Breaking Into Activism
Long time lurker - first post. I'm an incoming analyst at a NYC BB and will be graduating in the coming months. I'm ultimately looking to break into an activist hedge fund after my analyst stint, but am unsure how to best position myself.
From your experience, whats the best / most common way to break in? IB then PE? B-School? Go from IBD directly?
What can do in the coming months to make myself more attractive when recruiting for these sorts of funds? Thanks,
bump?
Also interested in this.
The resumes at the best shops tend to be gold-plated.
Pershing Square, for instance, really liked BX M&A / R&R alumni. The legacy BX groups used to be 8-9 per year in M&A and 6-7 in R&R. Out of the 15, 10-12 were usually Harvard or Wharton kids with a 3.8+. The GPA cutoff at Wharton was 3.9, or if you were in a dual-degree program like Huntsman, Fisher, Vagelos, 3.8. Harvard tended to be 3.9 because of the known grade inflation and lack of finance coursework.
A few guys got there directly. Others took MF PE jobs, went to HBS, and then over.
Other funds (MHR, Trian, Perry, Elliott, Greenlight, ESL) are similar. Draw from the elite banking groups for very junior roles, or draw from elite business schools (that typically meant HBS or Wharton, largely because the HF type often self-selected away from GSB; Wharton seems to be getting less interest both from the strongest applicants, though I haven't heard negative things said from people in hiring positions at these funds) and take the alum of the elite banking group who was kind enough to go get two years of experience at Apollo or Blackstone first.
Some funds have a bias toward their founders' alma mater firms. Trian loves Goldman kids, largely because Matt Peltz (Nelson's son) did his banking stint there plus a couple years in the internal multi-strat fund Liberty Harbor. They've hired one kid from consecutive GS FIG classes for a couple years. They also like CS Sponsors, because Ed Garden (CIO and Nelson's son-in-law) was an MD there. They clearly like to keep things in the family there, in more ways than one.
In short: get into the very best banking group you can. Have the very best profile you can (top-flight school, stellar grades). If there are holes (i.e. you have a 3.6 and went to UVA), know that you have an uphill climb; there's a slew of 3.9 kids from Harvard, Yale, Penn, etc. who are in GS TMT, GS FIG, Moelis, etc. who will soak up all the headhunter love and be vying for the half dozen analyst seats that exist at these funds per year.
Consider addressing those holes by getting a really strong PE placement and proceeding to a top-flight business school afterward (today, that list increasingly looks like HBS and GSB alone).
Interesting insight - do you have an idea why Columbia is not as much of a target for these guys? Location wise and with the value investing program, I would've thought they'd be a feeder.
My guess it is just the fact that these shops are HIGHLY selective so they will take the cream of the crop aka IB/PE --> HSW
It does get good recruiting. The alumni of the VIP are fairly involved; they're on campus for presentations and individual lectures and also make themselves relatively accessible for coffees and office visits.
While the program is respected, the perception is that the best candidates get into the best schools. It's not like undergrad where there's a few dozen compelling and very competitive options (Stanford is as or more selective than the Ivies; Cal's public schools are ridiculously competitve; CalTech, MIT, and Chicago are all rigorous; certain programs at 'new Ivies' or 'public Ivies' are selective and challenging [think Stern at NYU, McIntire at UVA, Ross at Michigan, and so on]). For the MBA, there's 7 schools that matter: the M7 (yes, I'm aware Tuck, Fuqua, Yale, insert-your-pet-program are all on the cusp). Within that, there has always been the holy trinity of H/S/W, and in the past few cycles, that's narrowed to H/S.
The Bridgers and White Elms of the world (i.e. the funds with a relatively regular analyst intake [I'm using that as one new hire every two years or quicker]) go to HBS simply because they know that HBS has a formula for identifying with the greatest accuracy a large group of the smartest applicants on the planet. The fund's job then is simply to winnow through and find the most qualified applicants (often with the help of headhunter firms), looking at metrics like undergrad institution, undergrad grades, prior work experience, and sometimes an extended interview via a summer internship at the fund.
