Hedge Fund Exit Opportunity

I used to be at an HF. Saw one person last 2 weeks. Dont know what happened to her.

Another one lasted 1.5 months. Got into Asset Management at a bank afterwards.

you say you used to be at a HF. where are you now?
any insights during your time there that you'd like to pass on?

thanks.

Actually made the (unconventional) jump to IB. Did about 8 months out of school before the jump.

My advice...fit/culture is very important. IMO, above all else, that will dictate how much you learn and enjoy the job. Also, you've got to like the strategy that the HF is using. Just because its an HF, doesn't mean you will be loving what you do...each is different. Plus, I think HFs really pigeonhole you, so be ready to make the commitment.

Any books you would recommend on HF strategy?

I can't speak for your case personally without specifics, but based on my understanding, hedge funds don't follow as regimented of a recruiting timeline as private equity firms, and are far more willing to hire a new analyst, rather than running through the cycle around the end of year 1, to start sometime around the end of year 2. I expect this has something to do with the fact that they are generally not customers of investment banking divisions, and so don't have to maintain relationships. Naturally, someone in that part of the buy-side will be able to offer more specific perspective. But it's certainly more informal, and probably more fragmented.

HF recruitment in general is much more random than PE as pointed out above. Yes you will have a shot at some of the L/S value etc. funds from a traditional IB group but you have to look for those more actively than the PE ones where the headhunter just calls in and you are set. Obviously they generally hire less people and whenever the need arises so its much more random to find a job at a HF.

From my own experience most L/S funds would consider you if you come from one of the top groups but you kind of have to chase those opportunities and be more flexible in terms of recruitment, starting dates etc.

I have seen people go from completely different industry backgrounds into industry groups at lets say a global L/S without ever having worked in their new industry so I imagine it wont be a problem.

generally many of the larger funds however look more at PE associates after they have done two years and then hire those given their experience (again I am London based so that might be slightly different in the US)

Thanks for the input guys. I'm going to give this a gentleman's bump.

One more go at it. Looking for a bit of anecdote as far as IB analysts transitioning to HF? I've only ever seen first hand IB to PE.

Things I've seen: Other types of asset-managment (mutual funds, PE, etc), depending on the type of fund Sell-side roles (especially research) Capital markets/treasury functions within companies Business school

thanks.

is it difficult to make the move from HF to PE?
people have told me that PE tends to hire MBAs and IBD analysts for pre-MBA positions.

Depends on the strategy/type of HF, the strategy/type of PE fund, and the quality of candidate. There's a much wider world of PE out there than the megafund-boner crowd on WSO will lead you to believe. I know a few people who've moved from distressed funds to distressed-focused PE, for example, and someone at a growth equity fund who worked at a L/S equity fund pre-MBA, as well as post-MBA PE associates who (gasp) didn't have PE experience before business school. The reverse is true as well-a number of big-time event-driven and distressed HFs regularly hire former PE associates (3rd Point and Owl Creek are two that come to mind.)

KP raises some good examples, but be aware these are the exception rather than the rule. If anything, it's much more common to see PE --> HF cross pollination rather than the other way around, especially at well regarded shops. You'll never see an ex-HF analyst doing PE at places like a Blackstone, Carlyle, Fortress, etc.

Agreed that direction is more common, the biggest funds have a much more set recruiting path and a firmer requirement for pre-MBA experience, though I am always hesitant to say "never"-I met someone at one of the funds you mentioned who is a PE principal who worked at a big asset manager before MBA when we were looking at one of their deals.

Of course, at the senior levels this all changes, I take it you guys are talking at the Analyst-VP level?

Yes, my point was simply that at the junior level, its not common to see a hedgie switch into a traditional PE role at a top tier shop. Sure, there are outliers like the example above, but thats very much the exception, rather than the rule. Conversely, there are tons of hedge funds that hire ex-PE associates. I dont even know why people are acting like this is debatable, thats just how it is. A famous example of this is Dan Loeb, who worked at Warburg Pincus before he was a hedgie.

