Breaking Into Funds Without Investment Banking

EDIT: There isn't much traffic over at the HF forum, so I moved it here. It is still about banking (or the lack thereof), so it fits.

I am curious about how to break into a fund without ibanking first. There are many many articles and posts saying that it is very possible, but no one ever says how, and I didn't find anything in several searches.

How does it happen? Is it wishful thinking? Do you have to invest your own money first, and then do an internship, or what?

Thanks!

 

I would say that a great start is to write reports on companies. There are many ways to do this and a lot of information on the ER forum, but one thing I found is making it your goal of becoming a member at valueinvestorsclub.com. It doesn't seem that easy, but it gets you into the mode and the work you do to get accepted on that website is quite similar with what you would do as a research associate at a AM/HF firm.

That's my plan at least, and the least you get from that excercise is excellent stock pitches.

 

There are far more analysts and portfolio managers working at hedge funds right now who have never worked a day of banking in their life than the WSO community generally gives credit to. There ARE a lot of people who started in banking, but I don't think it's a rule of thumb or anything that banking automatically makes you a better candidate for working at a hedge fund than everyone else.

Some of the more common alternative paths for eventually working at a hedge fund are trading and equity research. I'm not a fan of sell-side research coming from the investment banks, but I've seen a lot of analysts from smaller, independent research firms land positions with hedge funds based on their specialized skill sets or expertise. A lot of former traders (both buy and sell side) have transitioned successfully into analysts as well.

Some hedge funds will hire analysts out of corporate finance positions for specialized industries and there are a lot of former med students/doctors who have gone on to become healthcare sector analysts at hedge funds.

One other path (which has been debated a bit on WSO) is the MBA route. I don't think anybody here knows for sure exactly how many people each year land hedge fund positions right out of Business School but if you look at places like Linkedin or the website for Columbia's Heilbrunn Center, they show that it DOES happen. (SMU seems to have a lot of alumni at hedge funds in Dallas, so it's not only the elite schools)

At the risk of sounding too cliche, if your heart is set on working at a hedge fund and you're willing to do the work necessary to get there, then I'm sure you can probably find a way to get there from just about any position in finance. Hedge funds seem to hire people from all walks of life.

 

You can break in from consulting also. If you're not coming from consulting, IB, or ER then the likelihood of getting in grows as the fund shrinks in size.

If you're in college and looking for ops you could look at some of the restructuring consulting firms like FTI or Alvarez. You'll get good experience you could leverage into a distressed debt investing role.

 

I would say you have near 0% chance coming from your current position (based on a previous conversation we had), unless you send a very good investment writeup with your resume to each fund.

It would also help if you can talk about your PA investments from the past few years during the actual interviews.

Array
 
Cries:

I would say you have near 0% chance coming from your current position (based on a previous conversation we had), unless you send a very good investment writeup with your resume to each fund.

It would also help if you can talk about your PA investments from the past few years during the actual interviews.

What's up Cries! Just checking out my options, I appreciate the honesty!

 
Cries:

I would say you have near 0% chance coming from your current position (based on a previous conversation we had), unless you send a very good investment writeup with your resume to each fund.

It would also help if you can talk about your PA investments from the past few years during the actual interviews.

That's exactly what I did. I put together a comprehensive research report with an investment recommendation and an in-depth valuation of the company that I sent to several funds along with my resume. I got some responses.

Undergraduates are the last thing HFs are really looking for. You need to put yourself out there with unique and creative investment ideas in order to get noticed. HFs exist purely to make money, and you need to show them that you can bring value to such a mission.

 

I am working as a management consultant in one of the top pharmaceutical strategy consulting shops after my B school. I have prepared investment positions / write-ups on three long and short ideas. The problem is I don't have any finance experience to speak of ( Engg. Undergrad+ Software Engg + MBA with a focus on Entrepreneurship). But I have interviewed with two big hedge funds before ( Bridgewater ,BlackRock) . Any advice on how to break-in from MC side

 
Best Response

I'm not sure what position the OP is in and I guess I'll assume undergraduate.

