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12/17/15

Mod Note (Andy): #TBT Throwback Thursday - this was originally posted on 10/17/12. To see all of our top content from the past, click here.

Most of my friends are going into banking. Not because pitch books and road shows are their thing, of course, but it opens a lot of doors. 100 hour work weeks, camaraderie in the form of all-nighters editing PowerPoint slides and sharing Seamless meals, and having no skin in the game never really sounded appealing to me, but I guess to each his own, right? Needless to say, it turns out I'm not the only one who's not overly excited about the idea of working on the sell-side, and this includes my friends lucky enough to get return offers or full-time gigs at their respective banks/research houses. But as most of them will tell me, "starting on the sell side is the quickest route to the buy side, and I'll be a hedge fund rockstar in just two years!"

Wait a second... wouldn't the quickest route to the buy side be... starting on the buy side? Or was I missing something?

Fortunately, I wasn't. And if you're sure you want to be investing for a living, going straight to the buy side is the best career move you can make. With recruiting all but over, I'm happy to be starting my career with the job title "Research Analyst" and doing something I'm actually interested in doing.

Anyone interested in making a career out of investing should be trying to make this jump. The argument that banking or sell-side research makes you a better investment analyst is bullshit. Being an investment analyst makes you a better investment analyst. But if you're planning on interviewing for the buy-side right away, there's a few things you need to be prepared for. I'll try to highlight a few of those below.

1. Have two stocks to pitch. And know everything there is to know about them.

If this sounds hard, you're not actually as interested in investing as you thought you were. If it sounds fun, keep reading. You should be able to explain exactly what these companies do in very simple terms (if they don't already know them), be able to paint the picture of why the market is divided on the stock, identify the catalysts in the short and long term that make this a great business that will eventually realize its intrinsic value, and provide some intelligent thoughts on valuation and why the stock is worth investing in today. I'd stress illustrating the long-term growth profile of the company over anything else, and make sure you highlight what the drivers are of that growth. Analysts want to know that you look at all aspects of a company, so mentioning management, industry economics, and company-specific competitive advantages are all essential. On valuation, you don't have to be an absolute wizard but you should know the typical industry multiples, show where the company is undervalued relative to competitors, and have some insights into how the company manages its cash flows and if there is a shareholder-friendly focus coming from management.

Obviously having one stock to pitch is always important, but I strongly recommend two. In a standard superday you'll most likely be talking to several analysts individually, and pitching them all on the same thing isn't a bad thing, but knowing just one business is something anyone can do. If you mix it up, it's that much better. You're likely not going to be asked for more than two ideas in any interview, so knowing three or four is probably not as beneficial as the jump from one to two.

2. Have a reasonable (and legitimate) explanation for why you're passionate about investing.

A lot of the decision-making around who to hire coming straight out of undergrad seems to come simply from who actually wants it the most. Often, the simple "walk me through your resume" question gets substituted in buy-side interviews for a slightly different question, "tell me why you're here.", The answer isn't too different since either way you're trying to lay out a narrative, but if you can't point specifically to your experiences in the past (both on and off your resume) that show why you're a good fit for an investment firm right away, it's probably not going to work out. This is where having personal investing experience comes in handy, as you can usually point to that (but be ready to talk about your investments, see #1), or being part of some investing group may be just as good if it's not bullshit. Either way, you need to come across as someone who's completely okay with sitting at a desk doing directed research and crushing 10-Ks for a year or two, so conveying a strong interest is actually important.

3. Be prepared to take lower compensation at first. Trust me, it's justified by better hours and over-justified by a much higher ceiling as quickly as a few years out.

