why are you in banking to begin with?

After that, really consider what buyside path you want to take. HFs don’t care as much about which group you’re in, as most are taking kids after just 1 year of banking while PE usually wants analysts to complete their entire 2 year banking stint before coming on-board. Therefore, HFs usually want creative and bright analysts so the group differentiation is not that important. For example, I've seen just about every group from healthcare to industrials send at least 1 kid to SAC over the course of 2-3 years.

The main differentiation between groups from what I’ve witnessed at my BB, is the likelihood of headhunters to pigeonhole you for VC or growth equity or PE based on what group you’re in. This isn’t to say you’re not going to get into PE from TMT, obviously many have, and if you’re at a bank like GS, you can forget what I’m about to write because you’re probably going to get what you want no matter the group you’re in.

Now for the group splits, but keep in mind any of the groups have a HIGH chance of being placed into a specific shop if that shop focuses on the industry (Silverlake for TMT for example).

Venture Capital:

Healthcare – Have seen several friends at my mid tier BB have a harder time getting into PE from this group. However, VCs and growth equity will be knocking on your door. This also depends on whether you’re in pharma or health services or whatever other specific sector focus. The key thing you’ll notice for all of these is whether or not you’re familiar with debt structures and FCF, which you'll need for most PE gigs. Another thing about healthcare is that at most BBs it means SWEATSHOP!

TMT – Again, heavy preference for headhunters to push you into VC/Growth equity. However, ignore this for top shops or places like GS/MS TMT. But at a mid-tier BB, I have 2 friends who went corp dev and VC after not getting much luck in the PE recruiting side.

Private Equity:

Financial Sponsors / Levfin – Obviously a preference here for HH’s to push you into PE shops, and especially into distressed shops and mezz shops if you’re in LevFin.

Consumer/Retail – Asset heavy + debt and lots of cash flow, obviously a huge bias for PE here. You can also expect distressed type shops from here if your deal experience is relevant.

Industrials – Same as above, industrials is a LBO favorite of PE shops, and you’ll be pushed to interview for one. You can also expect distressed type shops from here as there's been a lot of restructuring deals in industrials.

Oil & Gas/Energy – Now this is tricky. Most Energy guys I know go into PE, but at ENERGY specific shops. This is especially true for those in Houston, but luckily the competition isn’t that fierce because there’s a lot of energy gigs for those with the right experience. Or maybe my bank is just good at Oil & Gas.

Specialized Buyside:

Real Estate – Now this is where generalization actually meets truth. This group is the worst at my bank and has had consistently worse exit ops than the rest of the groups. The only few exits they’ve gotten is into REITs and REPEs. Yes, real estate does pigeonhole (somewhat).

FIG – If at a strong FIG shop, you can pretty much go wherever anyone else goes. But if you're at a BB where it’s not the strongest, you’ll have to fight tooth and nail to get out of FIG oriented buyside. JC Flowers type shops are expected, while the others get into smaller financial-oriented gigs or corp dev.

Notice I didn’t list M&A, but as the top group you’ll be likely pushed into PE/HF from there, as I haven’t seen many go into VC. Not that you can’t, but most don’t want to. As top headhunters will tell you, you should avoid VC if you’re unsure, because it’s a lot easier going UPSTREAM rather than DOWNSTREAM. In other words, it’s easier to go from Megafund PE to mid-market PE, and easier from growth shop to VC rather than the other way around. My shop for example would never consider hiring someone from a VC or sourcing growth equity shop, as the modeling/technical skillset simply isn’t there.

Lots of generalization in this thread because to be frank, you can’t generalize the topic of what group is best for YOU. But there are trends, especially in the mid-tier BB range where competition is FIERCE. There, the group you are in can give you an advantage or disadvantage that could be meaningful, but of course the key to every story is that PERSISTENCE and your own SKILLSET is what ultimately matters. I’ve seen kids in the real estate group (worst group in my bank) go on to megafunds and similarly I’ve seen M&A kids (best group in my bank) strike out with 0 offers.

Best of luck out there.

6

Comments (21)

  • APAE's picture

    +1 for mapping out a clear, actionable framework.