Yeah Prescient, everyone's in agreement I think; your points are dead on and I totally agree that PE>HF is much more common, just trying to make the point that there can be (rare) exceptions.

Sorry, was just trying to clarify, didn't mean to add to the discombobulation

Agree with everyone above. PE to HF is much more common, but you see examples of it going both ways, particularly with certain more exotic / smaller PE firms.

I also met a guy here in China the other day who was at Tiger Asia Management and is now at a major PE fund here... his girlfriend was extremely, extremely hot. Like - totally fucking legendarily hot. Even standing next to my abnormally hot chinese girlfriend this chick was like burning shit up: asian supermodel style... I have respect for that guy on many levels

most people who go to one of the top hfs (tiger, Citadel) would rarely choose to go to any of the PE funds to be honest, even if it's tpg, BX, etc. They chose the top hf over top pe shop (guys who got a job at bx can probably get a spot at a good hf and vice versa)

You will see more often that the upper MM hf guys who are in fundamental shops (l/s or sometimes distressed shops) to go to another MM pe fund if they want more corporate/management experiences

Two different animals though if you compare the lifestyle and the work you do. if someone does hf after 2 years in sellside, chances are it's the path he likes and won't go back to PE, which is more similar to banking work

Of course, at the senior levels this all changes, I take it you guys are talking at the Analyst-VP level?

+1 Ravenous, very informative answer. I have a few more questions for another SB if you might be able to help.

When deciding on my offer I was debating whether to go with a regional boutique Investment Bank or go with this better known Buy side fund. I ultimately decided to go with the Buy side fund and from your answer, this seems like I made the right choice. I was also wondering...

• The program is a 4 year ER Research Associate Program. If I want to transition to IB, should I try transition after year 1 because I won't get any credit for time?
• How long should I plan on staying with the program to get into a top tier b-school? 2, 3, all 4 years?
• How long should I plan on staying before trying to lateral to an HF in I make that decision?
• What other options in terms of Finance exits opps will I have coming out of this value based firm?

Thanks again for your help, definitely appreciated.

1) Why would you want to transition to IB if you were already on the buy side? That's going backwards. You can make more money with a better quality of life and more interesting work on the buy side. Obviously that is somewhat subjective, but I think in most roles that is true. Bankers may make more money initially, but not in the long-run.

A four year program is a good sign if it is a good fund -- that means they want to grow you. Realistically, you won't be much help during the first year or two. I had to make a three year committment where I work now. If it's going well and you are learning a lot, there is no reason to switch to IB.

2) Depends on your age. I understand it starts getting harder after about age 27 at most of the top schools. I think Wharton skews a little older, not sure about Columbia or Chicago. If you do really well on the buy side, you won't need to get an MBA. If you're set on value investing, you might be able to move at another fund or get promoted to analyst at your existing fund. IMO either option would be better than b-school, especially if your UG degree is in finance from a reputable school. Maybe get the CFA if you need an extra boost, although I don't think the program has much value (I have it and don't ever use the material I learned).

3) If it's a good value fund and they pay you alright, why would you necessarily want to switch to a HF? There aren't a lot of good value-based hedge funds, and the good ones are small and hard to crack. Not impossible, but it's hard.

4) Value investors typically stay with value investing by either starting their own firm or moving around between value funds. As Buffett has said repeatedly, people either latch on to value investing immediately or not at all. If you take to it, it's hard to imagine doing anything else. I interviewed a few months ago with a more trading / macro oriented firm and I really didn't get it -- it seemed like they were guessing on a lot of top down factors. The fund has had two major blow ups as well, which made me think they didn't understand risk management. Value investing will always be a niche in the industry and you can make a very good living if you're good at it. I know a couple of 40-something value investors that make $50M+ per year on a consistent basis. What's not to like? Granted, it is very difficult to break in and get to that level, but if you love the work, even a much, much lower comp level could be rewarding.

+1 again, I have a few more SBs, would really enjoy hearing some more.