Even if you think you're better than Warren Buffet, you're in your early 20s and haven't proven yourself to anyone yet, so don't expect any more than you'd be getting had you worked on the sell side. In fact, it may suck but you should probably expect less. Some of my offers were pretty bare. Even among respected firms 70k base with 10k signing and 10-15% bonuses for the first year are pretty standard. And for someone just starting out, that's going to be plenty. Most places will pay less, some places may pay more, but it's not about your first year's pay. What's more important is what your ceiling looks like and how quickly you are going to gain experience and hopefully move up the ladder to a position with more responsibility. Though it's easier to make 150k in 1-2 years in banking, it's easier to make 400k (or way, way more) in 4-5 years at an asset manager or hedge fund.

4. Location is irrelevant.

Unless you can't handle early mornings in San Francisco (I know I couldn't), geography can't be a big deal to you, since many of the best places to work on the buy side aren't even in New York. For a while I was convinced that if you work in finance and you're not in New York, you must be a failure. I'm starting to think it's the other way around. I don't have much to add aside from that, but if you really want to jump straight into an investment research role, you can't be dead-set on a certain city.

Any other monkeys taking this path? Thinking about it? Advise against it? As always, I'd love to hear. But so far, I'm not having any regrets...

Comments (278)

In reply to cauchymonkey
Best Response
10/17/12
cauchymonkey:

Ravenous: Thanks for the informative comment. When you say that 90% of the buyside don't know what they are doing, what is it that they are generally doing wrong?

In addition, a lot of stuff I've read about pitches points to the importance of knowing why others are wrong, and knowing what is your "edge" on the street.

How do I know what "others" are thinking? For example, I might look at a stock X and see various sell-side analysts holding different ratings. Suppose I think that their overall consensus is wrong. However, how do I know whether people have actually bought/sold the stock according to this consensus opinion. From what I've gathered reading these forums, it seems typical for buyside firms to completely disregard sell-side research.

So what's the best way to get a hold of the consensus opinion that is being acted on, the consensus opinion that presumably is being priced into the stock?

Cheese: Thanks for the reply. Are there free database tools that I can use or do I need to pay for them?

I don't want to disrespect WhiteHat by thread jacking, but I also realize other readers might be interested in my response. I'll keep this short as a compromise and you or others can follow up with me off the thread if you want to go into more detail.

I should clarify my comment since the buy side is a big place and you have technical traders, swing traders, quant traders, and a bunch of other stuff going on. I should have said "90% of fundamental investors."

There are all kinds of ways to get into trouble:

- Don't understand capitalism and associated principles
- Bad timing
- Fall for "stories" from management
- Artificial institutional constraints (e.g., no stocks below $5.00)
- Quarterly mandate that forces short-term decision making
- Don't recognize value and/or catalysts
- Like to buy stocks that are way up because that's comforting
- Think you're a value investor because you buy stocks at low multiples (NO!)
- Think that because something bad hasn't happened yet, it never will (so predictable)

The list goes on and on and there are many iterations. You need to find the intersection of value, good business, and timing. It might be 1 in 10 or 1 in 20 stocks within a set of criteria that is seriously mispriced. The rest is noise.

What others are thinking:

- Consensus
- Guidance
- Valuation
- Misperception about the business (this happens all the time)
- Industry reports
- Conferences
- Reading research on SumZero or Vic (much of which is bad!)

It depends on how "busy" the stock is. If it's a stock that has had a large price move in either direction in the last 12 months or less and is of a large cap size (>$500 million), there will be some general consensus in the stock, written or unwritten. If it is much smaller and has done nothing for years, there may not be anyone looking at the stock in detail. I always like it when I ask management when was the last time they spoke with an investor and they have to think about it for a while.

Edit: But I am a small and microcap investor, so that makes sense for me. My sweet spot is $250 - 500mm but I'll go lower or higher than that. I rarely spend much time on stocks above a billion because those almost always have good coverage on the sell side and buy side.

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10/17/12

I personally know of some people who chose very good sell side offers over decent buy side ones because they wanted to to end up at an "elite" (subjective) PE/HF that didn't necessarily recruit undergrads or, if they did, took like 2 analysts from H or W. With PE and even HF recruitment becoming more structured, I would say an argument could be made for starting in the sell side. Curious to hear your opinions though.

