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The BlackHat Interview: 1/4
 

BlackHat's picture
HF
 
Points)
 on 12/28/12 at 1:30pm
blackhat.jpg

Mod note (Andy): The much anticipated BlackHat interview is here. Questions came from myself and members of writing and intern teams. BIG thanks to BH for his really in-depth/quality/quick responses. I promise all of you will have some great takeaways from this series.

If you don't know of BlackHat, he has been in the HF industry for 5 years (broke in straight from ugrad), has been one of the most active members on the site this year, and boasts a formidable 173:25 sb:ms ratio.

Here's how the four part series will go:

  1. Background / breaking into HF
  2. HF info + Money & Motivation
  3. Career advice for all you WSO Monkeys + how he advanced in his career
  4. General life tips

First Q: How did you break into HF?

(btw, try to keep your questions relevant to the current post as he will have likely already answered it in an upcoming post.)

In college I was pretty sure of what I wanted to do with myself by the time I got into my Junior year, and it was definitely some sort of investing, preferably at a hedge fund since I’d always enjoyed looking for shitty companies as well – yes, that was my reasoning for HF vs AM. Anyway, I did what everyone else was doing and applied for all the banking jobs and the few PE jobs offering summer internships, but also a few investing firms that I didn’t put too much thought into. I got interviews at some of the BB banks, a few of the upper boutiques, one at a megafund PE shop, and another at an investment firm I had never heard of.

Well, turns out I hated most of the guys interviewing me at the banking stints and didn’t care much for the PE place either, and the kinds of questions they were asking me made absolutely no sense to me. I instantly loved the interviewer and their description of the investment firm, and most of our conversation was just about stuff going on in the markets, investment philosophy, and what we thought of certain businesses. I absolutely loved it and ended up taking an offer at this firm, which was a bit of an AM/HF hybrid, but focused intensely on value.

I think I got a really good experience there learning how to develop my own investment thesis from like-minded investors who were – strangely enough – actually happy to help me think through my ideas without seeing any tangible benefit for themselves. Not sure how many of those shops are left on Wall Street, but I was lucky enough to land at one out of college. From there, I got a call one day from a headhunter asking if I wanted to take a job at what was a pretty hot hedge fund at the time, and I said why not. I liked the guys there and knew someone who worked there already, so I think I kind of fooled myself into taking the job because it offered better pay and an opportunity to finally be in a ‘pure’ HF. Looking back I regret that decision, but it helped me get where I am now I guess, so whatever.

After about 1-1.5 years there I couldn’t take it anymore, saw the writing on the wall, and got back in touch with the headhunter who poached me from before. Luckily my skill set as a deep-value focused guy was pretty well-defined and he referred me to a fund that put a heavy emphasis on concentration and value, and I took an interview there despite the fact that they weren’t hiring (but apparently they never are). I ended up finishing the interview with the PM telling me “well, we like you. Nice meeting you. Bye.” My headhunter got in touch to see how the interview went and I told him about how it ended, and he said that was their way of offering me a job… strange, but I called them back up and said “Let’s do it!” and here I am now. I love where I’m at now, I got the opportunity to move up quickly, and I’m essentially running my own money now so I couldn’t have asked for more freedom than I got here.

Did you go to a non-target, semi-target, or target school?
I guess I went to a “target” but I hate calling it that. As some of you know I’m not afraid to say I went to Penn, specifically Wharton for those of you who need to make that distinction. It was a great school, helped out immensely with recruiting since it was one of 2-3 schools the place I interned at recruited, and even though I would have had much more fun at a Big Ten school I never regretted the decision. That said, I’ll never give a dime to those guys for screwing my dad so hard on financial aid. They’ve got more than enough from me and my family.

How did your background best prepare you for where you're at now?
I guess I’ve always been a pretty inquisitive person, always interested in the way businesses worked and all that crap that most people say about why they like investing. But outside of that, I think growing up in a competitive household, playing sports and being constantly put in situations that forced me to compare myself to other people kind of pushed me towards working in an environment like a hedge fund. We’re constantly trying to figure out what we can find out that nobody else is going to think about that will give us an edge, and for me personally I think having that mindset from a young age helps me look for the right things when I’m evaluating a business.

I also think it’s helped me be a really good judge of character, and that’s an often overlooked part of the business when it comes to assessing management and finding well-run companies. Sometimes you can tell when management is full of shit and when something is legitimate, and just being around people and having to discern the difference in my social life was another thing that helped me prepare for the role I’m in now. We were a very superficial and socially-elite neighborhood, albeit we had no reason to be so stuck up.

