My initial plan was to do IBD but now I have the opp to join a large HF in a vanilla strategy. The firm manages mid 10 figures in $ terms in a global equity L/S strat. I'm trying to make up my mind whether to go with IBD or take the HF gig. Long term career goal would be to start my own HF after successfully running a book at a top shop.
Some considerations:
IBD
(+) Great pedigree for future career, everyone in the industry knows the name
(+) Work with smart, thoughtful people and building relationships with fellow analysts
(+) Deep knowledge of the industry I will be covering
(+) Institutional training throughout and awesome global analyst training program
(-) Hours suck; group I’m joining has great deal flow but the hours are truly terrible
(-) Unhealthy
(-) A lot of the work is ‘client work’, i.e. formatting PPT/Excel files, building presentations etc. All in all the % of time spent on non-constructive work is quite high
HF
(+) Analytical work and a (very) steep learning curve
(+) Work with multiple PMs who have strong backgrounds (i.e. top tier IBD/HFs)
(+) Work-life balance is solid and allows me optionality in terms of improving (i) my network, (ii) investment skills and (iii) any other constructive hobbies/projects I might have on shelf
(+) Tremendous upside if I turn out to be a talented investor
(+) Nearly 100% of the work focused on investing due to the fund having an institutional quality infrastructure
(-) Lack of training and analyst camaraderie
(-) Career risk, fund could blow up/one of my positions goes bad (unlikely to be taking positions in the first year anyway, I guess)
(-) Career risk, financial markets in distress
(-) Potential for stress given multiple PMs to serve
Furthermore, when I look at the top tier HFs like Citadel, Och-Ziff etc. their investment analysts/associates all come from top tier BB/PE, but I never see someone who started his/her career on the buyside. Is this solely a function of starting at a reputable HF from college being rare or do these firms prefer people with strong modeling skills regardless of investing passion/skill?
I'm of the breed that thinks that unless you are absolutely in love with the fund's strategy and its PMs and you are very sure they will take you under their wing as an apprentice, I'd go into a well-known BB first. As an investor, you need to think in time scales of 3-5 years and decades as it takes years and years of experience to become a solid investor and to build a track record for others to believe that you are.
With that in mind, I don't think getting a 2-year head start at a HF would truly differentiate me from others unless I was sure this was a truly great opportunity to learn from the best investors when thinking in the long-term aka when I'm in my late 30s to early 40s. However, a 2-year stint at an IBD would teach me the basics and allow me to build a raw toolkit, build a strong network and brand via the BB, and really get into the nitty gritty of deals that I might not get at a HF unless it is highly research intensive. The downside is I wouldn't really gain experience in investing in these two years, but I'll definitely have the basic skillset and be in a situation to learn quickly if I join a good fund.
Thanks for the response.. Yeah there is definitely some dependence on the PMs. Also, I'm not entirely sure how liquid the HF job market is should I not completely love it after 1-2 years.
Re your points: (1) Raw toolkit: yes I will be able to do pretty much all modelling that is required, but I will also spend a huge amount of time on powerpoint and setting up conference calls until 2am in the morning (IBD).
(2) Network: I reckon in IBD I will probably work with 20-30 people within the BB over the course of 2-3 years. Within the HF this will probably be less at max 10-15. On the other hand, liaising with sellside and other buyside analysts is also a form of professional networking. In addition, some of my best friends go to GS/MS/JPM IBD etc. so on the social side it's all covered as well. People usually raise this point but I feel this is actually an argument for rather than against the HF job.
(3) Deal experience: hands down a win for IBD. Not sure how relevant for equity L/S or pretty much any HF strategy.
If you are sure you want to work in HF (sounds like it from your post) and you feel confident that this is a good fund, which only you can know, I'd go for the HF. No guarantee that you'll get a HF job after 2 years IBD.
If you aren't sure you want to be an investor, take the IBD job and reevaluate over the next 2 years.
