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http://www.wallstreetoasis.com/forums/cfa-and-i-ba...

The above post, and the response from lager44, made me curious as to how helpful the CFA would be in private equity. Also, what about CAIA?

Would either, or both, be helpful to have on your resume if you're interviewing for a position in PE?

Would either, or both, help you to become a better PE professional (assuming you already have the position)?

I tried to search for "CFA" in the PE forum, and came up with no results (although I guess the search function may be flawed), so I apologize if this has already been asked (if so, would you please provide a link to the forum topic?).

Thank you.

Comments (21)

  • numi's picture

    neither are useful. i stopped pursuing the CFA charter when i moved to PE. i don't think people care about it

  • CDN's picture

    really? I thought the cfa was good for the buyside, asset management or equity research. I can definately believe that people don't care about it, but isn't the content a bit relevent?

  • GameTheory's picture

    The question isn't "is it helpful" or even "is it relevant." Yes, of course - the CFA is a rigirous multi-phase testing process that paints a broad brushstroke on many financial concepts, and it's a hard distinction to attach to your resume, given the amount of years and manhours you need to put into it. There's no question that some business lines prefer it in place of an MBA, to expect someone to have both is highly unnecessary. Do I know bankers who have done all three levels? Yes. Are they technically sound? Absolutely. Would they have been better off if they had spent three years in banking rather than three years in some other profession studying for the CFA? Probably.

    That being said, the question becomes "is the CFA relevant enough, or are the advantages of the CFA such that it makes the time sacrifice and effort worth it as it pertains to private equity?" The answer is a resounding "no."

  • lager44's picture

    I know I have already weighed in on this as referenced above but again I have to disagree and perhaps it is because my PE experience is with a small firm that focuses on lower middle market deals and takes an extremely hands on approach.

    Personally, I think my CFA studies have helped me in a number of ways beyond just the basic valuation/analysis of transactions including developing capital structures that include what I would call "creative" funding sources and modeling out commodities as they relate to the underlying business and developing hedges. Granted some of you probably got this stuff out of undergrad and its little wonder given where I went to school that I didn't.

    Although, I would say that the most useful thing to pull out of the CFA, especially given that level 3 is pretty useless in PE, is the method of thinking that you develop. I think it is what makes you "become a better PE professional".

  • bmwhype's picture

    there's a decent amount of overlap between CFA and CAIA. They are said to be complements, although the valuation material on CFA L2 is more pertinent to PE.

  • ibleedexcel's picture

    I whole heartedly agree with GameTheory. Useful, yes, I guess, maybe. Worthwhile, absolutely not.

    You could utilize those hours (and hours and hours...) much more effectively by simply putting in more hours at the office doing deeper diligence and learning the legal docs(if already in PE) or by studying more relevant materials on your own: Get some books on terms sheets, venture investing, LBO investing, etc. Read the industry rags. Spend your time on more relevant stuff.

    As far as resume and interviewing - for me I would be modestly impressed based on degree of pain, but on balance might view it negatively - that you lack career direction.

  • lphiekick's picture

    Would it be worth taking the CFA Level 1 Exam to try to assist oneself in breaking into PE, or would I be better off just studying various ibanking/lbo/etc. materials that I've received from bankers? Or should I utilize both (assuming I don't shoot myself)?

    Thanks,
    V

  • In reply to lphiekick
    dmaniscool's picture

    I'm currently having second thoughts about what I'm doing - I've done L1 and L2 of CFA exam and am slated to start an MBA program in the fall. I am having trouble deciding if taking the extra couple years (an extra couple years without a personal life) to complete the MBA and CFA vs. just CFA is worth it. Does having an MBA really give you that much of an advantage when entering the PE field? (I currently work in a related finance area, though not IB)

  • ibleedexcel's picture

    The CFA on it's own will not help you enter the PE field. It will help you in the asset management field (as you know), but not buyout. An MBA from HSW would at least give you a shot--but probably at a small firm if you didn't have PE experience pre-MBA. Either way, sounds like a long shot without doing the traditional prerequisit of banking or consulting.

  • Ivan's picture

    Don't underestimate the charter, guys. Of course, first and foremost your experience is what is taken into account, but if you are a charterholder with good experience, then you are well positioned to get post-MBA level jobs without doing an MBA.