10/17/12

Very informative post. You mentioned having two stock pitches and a reason you want to be in investing, but what else do you need to know for research when preparing to interview?

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."

10/17/12
WhiteHat:

1. Have two stocks to pitch. And know everything there is to know about them.

If this sounds hard, you're not actually as interested in investing as you thought you were. If it sounds fun, keep reading. You should be able to explain exactly what these companies do in very simple terms (if they don't already know them), be able to paint the picture of why the market is divided on the stock, identify the catalysts in the short and long term that make this a great business that will eventually realize its intrinsic value, and provide some intelligent thoughts on valuation and why the stock is worth investing in today. I'd stress illustrating the long-term growth profile of the company over anything else, and make sure you highlight what the drivers are of that growth. Analysts want to know that you look at all aspects of a company, so mentioning management, industry economics, and company-specific competitive advantages are all essential. On valuation, you don't have to be an absolute wizard but you should know the typical industry multiples, show where the company is undervalued relative to competitors, and have some insights into how the company manages its cash flows and if there is a shareholder-friendly focus coming from management.

Obviously having one stock to pitch is always important, but I strongly recommend two. In a standard superday you'll most likely be talking to several analysts individually, and pitching them all on the same thing isn't a bad thing, but knowing just one business is something anyone can do. If you mix it up, it's that much better. You're likely not going to be asked for more than two ideas in any interview, so knowing three or four is probably not as beneficial as the jump from one to two.

This times a billion. So many people "want" to work on the buyside at a hedge fund but don't really want to, if you catch my drift. If you're thinking about hedge funds and aren't already doing this to some degree, you probably don't really want to work for a hedge fund.

Nothing wrong with that, btw. Not ever job is for everybody.

10/17/12

Thanks for the informative post.

I'm a junior in college interested in getting into the buyside after graduation. As a novice, I've been having some difficulty finding stocks worth pitching. Many companies look hot and have a lot of things going for them, but that stuff is usually already reflected in the stock price. Or some other companies are relatively cheap but may have problems that make them value traps.

I read in another HF thread on WSO that analysts in value hedge funds may come up with only a few good ideas in a whole year, and that with them spending a decent chunk of their workday doing research. Unfortunately at college I don't have the time to spend all day doing research and reading 10-ks and company histories of a ton of companies.

What was your strategy when you were an undergrad for formulating stock pitches?

In reply to TheKing
10/17/12
TheKing:
WhiteHat:

1. Have two stocks to pitch. And know everything there is to know about them.

If this sounds hard, you're not actually as interested in investing as you thought you were. If it sounds fun, keep reading. You should be able to explain exactly what these companies do in very simple terms (if they don't already know them), be able to paint the picture of why the market is divided on the stock, identify the catalysts in the short and long term that make this a great business that will eventually realize its intrinsic value, and provide some intelligent thoughts on valuation and why the stock is worth investing in today. I'd stress illustrating the long-term growth profile of the company over anything else, and make sure you highlight what the drivers are of that growth. Analysts want to know that you look at all aspects of a company, so mentioning management, industry economics, and company-specific competitive advantages are all essential. On valuation, you don't have to be an absolute wizard but you should know the typical industry multiples, show where the company is undervalued relative to competitors, and have some insights into how the company manages its cash flows and if there is a shareholder-friendly focus coming from management.

Obviously having one stock to pitch is always important, but I strongly recommend two. In a standard superday you'll most likely be talking to several analysts individually, and pitching them all on the same thing isn't a bad thing, but knowing just one business is something anyone can do. If you mix it up, it's that much better. You're likely not going to be asked for more than two ideas in any interview, so knowing three or four is probably not as beneficial as the jump from one to two.

This times a billion. So many people "want" to work on the buyside at a hedge fund but don't really want to, if you catch my drift. If you're thinking about hedge funds and aren't already doing this to some degree, you probably don't really want to work for a hedge fund.