Kind of surprised you even have to ask this. Being an IB analyst is a terrible job. Don't be swayed by the hype - didn't it occur to you that this forum refers to analysts as monkeys for a reason? You will not develop great relationships, deep industry knowledge, or a pedigree that means a damn thing by spending 100 hours per week slaving over PPT and getting yelled at. The "core skills" of modeling and the like can be picked up in a matter of months at any job and really don't require "deal experience" to obtain. You will develop great Stockholm Syndrome-induced camaraderie with your fellow analysts though, which I guess is something.
It's not like you'll have a ton of autonomy in your early years at a large HF, but in contrast to IB you will at least be asked to think. In my opinion there's no question you'll get more intellectually and experientially from working at a (good) fund. If you want to become an investor someday, you'd be foolish to pass up a good opportunity now.
This, completely agree. I think some people here are delusional and believe that a year or two of banking will make you a complete corporate finance expert with the ability to "correctly" model anything out. Realistically, after a year or two, you'll still know very little that could be directly applied in a HF role. Unfortunately, the sell-side from a buy-side preparation perspective has way too much focus on the marketing/presentation side of things, which is utterly useless if you ultimately want to be an investor.
It's also hard for me to know whether it's a "good" HF. Good can be good returns, stable capital base, people who are willing to share knowledge and teach me stuff etc. At this point I'm leaning towards the HF. I'm gauging opinions within the industry as well, usually the best way to check.
Clear view, thanks. I agree with a lot of your points.
True, I've done internships in IBD and HF and I found the latter a lot more efficient. Quite frankly, you won't become great at formatting powerpoints/excel at a HF, which I consider a good thing.
"There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don't like because you think it will look good on your resume. Isn't that a little like saving up sex for your old age?”
Go to the HF. You'll learn infinitely more about investing and pick up the vast majority of relevant knowledge you would have learned in IBD, plus get at least an extra two years learning under senior guys. Yes, you'll need to make more of an effort to network, but this isn't that big of a deal relative to the other factors. If you want to work in a HF long term with a strategy based on fundamental analysis long term then this is a no brainier.
The risk you run here is if you realize you don't want to do investing your whole life after you start. This is a reasonable concern for a lot of people, but if you know you're really passionate about it then I don't think this is that big of a deal.
Feel free to PM me if you want - I started on the buy side directly out of undergrad and am very happy with the decision now 4-5 yrs out.
I started in banking and have been doing long-short for a few years now. I have colleagues who joined right out of school, and think that path is better.
The reason very few people start on the buyside is training analysts from scratch is a pain and people would rather pay an extra $100k in comp + recruiter fees to get someone that isn't going to be a massive time sink for them, especially since most funds run lean on the investment team if not the back office.
Stockpicking is a narrow skillset, but in my opinion banking analysts pick up no real skills (more like a knowledge of process, which isn't worth much until you have done it for more than a couple years). Whatever ability you gain to work your ass off is offset by general cynicism + health issues (it took me over a year to get back in shape).
Plus most senior guys at large funds are extremely well networked. If you decide to leave or get ushered out, you can definitely find another interesting job assuming you weren't a total disaster. The b school thing is an issue but you can spend a year or two doing something that sounds really good on an application (Fulbright, etc.) and get in that way if you have to.
Don't freak out over risk - large multi-strats don't disappear that easily anymore. Everything has risk, it's just more obvious some places than other (ask any IB guy at a swiss/german bank how safe their job was/is...). And if its a good fund and they are hiring you, probably think you can handle the curve.
Haha also took me a year to be rid of my health problems after my analyst gig. How insane is it that these jobs pretty regularly destroy the health/well-being of people in their early 20s? Really hope those adjustments all the backs are making are not just for show.