You mentioned drugs and a near-death experience in a previous post, do you care to talk about how that’s affected your life?
(see below for tl;dr version) Sure. It’s a lot longer of a story than this, but back in high school I started getting pretty seriously depressed, and not because anything in particular ever happened, just because I was the kind of person who just thought too much and for whatever reason dwelled on the pessimistic and what was bad in the world. Things always came easily to me and I still never enjoyed any of the supposedly ‘good’ things going on in my life, so seeing the rest of my friends and the people around me enjoying the most mundane things got me really depressed. It’s a lot more complicated than that but for the sake of length I’ll move on. Anyway, I started doing a lot of drugs in high school with a girl I’d been seeing who was equally unhappy with her life, and from there things pretty much spiraled out of control. By sophomore year of college I had pretty much done every drug under the sun and had a legitimate addiction to one in particular.

My parents ended up finding out when I came home for the summer and they went as far as to send me to rehab, which was the worst place in the world. I don’t know how many of you have any idea what most rehabs are like, but they’re not great places unless you’re a celebrity apparently. Anyway, in rehab I got so depressed and felt so cut off that I had this idea that I’d just kill myself, so I got ahold of the only thing I could – a 500 count bottle of Tylenol ExtraStrength. To this day I still can’t even see the label on that stuff without it absolutely breaking me down. So I was later told that I ingested 180 of these bad boys, and luckily someone from the staff noticed me and I got rushed to the ER. I’ll spare you the details but it was an extremely unpleasant process.

Once I got out of the hospital my parents took me home and I spent a few weeks with them before going back to school. Now that I think back on it I really didn’t spend much time at all back home, that was probably a terrible idea sending me back like that. Anyway, that experience and how quickly it turned around and everything was almost ‘back to normal’ in the outside world kind of made me realize how … not-special I was. I ended up adopting that perspective on things and it actually helped me to kind of embrace who I was and the way I thought about things. Society had a name for me, I was “depressed,” but I don’t see why that’s a good or bad thing, it’s just a thing. Seeing the world the way I did wasn’t a big deal, and if it was how I was gonna function for the rest of my life I figured I might as well make the best of it. Since then I’ve still occasionally used but always in as responsible a way as one can use, and it hasn’t affected me negatively ever since. That’s not to say that it won’t in the future, but I’m okay with that, as I’m okay with depression or not caring if I’m alive or dead, or anything else.

The tl;dr version of that entire story is that I made some big mistakes early on but ended up finding a way to use those to figure out who I was, then do the best I could with it to get what would satisfy me out of life. If anything, seeing the world this way makes you a much more objective, albeit often unemotional, observer. That definitely helps me at work, but I’m not trying to paint that into being a plus. Speaking of emotion, it wasn’t the end of the world for me because I ended up finding someone who understood me as well as I understood myself, and all that emotion that I hadn’t had in so long kind of came back to me. So if any of these things sound familiar to you, know that there’s hope for us yet.

Continue to Part 2
Continue to Part 3
Continue to Part 4

I hate victims who respect their executioners Follow BH & Co. on Twitter: @DumbLuckCapital twitter.com/DumbLuckCapital
Tags:

Comments

BlackHat's picture

Yeah - like Andy said I'm

HF
 
Points)
 on 7/18/12 at 4:42pm

Yeah - like Andy said I'm open to answering questions as they related to the stuff discussed in this part of the interview. Thanks again to Andy and crew for setting stuff like this up for WSO. I'm sure there's some other great interviews comin' up and it's an awesome idea, so big thanks to those guys for putting this all together.

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

animalz's picture

BlackHat: Yeah - like Andy

(Gorilla, 703
 
Points)
 on 7/18/12 at 4:46pm
BlackHat:

Yeah - like Andy said I'm open to answering questions as they related to the stuff discussed in this part of the interview. Thanks again to Andy and crew for setting stuff like this up for WSO. I'm sure there's some other great interviews comin' up and it's an awesome idea, so big thanks to those guys for putting this all together.

going to the gym, will post some questions afterwards/tomorrow

great stuff, +1

AndyLouis's picture

I took an interview there

 
Points)
 on 7/18/12 at 4:49pm

I took an interview there despite the fact that they weren’t hiring (but apparently they never are). I ended up finishing the interview with the PM telling me “well, we like you. Nice meeting you. Bye.” My headhunter got in touch to see how the interview went and I told him about how it ended, and he said that was their way of offering me a job… strange, but I called them back up and said “Let’s do it!” and here I am now.

interesting.... lol "well, we like you. Nice meeting you. Bye."

WSO's COO (Chief Operating Orangutan) | My story | Connect with me on Linkedin.

