1/30/17

Hey guys,

My ultimate goal is to work in a multi billion dollar HF doing equity l/s, after doing an M7 MBA. I would like to ask people familiar with HF megafunds recruitment 3 questions re my next step:

  1. Is working at even a small fund usually better than working in sell side ER? I feel that the advantage of sell side ER is that after a couple years you really understand the sector you cover and can immediately add value to a HF.
  2. Say I work at a smaller HF first. When I interview with the large HFs, what do they really care about in terms of my previous fund? I feel that your responsibilities/what you learned is most important, but isn't it easy to BS that?... So then is the fund AUM the most important factor?
  3. Let's say I work abroad and become very familiar with a certain sector(s) in a particular region (i.e. EMEA). How well does that knowledge/skill set translate to the same sector back in the US?

Comments (15)

1/7/17

if you have an MBA go recruit for HF? L/S depends on sector expertise. I assume you want to be an analyst and not a trader?

Hedge Fund Interview Course

1/8/17

Would almost always suggest going to smaller fund over sell-side. If you ascribe to the belief that the industry is consolidating then headcount will be shrinking. Firms that are hiring will have an opportunity to first hire the existing buyside guys and could make it tougher for sell-side guys trying to break-through.

A MF could not care less about your AUM at your prior fund. It's 100% walking through your investment process, do you have good ideas (origination), and a bit about your track record / P&L. They really just use these 3 items to assess the most important: will this person make me / my LPs money? If you can demonstrate that you can make $$ and are a cultural fit, you'll be hired.

1/29/17
JackandDaniels:

A MF could not care less about your AUM at your prior fund. It's 100% walking through your investment process, do you have good ideas (origination), and a bit about your track record / P&L.

So having previously worked at a large HF like Millenium etc doesn't count for much?

And I'm assuming you could just inflate your P&L...?

1/29/17

I think multi-manager pod systems are totally different. Your pod @ Millenium may manage $300mm of $20bn+ (or whatever it is now).

You probably won't have a direct P&L if you're a junior anyway. If you're senior enough to have it, you can track it. I wouldn't inflate anything - ever. It's a small industry. People talk. If you're going to a single-manager MF, they may be hiring 1-2 people per year. They have an intense vetting process during interviews and when they call your references. If they find out you were lying / can't trust you before you even start, you're canned. It's about being objective in the business. Are you right or wrong. You can't change the narrative to fit your thesis or you are 100% toast.

1/10/17

bump

Best Response
1/29/17
  1. Depends. There are pros and cons, but generally the more directly applicable work you do, the better. So, doing L/S investing at a small fund is clearly better preparation for a MF L/S role. Having said that, sometimes the name/branding of your former employer plays a role in you getting looks from the big funds, which means making a case in favor of a top sell-side sector team becomes easier. This is especially the case when you're more junior. If you're more senior then your PnL is more or less what only matters. Unfortunately, often times you don't have an auditable track record until you manage your own chunk of capital, which means that your PnL record is technically all backward looking fluff anyway.

Wouldn't really take into consideration the sector aspect of sell-side versus buy-side as a starting point for a career - you can equally, if not to a greater extent, become a sector specialist on the buy-side if you wish.

  1. Responsibilities/what you learn is not really easy to BS. You speak with the person and you know within the first couple of minutes if that person knows what he/she is talking about. Give more credit to your prospective employers. AUM is hardly the most important factor. It's down to whether 1) they like you / you're a fit to the team 2) your thinking is not completely different to how the team thinks 3) whether they like your pitch / reasoning / believe that you have the skills to add value 4) your former team's record / how well known (or good) the former team is (albeit this is more for you even getting the initial interview, not much more, but is often considered for their own marketing/fund pitching purposes).

So, in a nutshell, you have two things at play: stuff that will get you the interview and stuff that will get you employed. To get the interview it's a bit like banking - you need a good school, branding in terms of work experience etc. It's more intangible once you're already speaking with them.