Definitely possible. Proprietary trading shops don't really care if you are straight out of college and there are a few reputable shops in Chicago. DRW, Optiver, and SIG have prop trading roles that actually does l/s equity and analyst roles in private equity divisions. I interviewed for these fundamental roles at these shops and were really surprised. You basically apply for prop trading and if you expressed an interest in fundamental stuff (mention you did investment analysis), they will tap you for interviews with special groups.

For straight hedge funds, larger ones have analyst programs. More and more are choosing to hire out of undergrad instead of traditional IBD programs. My friends who are still college seniors at alma mater tell me that Point72, Oakhill Advisors, Bain Cap Sankaty, and prop shops are making some moves with pretty massive analyst classes. Very competitive and you must demonstrate an interest in investing.

Pennies from JcPenny
 
aspiringmonkey:
my freind got into a hedge fund right out of undergrad(stern), but he had an internship. But he was a top performer, he made it to VP after 2-3 years...but it came with a price...at 25 he had gray hair.
  1. some gray hair.
 

Distressed and ExGsBanker I am currently in a M&A group at a BB. I am looking to move to a hedge fund after I finish my first year of banking. Can you guys shed some light on how to make the transition? Did you guys use head hunters, apply on company websites, etc? Also, in your experience, what type of hedge funds seem to like former ibankers? I know distressed funds tend to hire ibankers, but are there other types of funds that hire ibankers, and if so what kind? Thanks in advance for your help.

 
StonedMonkey:
Distressed and ExGsBanker I am currently in a M&A group at a BB. I am looking to move to a hedge fund after I finish my first year of banking. Can you guys shed some light on how to make the transition? Did you guys use head hunters, apply on company websites, etc? Also, in your experience, what type of hedge funds seem to like former ibankers? I know distressed funds tend to hire ibankers, but are there other types of funds that hire ibankers, and if so what kind? Thanks in advance for your help.

First, anyone who joins a reputable, well-lnown, sizeable fund is lucky. The process is INSANELY competitive and often extremely onerous.

Many funds interview bankers and many hire bankers. It varies though, b/c every hf isn't hiring every year or every 2 years or every 3 years. Just depends.

Recruiters will call you.

And the most important thing I can say is that if you're already worried about and thinking about moving, then you're probably not ready for it. You need to keep busting your a and let it come to you. It will if you're talented. References matter a WHOLE lot, and if you haven't put 100% into banking, it won't happen after 2 let alone after 1.

Look, from my year, based on conversations I have with friends across the street, probably the number of analysts who left after 1 year is probably HF after banking. It is not. Getting interviews is not that hard, especially if you're at GS or MS, but actually getting a job is not easy like banking. You generally don't have the opportunity to collect 6 offers and then pick one like you do in banking.

Moreover, if and when it ever comes, you need to take the decision of whether to leave or stay VERY seriously. It is not as easy of a decision as you might think.

I obviously have a lot of thoughts on this, and am always around to answer questions any of you have, but that's the start of my thoughts.

 

First, anyone who joins a reputable, well-lnown, sizeable fund is lucky. The process is INSANELY competitive and often extremely onerous.

Many funds interview bankers and many hire bankers. It varies though, b/c every hf isn't hiring every year or every 2 years or every 3 years. Just depends.

Recruiters will call you.

And the most important thing I can say is that if you're already worried about and thinking about moving, then you're probably not ready for it. You need to keep busting your a and let it come to you. It will if you're talented. References matter a WHOLE lot, and if you haven't put 100% into banking, it won't happen after 2 let alone after 1.

Look, from my year, based on conversations I have with friends across the street, probably the number of analysts who left after 1 year is probably less than 20 (maybe 10ish) and not all of them took what I would consider to be top tier jobs...

I know exactly how lucky I am that I am where I am, but I am constantly surprised by how easy people think it is to break into HF after banking. It is not. Getting interviews is not that hard, especially if you're at GS or MS, but actually getting a job is not easy like banking. You generally don't have the opportunity to collect 6 offers and then pick one like you do in banking.

Moreover, if and when it ever comes, you need to take the decision of whether to leave or stay VERY seriously. It is not as easy of a decision as you might think.

I obviously have a lot of thoughts on this, and am always around to answer questions any of you have, but that's the start of my thoughts.

 

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