Nothing wrong with that, btw. Not ever job is for everybody.

agree with everything said white and king, making the same jump myself and would echo all of your points.

And so it goes

10/17/12

That is definitely true cauchymonkey but bear in mind you just need to sound somewhat knowledgable in an interview whereas we need to pick winners or lose our job. You are correct that just because a company has a low P/E, EV/EBITDA, w/e metric you use doesn't make it a good value pick. If you have screening tools those can be a good place to start so at least you can get pointed in the right direction (try net debt <1 EBITDA, <6x EV/EBITDA, etc. to get you started). From there you start to look bottom up, start looking at the companies that you see and use your gut to guide you. Some will be an obvious pass within five minutes but some you may spend hours on before deciding it just isn't up to snuff (this happens all the time and is the reason for the few big ideas a year comment). No one is going to go out and buy on your pitch alone but the most important thing for you to do in an interview is to demonstrate an understanding of what holds/creates value in a stock, a basic understanding of valuation, and some more qualitative reasons for buying. Oh, and I almost forgot PASSION FOR INVESTING/MARKETS!! That alone can get you the job out of undergrad....I would say the toughest part is just finding the opportunities that are even open to you with no work experience.

In reply to cauchymonkey
10/17/12
cauchymonkey:

Thanks for the informative post.

I'm a junior in college interested in getting into the buyside after graduation. As a novice, I've been having some difficulty finding stocks worth pitching. Many companies look hot and have a lot of things going for them, but that stuff is usually already reflected in the stock price. Or some other companies are relatively cheap but may have problems that make them value traps.

I read in another HF thread on WSO that analysts in value hedge funds may come up with only a few good ideas in a whole year, and that with them spending a decent chunk of their workday doing research. Unfortunately at college I don't have the time to spend all day doing research and reading 10-ks and company histories of a ton of companies.

What was your strategy when you were an undergrad for formulating stock pitches?

Ditto. Unless the point is not necessarilty to show the employer the best stocks, but to show them you're passionate? That might make sense..

This could be it, sweetheart.

10/17/12
10/17/12
WhiteHat:

4. Location is irrelevant.

Unless you can't handle early mornings in San Francisco (I know I couldn't), geography can't be a big deal to you, since many of the best places to work on the buy side aren't even in New York. For a while I was convinced that if you work in finance and you're not in New York, you must be a failure. I'm starting to think it's the other way around.

Don't agree with this. Sure not all good buy side roles are in New York, but they're also not in Wyoming. Also moving to a different role within the same city you're in is definitely easier than trying to relocate to a different city further down the line.

Sometimes I go about in pity for myself, and all the while a great wind carries me across the sky
10/17/12

This is a pretty good post, +1 for you sir.

#1 I don't agree with however. You don't need to know everything about the stock, you just need to know why others are wrong and the current price is not an accurate reflection of future performance, and then identify the (hopefully large) delta between fair value and current. It is far, far better to have a crisp, well reasoned thesis than to have a rambling dissertation about a name (I know you weren't saying to have a dissertation). It's kind of disappointing to interview someone from HBS / GSB / Wharton and get a 50 page slide deck on a stock only to realize they don't actually have any clue how the company works or why it would be a good investment. Like, at what point during your rambling 50 page presentation should you have realized that you have no idea what you're talking about?

It's also a question of return on time. If I can cover five names in the time it takes you to cover one, I'm going to win over time if I can hone in on the key points consistently (which I can).

Something approximating 90% of the people on the buy side have no idea what they are doing (true story). It took me a while to come around to that fact, but having met with over 200 management teams, read through countless conference calls with retards asking retarded questions, and having interviewed with many firms, I know that's a true statement.

#2 This is unnecessary. It doesn't matter what your reason is as long as you're good and can make money for the firm. "Why do you want to be an investor?" is a retarded interview crutch question for retarded interviewers who don't know what to ask. It's a red flag if anyone asks you that. Real interviewers only need to ask 3 to 5 questions depending on the candidate (each of which may have follow up questions).