On top of that, funds like these (Bridger notoriously) lean heavily on referrals. Since like attracts like, outgoing analysts (whether starting their own shop or moving elsewhere as a senior analyst or PM) who are all white, male, finance powerhouses tend to recommend clones of themselves. Since HBS is where most of them went, HBS students are able to find them in the alumni database or on LinkedIn and leverage that to make initial contact. The alumni factor thus reinforces everything I described above.
Therefore if you want to maximize your chances of getting into a great fund (and that goes beyond only activist strategies), HBS is your best bet, not because the coursework is most relevant or the faculty is the greatest, but simply because you'll have the highest concentration of opportunities.
Thank you for the fantastic response. A couple follow-up questions: - Assuming you do come from this background (Ivy/Top BB Group/High SAT/GPA), what is the best way to go about this process going into your first year? Will all of the recruiters come to you and do you go with general hedge fund interest or limit yourself specifically to Activism if that's your main interest? - What is the best way to go about preparing for Activism HF interviews?
Unless a golden ticket (or goldman ticket) lands in your lap, It's nearly impossible to jump into one of the top 5 firm's. Your better bet is to cultivate relationships with the smaller and emerging Activist funds, as chances are they haven't peaked yet. This article highlights the trend:
Top Activist Hedge Funds continue to tumble; Assets fall -3.4% http://www.hedgetracker.com/article/Top-Activist-Hedge-Funds-continue-t…
Activist Hedge Funds - What kind of background is required? (Originally Posted: 11/26/2007)
Fellas, what kind of background/skillset is required to join such a fund?
Are their strategies pretty much "sell off assets or we sell your assets"?
Resources would be great...
This. If you aren't in any of the IBD groups mentioned thus far, your time is better spent trying to network into a smaller/emerging activist fund.
http://knowledge.wharton.upenn.edu/papers/1338.pdf
the abstract has what activist hedge fund strategy is all about
the better hedge funds that employ activist strategies are run by some extraordinarily high profile managers (Icahn, loeb, falcone, hohn, etc) and are consequently going to be very difficult to get into. best bet would be banking or research and likely some buy side experience with a smaller fund. activist funds go to court pretty frequently too so i'd imagine a law background could get you in as well.
good activists use pretty much every angle they can (read about TCI&3G vs. CSX to get an idea) but a lot of the times they'll take a very focused approach- if you've followed Icahn yahoo it can sometimes just be a glorified merger arb.
Activist investor (Originally Posted: 01/01/2014)
I would like to become an activist investor like Carl Icahn but I don't have hundreds of millions of dollars. So I was wondering how I could do this, I was thinking starting a hedge fund? Do you think this is a good idea? And are there any better ways of obtaining capital to do this?
APAE hit the nail on the head. I think things have become even more standardized the past five years. Banking + 2 years MF PE is the new banking stint. I think after top banking to megafund PE the incremental opportunities from bschool, even HBS/GSB, aren't that much more. That being said if I had to do four years or banking/PE I would definitely want to take two years off and go to bschool.
Its a huge amount of signaling and a lot of luck rather than a comprehensive way to evaluate talent.
Well said, and succinctly.
What's post MBA comp for these activist funds? They are competing with large PE firms for the same talent so would assume comp would be very good ($500k or more first year?) since there is more risk and the PE guys often get carry that takes their first year post MBA compensation to $1mm+ on an annualized basis? Or is that too generous an assumption?
Sounds like you have everything planned!
The best way is to get a few investors, let's say 5 and ask for some capital. A small amount will do but make sure to promise them good results. Then get another group of investors and ask for some capital. Use some of that money for yourself and use some of that money to pay the first group of investors a return. Get a third group to give you capital, use that money for yourself, and return money to the first two groups and so on and so forth.
That's usually the best way, and easiest, to start a fund.
lol
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