If people want to end up in HF, why not equity research but IB?
(Monkey, 41
Points)
on 11/13/12 at 4:00am
I mean equity research is more close to the stocks, IB skills would not be that important except modeling. If my understanding is correct, then why?
Yes, it is. This is actually
Yes, it is. This is actually why I chose ER over IB. I want to work for an equity focused hedge fund long term, and figured that out early on.
But there are a few caveats:
(1) You will only be appealing to equity focused funds. Distressed debt, credit, merger arb, etc. are effectively off the table. You don't work with debt much in ER. While it isn't rocket science (I was able to teach myself a lot of the material), good luck convincing a headhunter to take a chance.
(2) There is no pipeline. You will be reaching out to hedge funds and headhunters, not the other way around. ER is a much smaller field, and people tend to stay in it for several years. You don't have an 80+ entry level employees looking for a job every year (as you would have in a BB IB department).
Because most funds all you do
Because most funds all you do is model (at least early on) and IBD will give you the most in-depth modeling experience. Dynamics told me they prefer IBD for long/short because of the transactional experience and the more extensive modeling. You guys can argue this however you like but if a top HH thinks this way then that's your best foot in the door.
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Because of Eliot Spitzer.
Because of Eliot Spitzer.
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This was actually discussed
This was actually discussed extensively in a longer thread almost two years ago.
http://www.wallstreetoasis.com/forums/investment-b...
Look specifically at the 3rd post and any others by DurbanDiMangus. Essentially it boils down to the perception you will have coming out of that role.
Sadly, it's analogous to so many other things in life that are driven by "prestige," but the image among recruiters is that the technical skillset those coming from a 2-year banking stint have is more rigorous and their deal experience is broad-based, giving them an advantage over the ER guys. Many senior guys at the top funds everyone dreams of will specifically ask headhunters to go out and find IBD analysts. There's also the element of a filtering process; people recognize that IBD recruiting is an intensely competitive process.
A lot of people do certain things to add days to their life. I do things to add life to my days.
1) IB candidates are
1) IB candidates are perceived to be stronger in general as its more competitive
2) Sellside research analysts bullshit too much about equities. Banking analysts bullshit as well but they do it about whole companies and everyone knows its bullshit so its easier to get rid of.
3) Sellside er teaches you the wrong modelling / thinking about stocks, this is similar to 2. It's much easier to start from a clean slate banking analyst that only has the modelling skill set and none of the preconceived notions that need to be untrained.
Like some of the other people
Like some of the other people said, banking is simply a much better pipeline of high-quality candidates and funds assume they know how to model well and have a good understanding of how to navigate a financial statement. That's not to say ER candidates don't, since their job is actually way closer to what you'd do at an equity HF, but the pipeline is just easier and we know top students go into banking and so if we take bankers we're getting the cream of the crop. I personally think it's bullshit, but that's more or less the general thinking of headhunters and most hedge funds.
That said, your chances at a fund that does value or something exclusively in equity should be as close to a banker's as anything. Credit, distressed, etc. are the only funds I'd say bankers definitely have a better skill set and experience set coming in. But that stuff is actually pretty damn easy to pick up on the job.
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leveredarb: 1) IB candidates
1) IB candidates are perceived to be stronger in general as its more competitive
2) Sellside research analysts bullshit too much about equities. Banking analysts bullshit as well but they do it about whole companies and everyone knows its bullshit so its easier to get rid of.
3) Sellside er teaches you the wrong modelling / thinking about stocks, this is similar to 2. It's much easier to start from a clean slate banking analyst that only has the modelling skill set and none of the preconceived notions that need to be untrained.
I would say this applies more to senior level hires (but this may very well be the perception - in which case it is as good as reality). Your are an excel monkey for your first few years, cranking out models and presentations.
In ER, you won't be modeling transactions beyond their basic impact on the balance sheet/eps/earnings forecasts. However, you will be spreading comps and building DCFs just like banking analysts. I will admit ER focuses too much on details - your model might be 5x larger than an IB analyst's, but still arrives at nearly the same value. I am sure this would kill efficiency at a hedge fund.
Perhaps a good follow up question would be: If ER associates are overlooked by headhunters, how can you improve your odds at landing a buyside offer?
Doesn't make a lot of sense
Doesn't make a lot of sense still.
Surely, the guys that do the best and going to be the best additions to a hedge fund are the guys that live and breath the stock markets. Wouldn't a college senior who loves the equities markets and quite possibly trades his own account (and has possibly been doing this since high school) be the sort of guy that is going to ER or even sales and trading and eventually will be the best guy who succeeds at the hedge fund level because equities are his passion.