I went straight to the buy-side and have been there 4-6 years. These threads come up every once and awhile and I have always said the same thing. If it is truly top banking group, do the two years of banking and get out of there. There may be rare occasions where I would say something different (ie a mediocre banking group vs. the new Point72 program), but at 22 you want to preserve as much optionality as possible.
-Working at a hedge fund is a very narrow career path and it only gets more narrow as you progress. Even generalists find somewhat of a niche over time. Identifying mispriced securities is a skill set that doesn't transfer well to other things. -The fund where you currently have an offer sounds quite good, but you will have multiple offers like that out of a top banking group. -HF experience doesn't correlate well with business school. If an MBA is on your mind, banking/PE is kind of the gold standard. -The obvious risks on the HF, performance, finding out its not enjoyable work, etc.
Maybe its a grass is always greener thing, but I fully recognize that I got lucky to start right away at a HF and wound up staying there. The upside is basically the same on the two paths, but the HF is more risky. The banking involves two years of shitty work.
I cannot emphasize enough how clear cut this is: take the HF job. People that recommend IB massively over-estimate the practical value of the experience. These experiences open up opportunity because they are a filter (like going to a top school), not because you'd be missing out on some key learning by going there. Anyone on the buyside (HF, but even PE) will recognize that being at a $1B+ HF is an even better filter, as it is more competitive and actually involves investing.
I cannot emphasize enough that the best practice for a job is doing that job, or something close to it. Even at a mediocre fund, in 2 years you will be a better investor than anyone coming out of IB. Should you need to shift to another buyside job, you will be better qualified than any of them.
The situation might change a little if you move out of finance and attempt to engage with people that don't understand the industry and somehow think bankers have magical "CFO level" insight while HF guys are just traders. You probably do not want to work for these people.
To recap, Pros: 1) Learn to be an investor, the job you actually want to do 2) Open up BETTER (did i mention with 2 yrs of experience it will be easier for you to join to an elite fund than someone from banking) opportunities in investing in the future 3) More money. Maybe much more 4) Probably better lifestyle 5) Almost certainly learn WAY more - especially if the fund is analytical as you've stated. The learning differential tends to favor HFs by a ton 6) Optionality - decent size hedge funds tend to provide massive positive optionality (e.g. you have a monster year and get paid a million or your senior analyst/ boss leaves and you get a job you normally don't get till you're 30). It's interesting that people only focus on the negative optionality (omg bad performance!), even though at your level your downside is basically nil (a $1B+ hedge fund can pay you more than banking no matter how they do, if the fund shuts you will STILL be better qualified than people in IB).
Cons: You don't 'pay your dues' or develop that fantastic banking 'raw toolkit' - seriously, I don't understand what superpowers people think you get from banking. This 'raw toolkit' business is like a college kid's fantasy of how the job really works. The practical skills and learning differential between the two jobs STRONGLY favors the HF.
The only thing that is nice about banking is there will be a bunch of ppl in your exact age bracket to meet, networks with, hang out with, etc. However, I'm sure you can find a way to make friends outside the office.
None of this changes because the bank is GS. PM me if you are having any doubts at all about the decision
I have to agree with the optionality part. In a bad year, you'll get paid the IB analyst salary+bonus (assuming it's not so bad that the HF suffers massive withdrawals and has to resort to lay-offs), and in a good year, you'll get paid multiples. The bonus cut affects the PMs and partners whose discretionary bonus are multiples their salary+core bonus. The junior analysts get their salary + core bonus no matter what, there is only upside on that discretionary bonus for a junior analyst. Work-life is typically good as well.
I think it's pretty crucial to find out if there are people at that fund who joined with no experience and actually managed to progress up the ranks, and how open people are to training and teaching junior staff, and what your role will actually be. The fact is very few L/S funds take on inexperienced hires because people just don't have time to teach the basics. It's not like banking where you can let a first year analyst build a model for a meaningless pitchbook where it's ok to make mistakes. How much you manage to learn will be key when you eventually move on to the next job.
