Q&A: Target to megafund Straight out of college

Hey WSO, I'm posting this in a new account because i want to maintain my privacy but give back to the community. Happy to take questions. My story: I went to a target school and wanted to be an engineer at first. All my friends started to drool over investment banking internships so I got lured into finance as well by my sophomore year. Sophomore and junior summer, I worked at a real estate private equity firm and then a top tiered hedge fund. I happened to luck into the sophomore summer internship and it was a blast learning about basic investing principals and reading the books the partners recommended. They happened to be value investing books, which made a lot of sense given the cash and tangible nature of real estate PE. Junior summer, I recruited for IBD, S&T, ER, and consulting. However, I failed at banking, ER, and consulting interviews because I guess I couldn't convey my passion for those fields. One interviewer actually told me to go "follow your passion and work on the buyside." I applied out of fear of not having an internship and applied because of herd mentality. In the end, I was choosing between a BB S&T rotation and a HF. The decision was particularly difficult because all of my peers told me that it was important to have BB on your resume for "pedigree" or "training" or whatever. Ultimately, I chose a credit hedge fund ($2 billion or so) where I liked the people and was impressed by their strategies. For some reason or another, I was put into structured credit, which I knew nothing about. I guess it was probably because I mentioned that I liked residential real estate. The summer wasn't too busy in terms of deals that we participated in but I had to furiously read primers on CLOs, CDOs, RMBS, specialty finance, and general credit primers provided by our friendly BB brokers. I think I even asked a friend at a BB structuring group for his training material. In the end, I did not receive a return offer and was crushed because I thought a return offer was crucial for FT recruiting. While bulge brackets did not come onto campus for FT, I was shocked by the amount of quality buyside shops that recruited. In the end, armed with a recommendation from my supervisors, I was able to secure a FT position at a top manager in a long short equities role. WSO was a tremendous resource for me while I recruited so I hope to be able to answer some questions for all my fellow students hoping to break into finance. Particularly, I hope I can dispel the myth that it is impossible to break into a top HF/PE shop straight out of college because quite a few top buyside shops have reached a critical mass where they can host & train sizable analyst classes.

 

Congratulations! What a marvelous story; I hope you enjoy your time at the fund. A few questions from me:

1) Did you network with anyone at your FT employer prior to interviewing (it seems like you mainly relied on OCR, if I understand correctly)? 2) Besides your megafund, what other funds recruited on your campus and what roles will they put new Analysts into (will their duties be similar to yours or will they be more traditional PE Associate duties)?

 
Best Response
  1. I spoke with an alum who did a presentation prior to interviews and I guess that helped get me a first round. Networking helps but once you are at the interview, it's just you and the person in front of you.

  2. There were some pretty large hedge funds and PE shops. Point72, oak hill, Blackstone in various divisions, some hedge funds in the $1-5 bil aum range. A few PE shops around 1-2 billion also did some recruiting. A lot of prop trading firms too. From what I can tell, larger firms tend to have pretty structured programs that focus a bit more on training while smaller firms have you learn by doing. I'm not super sure how analyst responsibilities will compare to associate responsibilities but people who were selling the programs said that they think they can bring analysts to take on associate responsibilities pretty quickly.

 

Wow, those are some big-name funds! Congratulations again on the opportunity; it sounds wonderful. I hope you enjoy it.

 

Congrats on the offer, sounds like an awesome experience you had in undergrad. Mind expanding on how you received the sophomore internship? Did you just start off with cold-calling & emailing, or were they a firm you found from campus / networking?

 

Gotcha, thanks for the quick reply. One last question- how did you present yourself as a potential intern? I imagine they hired you because you were hungry and actually interested in the buy-side, but were you prepared for any technical questions or did you have any background in finance/modeling at the time?

 

Showing an interest in investing and not bullshitting are two key traits. If they ask you something and you don't know, say "I don't know." Prepare a stock pitch and be able to talk about it also helps.

 

Sorry, I misread question. I think the hunger definitely helped. If you take the effort and actually try to understand a stock, it becomes pretty clear that you are passionate about investing when they question your pitch. For me, I bonded with the guys by sharing that I read a bunch of investing books and they gave me some more book recommendations.

For my first internship, I didn't have much modeling experience and my technicals weren't super strong. To be honest, the interview was just two brain teasers and a stock pitch. The guys didn't expect me to know a lot of the finance underpinnings and were just looking for a hungry passionate kid to do some work.

 

Margin of Safety by Klarman, Security Analysis, Buffet Annual Letters compiled come to mind. Something else I really enjoyed was More Money Than God, which traces the historical development of the HF industry. Blogs were also pretty good for learning information that was up to date in the market. GMO Letters and John Hempton were two value guys that the partners at my firms respected.

Oh, and Greenblatt's How you can be a stock market genius. Sounds corny but it is an excellent read by exploring how savvy value investors can pick the corners of the market ignored by most investors.

 

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