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  • ct banker's picture

    Is there any groups that place better (as an industry group into HF) other than just M&A?

  • SanityCheck's picture

    Like I said, most groups will do well with hedge funds, except perhaps the "worst" performing one at your bank, which is different for every bank. In general though I would just say avoid real estate for hedge funds, and avoid levfin for long/short hedge funds, though levfin is obviously great for distressed shops.

    Other than that, just about every coverage group can place you well into a HF. It's really not about intense technical modeling, and you'll see that once you interview. It's more about talking through your assumptions and ideas, making a concise and intelligent pitch and having a good idea on what the company actually does and coming up with a buy/sell recommendation rather than intense technical valuations.

  • In reply to SanityCheck
    ct banker's picture

    SanityCheck wrote:
    Like I said, most groups will do well with hedge funds, except perhaps the "worst" performing one at your bank, which is different for every bank. In general though I would just say avoid real estate for hedge funds, and avoid levfin for long/short hedge funds, though levfin is obviously great for distressed shops.

    Other than that, just about every coverage group can place you well into a HF. It's really not about intense technical modeling, and you'll see that once you interview. It's more about talking through your assumptions and ideas, making a concise and intelligent pitch and having a good idea on what the company actually does and coming up with a buy/sell recommendation rather than intense technical valuations.

    Also another question, so say if you get an offer for a SA position and you need to get placed into a group. clearly if you are working long hours you want to fit in with the group you are working. How do you go about finding out about the culture of the different ground or at least the groups that you have industry interest with.

  • Vi's picture

    Wooops, posted in wrong thread. Disregard this. :(

  • WildColonialBoy's picture

    Sorry, if this is a bit off topic. How do you get into a Specialist Situation Fund i.e. the guys running about picking up distressed debt for 25c and selling it 12mths later for 80c? What skill set, group do they target from?
    The Nine Entertainment deal Apollo and Oaktree just completed was awesome. Like they came in to town and slept with the leader of the football teams girlfriend (Goldman) while he had to watch.

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  • In reply to ct banker
    SanityCheck's picture

    CTBanker: With questions like this it's best to go IRL and ask around, especially CURRENT analysts and maybe even fellow summers who have offers too.

    Trust me, analysts are bored creatures when they're not running fire drills. I would have loved to talk to incoming summers about my group and give them pros/cons.

    Call up some analysts and ask.

    Wildcolonial: I've seen SSG groups interview bankers from any group, but for a distressed oriented strategy I would think they give an advantage to those with levfin and restructuring/debt experience, so probably retal/consumer/industrials and M&A as well.

    M&A is usually always wanted just for modeling skillsets.

  • ct banker's picture

    Thanks for the help, great post

  • AnalystMonkey2769's picture

    Great info! thanks man

    I don't throw darts at a board. I bet on sure things. Read Sun-tzu, The Art of War. Every battle is won before it is ever fought- GG

  • firestormllp's picture

    Fantastic post man! I know now that I want to get into FSG or Lev Fin.

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  • hai_banker's picture

    Could you provide more comments on the exit opportunities coming for a natural resources group. ie: how hard is it to break into PE knowing that LBO of natural resources coming are extremely rare. Do you think the "banking skillset" acquired can make up for the lack of "LBO prone industry expertise"

  • SanityCheck's picture

    I never did energy or nat resources, but from the few friends I know who have, they usually exit into energy related PE shops. Places like Riverstone that are considered PE and other energy shops that make large equity investments rather than debt.

    That's why I considered putting energy, which will include nat resources, into specialized buyside. PE is considered to be many things, but if you're talking about a non-energy related PE shop, it will be difficult from a mid-tier BB shop. You'll have to convince the headhunter and ultimately the firm you're interviewing with that you possess the skillsets needed and spin your deal experience as needed.

    That's why I think most bankers in that group tend to just stick with a nat resources or oil & gas related shop. I would say it just totally depends and you should network and get your name out there and see for yourself.

  • eleutheros's picture

    Wow, very informative post!

  • EJS123456's picture

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  • SanityCheck's picture