The whole prestige idea doesn't seem to make too much sense. Seems to me that a large majority of the people who land in BB IBD jobs do so because it's seen as prestigious then jump to a hedge fund because it's prestigious without having much knowledge or even real interest in the stock markets. Are these guys going to be the guys who end up being great PM's? I'd be interested to know how many of the great L/S managers ever worked in IBD.
Seems to me like this is a case of many of the people on here who say their goal is "BB IBD, Top MBA and then megafund PE" and if you asked them why they couldn't tell you.
Merger Arbitrage I can understand, but for credit hedge funds you'd also think that Credit Research would be the best place to start as well - i.e. those people who actually like credit markets and have an interest in it.
Question - if you can get
Question - if you can get into a HF directly out of undergrad, is there any added value in going into IBD/ER first and then moving over?
Pre-Eliot Spitzer (when I
Pre-Eliot Spitzer (when I graduated), I always thought of ER as more desirable/prestigious than banking. Interesting to hear how things have changed or how my perception was wrong.
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Probably largely driven by
Probably largely driven by (as the first reply alluded to) the supply of IBD analysts vs. ER analysts. ER intakes are about 1/10th IBD intakes, with a lot of the hiring also being qualified accountants instead of college kids. ER might be the better programme, but chances are you can find better individuals in IBD just by virtue of IBD being much bigger.
I mean logically someone who works in a role that is very similar to what a hedge fund does (because they're tailoring their research for hedge funds/other investors), actually has contact with hedge funds and actually has some market exposure is in a much better position. Sure, IBD people work longer but a lot of that time is "wasted" (from a hedge fund viewpoint) relative to what ER analysts do.
There's also the other great point raised in the first post that not every hedge fund is equity based. Then again, it's not like the IBD skillset is really that much more applicable for other asset classes, at least judging by how little the typical IBD analyst seems to know about debt products. edit: and that's just debt, virtually no advantage for most strategies
adast027: Doesn't make a lot
Doesn't make a lot of sense still.
Nobody said it had to make sense.
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Now I don't necessarily mean
Now I don't necessarily mean this in a negative way, but one might say that hedge funds are bastions of elitism, fortresses of pretension that snobbery lovers go to hide in and be protected from cruel world outside that tries to passively instill egalitarian principles into the collective subconscious.
Guess which other area of work that offers entry level positions fits that description...
And I think it's gonna be a long, long, time
Going Concern: Now I don't
Now I don't necessarily mean this in a negative way, but one might say that hedge funds are bastions of elitism, fortresses of pretension that snobbery lovers go to hide in and be protected from cruel world outside that tries to passively instill egalitarian principles into the collective subconscious.
Guess which other area of work that offers entry level positions fits that description...
Ya no that's definitely us
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APAE: Sadly, it's analogous
Sadly, it's analogous to so many other things in life that are driven by "prestige," but the image among recruiters is that the technical skillset those coming from a 2-year banking stint have is more rigorous and their deal experience is broad-based, giving them an advantage over the ER guys.
Precisely. I'm of the skool of thought that feels this "image" is basically a self-reinforcing delusion. Personally I don't see how formatting pitchbooks and following orders is "more rigorous", but I'm also pretty dense.
And I think it's gonna be a long, long, time
adast027: The whole prestige
Just a sophomore looking for an opportunity to start up this dream of mine.
the thing with ER is that it
Going Concern: APAE: Sadly,
West Coast rainmaker: Going
And I think it's gonna be a long, long, time
SirTradesaLot: Pre-Eliot
buy it. ride it. sell it.
Fundamentally
Turbo leverage for capital explosion -- BD Capital
My WSO Blog
Going Concern: West Coast
leveredarb: i think part of
And I think it's gonna be a long, long, time
SirTradesaLot: Fundamentall
buy it. ride it. sell it.
http://www.forbes.com/sites/b
And I think it's gonna be a long, long, time
ER is less of a profit center
This thread is full of some
There is a stigma about
slowdive: There is a stigma
I hate victims who respect their executioners
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slowdive: There is a stigma
And I think it's gonna be a long, long, time
What isn't anyone here
Going
BlackHat: I pretty much agree
West Coast rainmaker: Going
And I think it's gonna be a long, long, time
West Coast rainmaker: Would
I hate victims who respect their executioners
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BlackHat: My thinking is that
And I think it's gonna be a long, long, time
Going Concern: BlackHat: My
I hate victims who respect their executioners
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APAE: This was actually
I think there is a decent