#3 I agree with this completely, but you have to realize that this is beyond the scope of the vast majority of the people entering this business. I spent 4 years working directly for a PM with a top 3 track record among long / short funds over the last 15 years. Tell me how that's worse than working for some moron running a billion dollar fund where I would have made twice as much in the short run.

#4 This is true. But West Coast hours are terrible.

10/17/12

In addition to my post above, I also want to echo the comp statements. It may seem odd that the hallowed buyside is coming in below your BB banking offer but do NOT let that influence your decision at all. It is just silly and not to mention, lifestyle on the buyside is far better than for any bankers I know.

10/17/12

Ravenous: Thanks for the informative comment. When you say that 90% of the buyside don't know what they are doing, what is it that they are generally doing wrong?

In addition, a lot of stuff I've read about pitches points to the importance of knowing why others are wrong, and knowing what is your "edge" on the street.

How do I know what "others" are thinking? For example, I might look at a stock X and see various sell-side analysts holding different ratings. Suppose I think that their overall consensus is wrong. However, how do I know whether people have actually bought/sold the stock according to this consensus opinion. From what I've gathered reading these forums, it seems typical for buyside firms to completely disregard sell-side research.

So what's the best way to get a hold of the consensus opinion that is being acted on, the consensus opinion that presumably is being priced into the stock?

Cheese: Thanks for the reply. Are there free database tools that I can use or do I need to pay for them?

10/17/12

If you want to hit a growing AM city...... Welcome to Minneapolis, Minnesota!

10/17/12

Generally would have to pay for the robust ones (Bloomberg, CapIQ, Factset) but I would imagine there are basic free tools out there...

Do not quote consensus/sell-side research in a buyside interview. You are correct that it is not very important to buyside analysts what the buy/sell rec or PT are.

10/17/12
WhiteHat:

1. Have two stocks to pitch. And know everything there is to know about them.

I would add that you should have one SHORT to pitch as well. I've had to do this for a hedge fund interview before, and if you come in with a prepared short they may be impressed that you are even thinking about shorting stocks.

10/17/12

This post seems mostly directed at the hedge fund industry, but do you think a lot of this applies to PE as well? I've done some more research and I think Private Equity is where I want to be. I don't think that I care where I do PE (i.e. I won't care if I'm not at Silverlake and instead at a boutique in Atlanta instead as long as I'm in), but do you think your principles still apply to PE? Also, how realistic is it even on the HF side to do it from a non-target? I feel that a buyside firm would be more likely to take a chance on an UG from Harvard than your average state school.

In reply to Accrual Dictator
10/17/12
Accrual Dictator:

This post seems mostly directed at the hedge fund industry, but do you think a lot of this applies to PE as well? I've done some more research and I think Private Equity is where I want to be. I don't think that I care where I do PE (i.e. I won't care if I'm not at Silverlake and instead at a boutique in Atlanta instead as long as I'm in), but do you think your principles still apply to PE? Also, how realistic is it even on the HF side to do it from a non-target? I feel that a buyside firm would be more likely to take a chance on an UG from Harvard than your average state school.

The problem with PE is that the skills you need are honed in banking. Most PE shops, even tiny tiny tiny ones, won't look at you if you haven't already done banking. A couple major shops recruit straight from undergrad, but their target school list is VERY small. The job is way less about coming up with investing ideas and it's much more about modeling, due diligence, and other shit that you learn in banking.

I can answer follow-ups if you have any, just go ahead and post them here.

10/17/12

.

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

In reply to Ravenous
10/17/12
Ravenous:

This is a pretty good post, +1 for you sir.