Forget the comparison in terms of comp / job security. You are so early in your career that what you make in the first few years is pretty meaningless vs. your career earnings, and if you are solid you will always be able to find another job.
Waving Wind --
If you are young, it probably doesn't matter a ton either way professionally. Note, however that a "10 figure" fund that runs l/s and a quarterly redemption pattern can disappear faster than you would imagine. That's the risk of many funds, depending on their structure, the redemption cycle after poor performance can end the fund. Or the fund can be raided and taken down by inside trading and your career may be over.
As you get older, however, consider the role you are playing -- many analysts end up as niche knowledge experts and stuck behind older PMS, never get a track record, and then have trouble finding new positions. Getting to the PM level takes a lot of luck and timing.
Don't think anyone will mentor you BTW -- big myth. You might get lucky, but many analysts will say that they joined thinking they were going to be trained, and learned that its more like being tossed into the deep end of the pool.
Banking work can be useful because you then have someplace to go. It is possible to hop from IB to fund and back to IB, less common the other way around.
As for your other question, most managers made their money in banks before starting their own funds. A few (notably chase coleman) started straight from funds -- but starting your own fund at an "institutional" level virtually requires the founders to be independently wealthy before they start, since it can take up to a year to get it off the ground, which requires it to be pre-financed by someone (your investors won't show up until later).
Good luck.
I'm sorry, but this is so wrongheaded on so many levels I just have to respond:
Once again, it is stupid to conflate this worst case scenario with the base case. A '10 figure' fund is quite substantial (very few '11 figure' ones) and the operators probably know what they're doing if they got to $1B. The base case is grow + decent performance and the upside case is massive. - This is a joke right? This is like saying "or your bank could fall victim to exotic derivatives, not get bailed out by the fed, and your career is over". 1) Your career still isn't over and 2) More importantly, this is an insanely unlikely worst case scenarioThis is stupid. People hiring someone junior understand they'll have to train them. This is especially true if they are hiring straight out of college. Hedge fund investors are not in the business of wasting their own time and resources, so an hedge fund isn't likely to hire you into a situation where you have a high failure rate (straight out of school with no guidance). Getting to PM level does require luck, but so does getting to the top of any competitive profession. As I mentioned above, if you are even half decent the experience will also serve you better in getting other investing jobs than banking ever would.
Every part of this paragraph is wrong and convinces me lifesatrip doens't know a thing about funds and should be ignored. NO ONE starts a fund straight out of banking because you will never find people to back someone without investing experience to invest. Most founders are independently wealthy from having worked at other hedge funds. They still need backing to launch, which they typically secure through their hedge fund connections and because of their track record
TLDR: ignore everything lifesatrip said. He doesn't know the very basics about hedge funds. An hedge fund career isn't some kind of crazy gamble you need to secure with a banking job first. Go ahead, the water's fine.
1b fund isn't that large...but fuck the sell side, just go to the HF and learn as much as possible
Quick question on this because I was wondering basically the same thing as the OP posted-- do all IBD in BB's have the same type of "run down the analyst" programs, or are some programs similar to those in hedgefunds? For example, GS invests in certain things itself, similar to a hedgefund does, so does a similar job exist seeking new good technology investments in GS or other BB's as would exist in good hedgefunds?
HF vs IB vs Other as first grad job (Originally Posted: 07/19/2014)
Hey Guys - Need your option.
I'm currently still studying university and landed an internship / part-time work at a HF (AUM > 500M) for the rest of my degree. Wondering how would be experience differ if I do say, Investment Management at an IB? (Mac Investment Management Division). Currently focusing on equities in Asia-Pacific.
Would anyone choose ER Analyst or IBD over HF Analyst as their first Grad Job?
Just want your thoughts. Thanks in advance.
this is honestly a pretty dumb question this would entirely depend on the person
if you're a straight up baller within equity research, no reason you couldn't move up the ranks
depends on what you want right
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