10/26/09

Hi,

I have no financial/accounting background, I recently got a MBA from a top US school, I am just 30 and currently working for an operational advisory team for a big 4, I plan to join a PE firm in the future and I am wondering if having a CFA would add significant value to my profile.

Comments (51)

10/26/09

Having worked in PE for the past 4 years I would say that the CFA designation is not widely held in PE. I think a CFA would add neglible value to your candidacy considering you have already completed a top MBA and a CFA is not really relevant in PE. I would instead focus your attention on networking and building solid client relationships as a leap to PE from big 4 (without prior PE exp.) will be difficult.

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7/1/10

For PE, it won't hurt, but its value add is small.

For Asset Management, it is much more valuable. That is what the CFA is designed for.

7/1/10

CFA is generally viewed as more valuable for traditional Asset Management or fundmentals-driven HFs. You don't really see many CAIAs around, the two I know are both in marketing/investor relations.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.

7/1/10

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

10/31/09
junkbondswap:

Having worked in PE for the past 4 years I would say that the CFA designation is not widely held in PE. I think a CFA would add neglible value to your candidacy considering you have already completed a top MBA and a CFA is not really relevant in PE. I would instead focus your attention on networking and building solid client relationships as a leap to PE from big 4 (without prior PE exp.) will be difficult.

I agree with junkbondswap. I am a CFA charterholder and also went to a top3 bschool (and am in PE) - CFA charter helps a little bit and I'm glad I have it, but honestly bschool and prior work experience count the most. If you were 26, I'd tell you to go for it, but being 30, not sure its worth starting the program (min 2.5 years) - like junkbondswap, I think your time and efforts would be better spent on networking, etc.

4/24/10

I work in PE too, if you've got a good score from a good business school you shouldn't need a CFA. To be honest, at 30, that should already be behind you. Networking is important, you'll have to have a but of luck.

7/1/10

If you were already in PE, you should know how to get back. CFA and EMBA is pointless at this point. If you cannot pitch your deal experience after 9 years, a designation isn't going to change that.

7/1/10

As Tony has said - won't hurt but won't add value for PE. Depends what you want to do at the PE fund and what is their focus. But imo for pure PE play an accounting qualification would be better. Also, if it is Central - definitely accounting for all the books digging etc. for mature, traditional industries companies. West Coast is known for growth/mature VC focus now (so VC experience would do best). And East is a mix as usual, but mostly people after couple of years in IB go there. At least this is my perception of things.

And CFA is made for AM so if you decide to go for that, there is no better qualification imo. CAIA is more for HF.

7/1/10

Can't hurt (outside of the hypothetical opportunity cost of studying), but it won't help much in PE. Calculating bond durations and interest rate swaps or Margin Call scenarios among other Asset Management-related skills just isn't that relevant in PE. A CPA would be more useful, but only marginally so.

That's not to say it's not worth completing for other reasons, but it's hard to imagine a scenario outside of some managing partner's personal preference where you get an offer/interview over an equivalent candidate without a CFA.

7/1/10

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?

7/1/10
Tracer:

Can't hurt (outside of the hypothetical opportunity cost of studying), but it won't help much in PE. Calculating bond durations and interest rate swaps or Margin Call scenarios among other Asset Management-related skills just isn't that relevant in PE. A CPA would be more useful, but only marginally so.

That's not to say it's not worth completing for other reasons, but it's hard to imagine a scenario outside of some managing partner's personal preference where you get an offer/interview over an equivalent candidate without a CFA.

on the contrary, if you implement hedging activities you will need these tools.

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4/24/10

To all the responses above:

Would a CFA benefit an analyst from a BB looking to break into PE after a 2-3 year stint? Clearly, I would not have my MBA.

Thanks

7/1/10

The time and effort you put into getting a CFA isn't worth it at all for PE. Like others have said it won't hurt but it's a big lift for little benefit.

But it sounds like you want Asset Management anyway. BlackRock's largely an AM firm. I think they have some PE but Blackstone's the huge PE player.

7/1/10

Thanks guys! I guess CFA wouldn't be of much interest then, since I'd like to stay in PE rather than drift towards Asset Management.

Thanks again!

7/1/10

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."

7/1/10

Since you have good operational skills the CFA would add significant value because it will give you great knowledge about Finance.

@youngmonkey: CFA will not help you break in but it will add significant value to your name. Having said that, "breaking in," is an art in of itself and is not taught on the CFA, though your chances will be higher.

Example: GS Analyst vs. GS Analyst, CFA Candidate

You should also think about how this will benefit your chances for business school as well.

7/1/10

CFA is irrelevant for PE at your level. However, it might help you get a conversation you otherwise wouldn't.

7/1/10

CFA doesn't provide much value if you want to go into PE, but may set you apart from other candidates when interviewing.

7/1/10

I agree with the fact it's not that useful for PE. I myself consider taking just to improve my knowledge of finance rather than anything else. With CFA you learn stuff and also get the benefit of a qualification (you're basically shooting 2 birds at once), but the prime motive for taking CFA is to become more knowledgeable (particularly if you dont have a finance related degree) rather than taking it just so you can put it on a CV.

7/1/10

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".

7/1/10
non-target:

You should also think about how this will benefit your chances for business school as well.

Business schools care about CFA certification?

7/1/10
unqwertyfied:

Business schools care about CFA certification?

No, not really. I wouldn't focus on that aspect too much.