  • Wangta's picture

    dmaniscool - I was in the same position as you last year. I had completed level 1 and 2 of the CFA prior to bschool (I just finished my first year) and was contemplating completing the CFA charter my first year to help break into pe. I decided against it and am glad I did. I was able to get into PE without the completed CFA charter - was asked only once about it in interviews: "So whats this - why the CFA?" I think they were curious if I wanted to do more traditional asset management or hedge funds vs PE, so in that regard, it was almost a detriment!

    Long story short - its not needed to get into PE. The MBA and your school's recruiting and network are much more important. I plan to finish my CFA once I am finished with school, but trust me when I say this - you don't need it to do PE and ENJOY YOUR TIME IN BSCHOOL! Plus, I think people tend to think the first year in bschool is a cakewalk - its not! I barely had time to hit the gym during my first semester, and second semester was busy with recruiting. Studying CFA during all this madness would of sucked bigtime.

  • Ivan's picture

    Wangta, this is funny as hell.
    What you say is that it is better to spend 2 years not earning money in the business school (it's like MINIMUM negative 500k if we consider unearned salary and bonus for the time of education) than to work these 2 years, getting experience, money, and the CFA charter.

  • Wangta's picture

    Ivan, you can look at it that way, but obviously each person needs to decide if bschool is worth it for them. For me, I was burning out from banking and admittedly needed a break. Had already bought an apartment and paid off my undergrad loans, so what exactly was I saving money for? You're right - bschool is expensive, but I look at it as a long term investment. Many (not all) places have a glass ceiling for those without MBAs. While there are very successful people who have started businesses or been promoted through the ranks in corporate america, in banking and PE specifically - the officers typically have MBAs and I assume seek that in candidates. Might as well suck it up, take the hit now, and get it over with. When you think about it, hopefully our income now is small when compared to what we will make in the future. So while the opportunity cost you stated seems high, it could be higher should you go later (which is getting harder - applicants are getting younger) and could be astronomical if you're limited from reaching officer status without an MBA.

  • Ivan's picture

    Wangta, maybe (just maybe) you are partially right if you talk about the US explicitly. In many countries MBA is by no means a pre-requisite for promotions to any ranks - experience and track record counts (while banks, and PE firms operating here are the same as in US, and salaries may be even higher).

    What is obvious for me is that (for instance) in investment banking, you have a clear route to associate via working 3 years as analyst (and double promotions from 2nd year straigth to associate begin to happen, though for exceptional individuals only). Then, it takes 3 years as an associate to make it to VP - pretty much a guaranteed promotion if you take your time. And when you hit the VP level in a top tier IB, very very many employment opportunities become available, so a lot of people make great moves (and some stay in IB and grow further). That is how it works in this country, at least - both for locals and for foreigners (including US citizens, which are well represented). Under these circumstances, it is difficult to agree with what you say about "potential future benfits" of the MBA.
    Of course - and I should be honest about this - MBAs also do very well here - but by no means only them.

    It is difficult for me to understand how come the situation is THAT different in the US - still job is very much the same and in the same companies. Strange.

  • Wangta's picture

    I see your point - yes, you can go to VP from associate. I have two friends that are "lifers", been doing banking since graduating, and are now VPs at their respctive banks (CS and MS). While they have had nice paychecks, especially last year, their life is tough man. They have more than paid their dues. I would say thier hours going from associate to VP were fairly heavy, pushing 80+ hours per week. By the time I reached associate, I decided I didn't want to be a career banker. Hours suck, I hate the whole business model - crank out as many deals as possible, etc. Yes, VP is possible but I would of had no hair, and been 40 lbs overweight (kind of joking, but not really). Also, I would push back a little bit on your point of VP's being "mobile". My friends certainly don't feel that way, especialy in this economy. They are typcasted as bankers and are unable to make the jump to buyside (PE or hedge funds), typically bankers move to buyside after 2 or 3 years banking. What type of jobs are you seeing VPs from BB move to?

    I'm located in the US too, sorry if I didn't make that clear. Guessing my ID gave it away? Haha

    Apologies to the OP - didn't mean to hijack your thread. This wasn't supposed to be about me, lets talk CFA!

  • Ivan's picture

    Wangta, but where PE houses can find VP level hires, if not in IBs?
    To the OP - so once again, I would say that the charter, backed by good track record, is very good for PE.

  • GameTheory's picture

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