2013 WSO Conference

Knowledge Kick's picture

Did you grow up as a "rich

 
Points)
 on 7/18/12 at 4:53pm

Did you grow up as a "rich kid"? Be honest.

http://DollarDrip.com Username: Knowledge Kick

nauprillion's picture

Could you maybe shine some

ST
 
Points)
 on 7/18/12 at 5:13pm

Could you maybe shine some light on the key differences between HF analysts coming from an asset management background, those from an IBD background and those from an ER background?
- Which type have you seen perform best and why (based on your experience)?
- Which background do you think is the most applicable to lets say a L/S equity HF?

Have you ever seen someone making the move from equity sales to HF?

Thanks

Bearearns's picture

Knowledge Kick: Did you grow

(Orangutan, 275
 
Points)
 on 7/18/12 at 5:20pm
Knowledge Kick:

Did you grow up as a "rich kid"? Be honest.

Screwed my dad on financial aid. Me thinks not.

Thanks for sharing. You mentioned the other hedge fund not being a good fit. Care to share why it wasn't a good fit( was it investing style as you seem to be more value oriented)? Was there anything else besides investing style.

Those breaking into the hedge fund world and coming from nonhedge funds, what is their typical background? Is BB the norm? Those not coming from BB, what separates them? Thanks.

SF_Reg's picture

Black Hat, so hot right now,

 
Points)
 on 7/18/12 at 5:24pm

Black Hat, so hot right now, Black Hat.

Aragorn's picture

Great interview, BH. Looking

(Orangutan, 335
 
Points)
 on 7/18/12 at 5:27pm

Great interview, BH. Looking forward to part 2.

"Rage, rage against the dying of the light." - DT

Value_added's picture

Blackhat is an OG.

O
 
Points)
 on 7/18/12 at 5:33pm

Blackhat is an OG.

Febreeze's picture

BH... pump my stock.

(King Kong, 1,151
 
Points)
 on 7/18/12 at 5:35pm

BH... pump my stock.

RIP WSO Chat.

Abdel's picture

If you tried most of the

O
(Neanderthal, 2,064
 
Points)
 on 7/18/12 at 5:47pm

If you tried most of the drugs (crack, heroin, etc.), how in the world did you manage to stop using them?

I mean, from what I've heard, it is impossible to stop using them once you try them.

BlackHat's picture

It's storming, which is

HF
 
Points)
 on 7/18/12 at 6:00pm

It's storming, which is preventing me from going home, so I'll tackle as many of these as I can before someone starts bothering me.

KnowledgeKick:

Did you grow up us as a "rich kid"

My parents were in that income range where you pretty much have enough to not be called "poor" but don't have nearly enough to be considered well-off. That puts you in an awkward section of the middle class, and like I said, it ultimately is the section that gets screwed the hardest by financial aid. My parents probably made around 140-150k between the two of them, raising 3 kids. For a while that works out but unfortunately the way Ivy League tuition worked at the time (I've been told it's changed a bit), that's the income level that gets royally fucked. My brother, who's a bit older, was the first to go to college, and that tuition bill was around 25k. Once I got in and he was still in, the bill became 75k for the two of us, and we were given NO financial aid, though I had friends whose parents made more, yet they were getting free rides based on need. For what it's worth they were minorities too. But anyway, I'm getting ahead of myself here - growing up we were just an average family, I never got anything cool to play with and to a certain extent felt a little on the poor side since we were in a somewhat wealthy community, so no... I was not a "rich kid."

nauprillion:

Could you maybe shine some light on the key differences between HF analysts coming from an asset management background, those from an IBD background and those from an ER background?

Depending on what kind of AM we're talking about, I notice that these guys have a lot less of a learning curve to get over, and they're a little more equipped to hit the ground running if the type of research/analysis they were doing in their previous job is similar to our investment philosophy. So AM guys coming out of Value funds and some Large Cap Growth funds are pretty marketable at a L/S fund with an emphasis on value. Bankers on the other hand are much better at modeling and they have no problem transitioning to the hours though at first require a little bit extra hand-holding to get them to be more or less autonomous. Sometimes I've seen bankers that just never end up "getting it," and they'll try to jump to PE or something, which I think is a lot more suitable for a banker than a place like ours which is so research-intensive and long-term focused. ER guys are pretty similar to AM, though again you have to get them out of that mindset of only caring about next quarter's earnings numbers, and get them more in tune to focusing on a longer horizon. This is all from the perspective of a guy evaluating candidates for a position at a fund like mine, which is heavy-value, L/S, long-term horizon investing for the most part.