7/1/10

Hmm, well its not a requirement like the GMAT, but when it comes to the selection between someone with good experience and test scores there always have to be a significant differentiator. Obviously you expect someone with 2 - 3yr BB and possibly 2 yr PE experience to be looking at H/W/S/C/NYU/MIT, and its not like there are only a handful. If everyone follows the same path, you as an MBA candidate need something significant to get through the door.

7/1/10

We need a little more info than what you're telling us.

Are you looking to do PE in India? If so, your current skills with some networking should probably be enough. It may be that the CFA is essential for all PE hires in India, which makes it a pretty simple answer whether you should do it or not.

If you're looking to leave India, then I would recommend it.

"The power of accurate observation is commonly called cynicism by those who have not got it." - George Bernard Shaw

7/1/10

If you want to move from PE to HF, does the CFA provide any value add?

"If you want to succeed in this life, you need to understand that duty comes before rights and that responsibility precedes opportunity."

7/1/10

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.

7/1/10

What do you want to do in the HF and what kind of HF? Traditional - I would consider CAIA, but it's basically almost the same as CFA with some leaning towards alternative assets.

7/1/10

Forget about PE dude, you have no shot. Sorry to be harsh, but I am trying to be real here. PE hires ex-investment banking analysts. This is part of the reason why analyst recruiting and which group and which bank and exit ops and blah blah blah is so crazy competitive, because it will have an impact of your eventual PE career. There is not a shortcut to this process. CFA means absolutely zero. What matters is that you cranked through literally hundreds of LBO models and other financial models during your stint as an analyst and it's now second nature to you. There is an exception to this where you might be able to join a niche PE fund due to some extremely specialized industry knowledge, but even then that is tough and usually on a more senior level. Focus your attention elsewhere, buddy because looking at PE is a waste of your time.

7/1/10

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.

7/1/10
jhoratio:

Forget about PE dude, you have no shot. Sorry to be harsh, but I am trying to be real here. PE hires ex-investment banking analysts. This is part of the reason why analyst recruiting and which group and which bank and exit ops and blah blah blah is so crazy competitive, because it will have an impact of your eventual PE career. There is not a shortcut to this process. CFA means absolutely zero. What matters is that you cranked through literally hundreds of LBO models and other financial models during your stint as an analyst and it's now second nature to you. There is an exception to this where you might be able to join a niche PE fund due to some extremely specialized industry knowledge, but even then that is tough and usually on a more senior level. Focus your attention elsewhere, buddy because looking at PE is a waste of your time.

I've seen people end up in MM PE (from lower, to upper-MM) from all kinds of backgrounds. Commercial banking, FoFs, private investment arms of insurance companies (Prudential Capital, and the like), Big 4, and of course, all scales of IB.

Hell, I contacted a MD at a Chicago PE shop some months ago, and he said they only consider Big 4 backgrounds for their analyst and associate positions. This type of thing isn't the norm, but it's not a waste of time to have an eye on PE from various backgrounds.

7/1/10

^^ I think what jhoratio is saying is mostly true - and applies around 90% of the time. I assume he was being harsh to be a realist...

Obviously, there are people in PE from other backgrounds besides banking - you do have consultants and accountants. That said, the accountants also likely have some banking or high-finance experience. You CAN go into PE from other backgrounds - but it's rare. It also depends on the PE shop you're looking to go into (many of the megafunds would obviously prefer a more traditional profile - kid from a top BB in a top group). Some places like Audax for example have a lot of consultants.

In your case, it would be very hard to move into PE. And highly unlikely you'll be able to move into PE directly given the competition... It also hurts you that you've already done your MBA (the career changer card that you can only play once)... I think your best bet now is to try and transition into banking or internally to a corp fin team at the big 4, and seriously build your network.

As for the CFA - from the forums and etc. they'll all say that it's quite useless (in a sense that you're better off committing the 100-200 hours of studying into networking instead). From my experience, CFA does hold more value in Canada in these fields, than in the US... where it doesn't mean much unless you're going up against another candidate with a very similar profile as you and a designation can be used as a tiebreaker, for an interview spot.

7/1/10

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

7/1/10

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)

7/1/10

Its over dude. Just forget about PE. Unless you have 2-3 years of Modeling exp from a BB, just let it go....

7/1/10

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.

7/1/10

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.

7/1/10

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.

7/1/10

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.

7/1/10

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.

7/1/10

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.

7/1/10

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!

7/1/10

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.

7/1/10

Honestly the only VP level bankers that I've seen make the jump to PE have all had top-tier MBA's (this is US only).

In terms of desirability in post-MBA candidates I would rank it as such:

1) 2 years banking, 2 years pre-MBA PE, MBA
2) MBA, VP level banker
3) No MBA, CFA chartered VP level banker
4) No MBA, VP level banker

All other things being equal, of course.

7/1/10

I echo GameTheory's observations. To answer your question Ivan, most of the VPs I've seen at PE shops were associates that were promoted, and had come over post MBA or promoted internally (not as prevelant). I have yet to see a VP from BB ibank go directly to VP at buyside shop. VP's in PE are expected to add to the investment decisoin making process - I would argue that a VP who worked in banking their entire career doesn't have the buy side experience to fill the requirements.

To add to GT's list, I would also mention managers or people with finance background/experience, but also have significant operational experience (with the proper credentials, MBA, etc). They add value b/c they know how good companies are run and can thus identify good investment opportunities.

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