  1. Sector understanding in general translates well and it's very easy to pick up different regions of the same sector. However, if you're going for a sector specific team often times they will want familiarity / experience in the region they cover and familiarity of the companies in said region. So it doesn't always work out even though theoretically it shouldn't matter. This is due to some funds wanting "instant contributors" so they don't want to wait for you to learn the new region/companies.
1/30/17

(I am a VP at a large HF and do tons of interviewing)

  1. I would always say better to be in an investor/analyst seat at a fund than sellside ER. Rightly or wrongly, people who don't take direct risks are always looked at as a bit incomplete in their education. I tend to agree with this thinking, and there is also a reason why buyside guys tend to ignore the opinion of the majority of sellside analysts and use them just for information gathering.
  2. Knowing the name does play a role as it gives credibility, but beyond that its not a case of larger AUM is better. Once you are in the interview room, every interviewer has the mentality that they need to check what is under the hood thoroughly. You don't ever really assume that just because this guy worked at XYZ that he is a certain level. Most likely? Yes, but there are enough that slip through in the data set, and its quite crucial to get each hire right that you have to make your own judgement. HFs arent hiring grad classes of 20+ where a bad hire can hide.

(I realize point 2 sort of contradicts point 1, but thats the power of mental bias sometimes, when I see "equity research" I immediately think "not a risk taker")

  1. I sort of think you know the answer. Sector knowledge is partially useful, not fully. But its always useful to learn about other geographies and have a broad knowledge base. The best investors/traders ive come across are ones that properly look at the world holistically, even if they are a sector guy. Other than that, sort of becomes a "how long is a piece of string" type question.
1/30/17

Smaller fund is better, you will learn the secrets you won't on the sell side

Overwhelming grasp of the obvious.

1/30/17
George Kush:

Smaller fund is better, you will learn the secrets you won't on the sell side

Need to make sure you learn the right kind of secrets though. There are way more HFs nowadays than needed given the current aggregate AUM of the sector. Plenty of places that aren't great.

1/30/17

Curious what people's thoughts are on the CFA as it relates to buyside recruiting for a multi-manager platform, etc. I am frankly kind of amazed at how much it seems to be disregarded by the HF community. I would argue that what you learn in Level 2, while certainly academic in nature, is as relevant (if not more so) for understanding public markets as 90% of "skills" you learn in jr. sellside roles, either IB or ER.

1/31/17
johnwayne7:

Curious what people's thoughts are on the CFA as it relates to buyside recruiting for a multi-manager platform, etc. I am frankly kind of amazed at how much it seems to be disregarded by the HF community. I would argue that what you learn in Level 2, while certainly academic in nature, is as relevant (if not more so) for understanding public markets as 90% of "skills" you learn in jr. sellside roles, either IB or ER.

There will be very differing views from place to place. You're definitely right that long-only shops (especially the big ones) place more weight on the CFA qualification versus most hedge funds, however it's not like HF guys are ignorant of the benefits of having gone through the CFA material. I fall into the camp of people who believe that it's definitely useful for a broader / better understanding of it all, however the return on time invested is another matter. Learning by doing normally still trumps any qualification as long as you're not just going through the motions, but actually learning whilst doing. Which is probably why any relevant experience will always be better than just reading / taking exams. It's nice and all, but it doesn't really teach you accounting in the real world, it doesn't really teach you valuation in the real world - when you actually get down to it, you notice there are way more complications that the CFA can cover and you still have to learn it on the fly by looking it up online / speaking with colleagues etc.

2/1/17

Thanks for the reply. My contention is that, in the category of learning by doing, it's at least on par with a lot of what you do on the sellside. In Level 2, it's not just about DDM or whatever, but it actually delves a lot into topics like earnings quality, managerial discretion, etc. And I definitely won't remember everything in the curriculum, but I have been exposed to a hell of a lot in terms of fundamentals and analysis...a good deal of which I will be able to use to figure out things more quickly in the future.

I suspect there's probably a phenomenon such that if you go through the program, you know what it entails, so that's a benefit if you interview with a guy who has the charter. But I hope that it's not disregarded outright or even looked at as a negative.

2/15/17

The CFA goes deep into background material, which is sometimes a necessary prerequisite to a good decision making process...but the info learned from the CFA does NOT meet the threshold of "should i buy XYZ security at ABC price right now?" THAT is the education that you should seek. Unfortunately, the only way to get to that level of knowledge is a combo of academic and real world market experience. Both are lacking wighout the other. However, if you only have one, then the real world markets experience will trump the CFA every time. In the world of money management (aka...hedge funds), there is just no substitution for the ability to extract $$ from the market...and the CFA on its own doesn't get you there.

2/16/17

CFA is not needed to get into HFs

"I like money (as do most females) but love is...great :)"-student
Winners take it all

2/16/17
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