Have you ever seen someone making the move from equity sales to HF?

None that I know of unfortunately.

JoshFi7:

You mentioned the other hedge fund not being a good fit. Care to share why it wasn't a good fit( was it investing style as you seem to be more value oriented)? Was there anything else besides investing style.

It was a fund that ballooned really quickly in terms of AUM because we had a high-profile manager who made a lot of headlines when he started, and they had been pulling in good returns in the year leading up to when I got there. Maybe I was bad luck or something, but the next year wasn't so hot and people started to head for the door. Other than that though, the fund had a lot of analysts and a more bureaucratic structure than I was used to. Junior analysts didn't source their own ideas and had to work under a PM who worked under the head guy. The investing style was all "quick buck" focused, which was fine for a little while but really not my cup of tea. We'd sometimes get told to do research on a certain thing about a company the PM wanted to know, without any idea if we were thinking about the idea as a long or a short, and sometimes we didn't even know what company we were doing research for. There was really no collegial environment and I felt like a drone rather than an analyst. The pay wasn't bad or anything but at a certain point if you're not enjoying your job anymore you have to make a move.

Those breaking into the hedge fund world and coming from nonhedge funds, what is their typical background? Is BB the norm? Those not coming from BB, what separates them?

Coming from investment banking is most definitely still the norm, and particularly BB as you'd expect. There's really no noticeable difference between BB and elite boutique though to most HFs (think BX, GHL, Evercore, etc.) and to a certain extent, the more multi-strategy and larger the fund, the more they prefer bankers. We focus on heavy concentration and pay a lot of attention to value, so we're not banker-heavy, but a place like Bridgewater that has enormous AUM and a dozen PMs managing it is going to prefer bankers who can crunch numbers and pound the pavement doing diligence for their PM. Obviously my firm is biased against bankers and as an extension, so am I, but it is by far the most traditional and best route to go if you want the best shot at "breaking in" to the HF industry. Those not coming from banking, however, are usually either ER analysts or more experienced associates that we've noticed over the years are very very good at what they do and have been reliable resources to us in the past. Also, coming from a name-brand asset manager, preferably run by a superstar PM, is a great way to break in. For example, if you're working directly for Peter Lynch we're never going to turn you down for an interview, even though we "don't hire."

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

BlackHat's picture

Abdel: If you tried most of

HF
 
Points)
 on 7/18/12 at 6:02pm
Abdel:

If you tried most of the drugs (crack, heroin, etc.), how in the world did you manage to stop using them?

I mean, from what I've heard, it is impossible to stop using them once you try them.

Rehab. And it didn't help at all. But after that I spent some time being almost dead and that kinda helped. I was never addicted to any of the standard drugs when you think of "street drugs," but I tried them all from time to time. Addiction is very real, but there's ways to manage it and I've (unfortunately) gotten experienced enough with them now to know when I can and cannot use, and which ones my body will be able to resist and which ones it won't. Plus the fear of ever going back to rehab is a powerful motivator for getting carried away.

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

West Coast Analyst's picture

BlackHat: Yeah - like Andy

CF
(Orangutan, 298
 
Points)
 on 7/18/12 at 6:03pm
BlackHat:

Yeah - like Andy said I'm open to answering questions as they related to the stuff discussed in this part of the interview. Thanks again to Andy and crew for setting stuff like this up for WSO. I'm sure there's some other great interviews comin' up and it's an awesome idea, so big thanks to those guys for putting this all together.

BH, SB for you! No questions as I've been a very avid follower of your posts/comments and contributions.

Well maybe one Q: Asian girls > *?

Abdel's picture

BlackHat: Abdel: If you

O
(Neanderthal, 2,064
 
Points)
 on 7/18/12 at 6:29pm
BlackHat:
Abdel:

If you tried most of the drugs (crack, heroin, etc.), how in the world did you manage to stop using them?

I mean, from what I've heard, it is impossible to stop using them once you try them.

Rehab. And it didn't help at all. But after that I spent some time being almost dead and that kinda helped. I was never addicted to any of the standard drugs when you think of "street drugs," but I tried them all from time to time. Addiction is very real, but there's ways to manage it and I've (unfortunately) gotten experienced enough with them now to know when I can and cannot use, and which ones my body will be able to resist and which ones it won't. Plus the fear of ever going back to rehab is a powerful motivator for getting carried away.

You're a lucky one. I have 2 cousins going through rehab right now and it doesn't seem to work.

Anyhow, glad that you managed to save yourself and thanks for sharing such a personal story.

Disincentivy's picture

I applaud your sincerity. Une

VC
(Gorilla, 713
 
Points)
 on 7/18/12 at 6:48pm

I may not be on the Jedi Council, but I sure am great with the Force.