1.) I wanted to go to IB because I really enjoy transaction oriented work and eventually PE was where I thought I wanted to be. That being said, I think I may have over-hyped IB in my head, and starting on the Buy side really couldn't be better. - What kind of HF do you work at now / what is your title?

2.) I will start after graduation at 21 years old, so age isn't really a concern for me. B-school is a personal goal of mine since my UG degree is from an absolute non-target (I worked my ass off to get this offer.) The cost of B-school is not an issue, I want to go to a top tier school and get an education where everyone isn't just concerned with partying Wednesday-Saturday. The fund typically brings in several Associates every year and none of them seem to get promoted directly to Analyst, they all lateral out or go to Grad school. This seems to stem from the fact, that once with the fund, the Analysts, never leave (insanely low turnover.) The fund also pays for my CFA and allows time off to study, so I should have the Charter 2 years after my start date. - Will the CFA help with b-school apps? - Although the CFA doesn't have much value, do you find it is needed to be competitive as an Analyst?

3.) The pay is pretty good (comparable to IB base, but much lower bonus), but I feel I could do much better after a few years. Also, it is also almost expected that you leave after the 4 year program, so it seems the a lateral to an HF or B-school are my two options. - Where do you think I should look for lateral opportunities or is B-school probably my best bet? - You mentioned it is very difficult to get in at a Value fund, after 4 years would I most likely be looking for a position as an Analyst?

4.) Value investing is great and if I stay on the Buy side, I really would only like to work in Value based shops.

1) I personally don't like IB, but to each their own. I work at a multi-strategy firm, though it's mostly L/S. I have a hybrid title based on geography -- Sr. Analyst / Director of Research within a specific geography where I run a small team (the firm invests globally).

2) CFA does not help with b-school but it will help you transition elsewhere if you want -- it has signaling value to recruiters. If your plan is b-school, I would recommend killing it at work, dominating the GMAT (750+) and doing something that involves leadership outside of work. The biggest problem with value investing candidates is that they can't really demonstrate meaningful leadership at the office -- it's such a difficult, technical job that you spend most of your time trying to figure out how things work, and not running teams until later. From an admissions perspective, I would guess they think, "Great, this guy knows something about the stock market -- but how is that going to make him a business leader?"

3) Depends on the hiring environment by then. The hedge fund industry is shrinking but it might be better in four years. B-school would open up a lot of opportunities across finance roles. If I were going to be 25/26 with 4 years at a good value fund, I would start preparing now and try to get into H / S / W. Wharton is probably a good bet if you can get good recs and destroy the GMAT. You don't NEED an MBA to succeed, but it helps at some funds, and the opportunity cost is relatively low if you can get in at a young age. I'm 29 and too old now with too high of an opportunity cost, so CFA + experience will have to work for me.

After four years you would probably be looking at an analyst role. Some people move up faster, but it depends on the fund you are coming from and the fund you are going to. Titles on the buy side can vary widely and are not always representative of the job.

This is such a great thread, thank you for all the helpful wisdom Ravenous! I'm just curious, did you manage to start at the fund you're currently working at out of undergrad? Or did you have to put in some time on the sell-side before making the switch?

Also eriginal, if the value fund you are talking about is the one I'm think of (hint: it's on the west coast), you really shouldn't have too hard of a time getting into a good bschool. I've met quite a few people from there that have gone to Stanford, Wharton, etc. Obviously you'll need the stats too, but the work experience you get at the fund will definitely be up to par.

I worked on the sell side for a couple of years while passing the CFA exams. I had a non-business background and it took me a while to master the basics or I probably would have left after the first year. I went into the industry because the game of investing seemed interesting to me, but I realized quickly that the sell side has little to do with actual investing. It's basically financial journalism for people who want to rent stocks (short-term trading based on the quarter, etc.). The firm I work for does hire right out of undergrad though, so anything is possible. It's hard to give advice on specific career paths because the industry is so fragmented and there are a lot of exceptions to general rules.