See my WSO blog posts

jpmoranmonkeysachs's picture

So how did you manage turn

(Baboon, 149
 
Points)
 on 7/18/12 at 7:12pm
BlackHat's picture

chimpout: no hate, but family

HF
 
Points)
 on 7/18/12 at 7:18pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

chimpout's picture

i'm from a rural part of the

 
Points)
 on 7/18/12 at 7:19pm
syntheticshit's picture

appreciate the thread +1

 
Points)
 on 7/18/12 at 7:27pm
happypantsmcgee's picture

BlackHat: Just can't stop

O
(Almost Human, 9,621
 
Points)
 on 7/18/12 at 7:34pm

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Heist's picture

Great interview and I'm

(Baboon, 131
 
Points)
 on 7/18/12 at 7:38pm
Strengthftw's picture

So it seems ER/AM first would

(Chimp, 1
 
Points)
 on 7/18/12 at 7:44pm
BlackHat's picture

jpmoranmonkeysachs: So how

HF
 
Points)
 on 7/18/12 at 7:46pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

BlackHat's picture

happypantsmcgee: BlackHat:

HF
 
Points)
 on 7/18/12 at 7:49pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

happypantsmcgee's picture

BlackHat: happypantsmcgee:

O
(Almost Human, 9,621
 
Points)
 on 7/18/12 at 7:52pm

If I had asked people what they wanted, they would have said faster horses - Henry Ford

BlackHat's picture

Heist: What did you do with

HF
 
Points)
 on 7/18/12 at 8:02pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

onepercent's picture

chimpout: i'm from a rural

CF
 
Points)
 on 7/18/12 at 9:41pm
historiclegend's picture

How did you motivate yourself

(Baboon, 111
 
Points)
 on 7/18/12 at 10:24pm
BlackHat's picture

historiclegend: How did you

HF
 
Points)
 on 7/18/12 at 11:06pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

See_ya's picture

I'm not sure if I missed this

O
 
Points)
 on 7/18/12 at 11:54pm
Imperialian's picture

Hi is age a factor to break

ST
(Baboon, 173
 
Points)
 on 7/19/12 at 12:20am
historiclegend's picture

BlackHat: historiclegend: H

(Baboon, 111
 
Points)
 on 7/19/12 at 12:46am
BlackHat's picture

See_ya: I'm not sure if I

HF
 
Points)
 on 7/19/12 at 7:57am

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

Onetwobit's picture

Solid interview...certainly

CF
(Orangutan, 252
 
Points)
 on 7/19/12 at 9:20am
Jeenyus's picture

What's your perspective on

PE
(Chimp, 11
 
Points)
 on 7/19/12 at 6:23pm
NYorbust's picture

I'd assume that BB traders

(Monkey, 42
 
Points)
 on 7/19/12 at 11:39pm
nauprillion's picture

NYorbust: I'd assume that BB

ST
 
Points)
 on 7/20/12 at 1:32pm
Raider's picture

I was wondering about your

(Chimp, 3
 
Points)
 on 7/21/12 at 1:25pm
BlackHat's picture

Raider: I was wondering about

HF
 
Points)
 on 7/21/12 at 1:51pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

John Rolfe's picture

Hey Blackhat. I will be

AM
(Orangutan, 361
 
Points)
 on 7/21/12 at 11:33pm
BlackHat's picture

John Rolfe: Hey Blackhat. I

HF
 
Points)
 on 7/22/12 at 4:17pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

sofa king smooth's picture

Hey man thanks for the

 
Points)
 on 7/23/12 at 4:31pm
BlackHat's picture

sofa king smooth: Hey man

HF
 
Points)
 on 7/23/12 at 6:18pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

graham-newman's picture

Hi BH, excellent post and I

(Chimp, 11
 
Points)
 on 7/24/12 at 6:36am
duke1's picture

BlackHat, thanks for sharing

(Chimp, 1
 
Points)
 on 7/25/12 at 9:49am
BlackHat's picture

duke1: BlackHat, thanks for

HF
 
Points)
 on 7/25/12 at 10:24am

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

darth_sidius's picture

Hey BlackHat, thanks for this

CO
(Chimp, 15
 
Points)
 on 7/26/12 at 12:38am
NGW's picture

If you don't mind me asking,

 
Points)
 on 7/31/12 at 1:45am
leonrox's picture

You said being in IBD is

(Monkey, 41
 
Points)
 on 7/31/12 at 1:56am

I know that diamonds mean money for this art, but that's not the shape of my heart.

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