#1 I don't agree with however. You don't need to know everything about the stock, you just need to know why others are wrong and the current price is not an accurate reflection of future performance, and then identify the (hopefully large) delta between fair value and current. It is far, far better to have a crisp, well reasoned thesis than to have a rambling dissertation about a name (I know you weren't saying to have a dissertation). It's kind of disappointing to interview someone from HBS / GSB / Wharton and get a 50 page slide deck on a stock only to realize they don't actually have any clue how the company works or why it would be a good investment. Like, at what point during your rambling 50 page presentation should you have realized that you have no idea what you're talking about?

It's also a question of return on time. If I can cover five names in the time it takes you to cover one, I'm going to win over time if I can hone in on the key points consistently (which I can).

Something approximating 90% of the people on the buy side have no idea what they are doing (true story). It took me a while to come around to that fact, but having met with over 200 management teams, read through countless conference calls with retards asking retarded questions, and having interviewed with many firms, I know that's a true statement.

#2 This is unnecessary. It doesn't matter what your reason is as long as you're good and can make money for the firm. "Why do you want to be an investor?" is a retarded interview crutch question for retarded interviewers who don't know what to ask. It's a red flag if anyone asks you that. Real interviewers only need to ask 3 to 5 questions depending on the candidate (each of which may have follow up questions).

#3 I agree with this completely, but you have to realize that this is beyond the scope of the vast majority of the people entering this business. I spent 4 years working directly for a PM with a top 3 track record among long / short funds over the last 15 years. Tell me how that's worse than working for some moron running a billion dollar fund where I would have made twice as much in the short run.

#4 This is true. But West Coast hours are terrible.

#1 - Totally agree with you that most folks on the buyside are morons. The biggest problem is that most people can only extrapolate what has happened in the past, and cannot use their imagination or common sense to think about how the game could change, before it happens. Even when things are obvious, people miss it, over and over again. But I am grateful for this, because that is why I can make money.

Also agree that being concise is key. Even if you have all the goods, if it is hidden in a pile of random information, no one is going to appreciate it. You want to be able to go deep, figure out what is most important, and hit the highlights hard. It is REALLY important to isolate and understand the one or two key drivers of a business. It totally differs depending on the industry, point in the cycle, etc.

#2 - I disagree with this. I always like to see people who are market junkies and really love what they are doing. Someone can nail all the technicals, but if they don't have the intangible attributes that makes a good HF investor (such as the aforementioned imagination and common sense), they'll never make it as an idea generator. I do think that simply asking why someone wants to be an investor is inviting a bullshit answer, but I like to ask about seemingly random parts of their background, and see whether they are passionate about investing from different angles. Not too dissimilar from coaxing the truth out of management teams.

In reply to slowdive
10/17/12
slowdive:

#2 - I disagree with this. I always like to see people who are market junkies and really love what they are doing. Someone can nail all the technicals, but if they don't have the intangible attributes that makes a good HF investor (such as the aforementioned imagination and common sense), they'll never make it as an idea generator. I do think that simply asking why someone wants to be an investor is inviting a bullshit answer, but I like to ask about seemingly random parts of their background, and see whether they are passionate about investing from different angles. Not too dissimilar from coaxing the truth out of management teams.

That's kind of my point. If you have to ask, it's already over. It shouldn't even be a question because there is no way that someone can prove that they want to be an investor except by demonstrating it through the quality of their work, so all you're going to get is lame answers. The candidate knows they are lame but still has to provide a lame answer. Everyone loses.

A good interviewer will only ask questions that add value and improve their understanding of you as a candidate in a very specific, targeted way. If they start asking you stuff like "Why did you go to X college?" or "Why do you want to be an investor?" it shows that they either don't know how to think or didn't prepare properly (especially evident if they're reading your resume on the spot). There are exceptions if you're coming from left field with a very unusual background, but basically, those questions should never be asked.

In reply to slowdive
10/17/12
slowdive:

Also agree that being concise is key. Even if you have all the goods, if it is hidden in a pile of random information, no one is going to appreciate it. You want to be able to go deep, figure out what is most important, and hit the highlights hard. It is REALLY important to isolate and understand the one or two key drivers of a business.

I think this is pretty eloquently stated. +1

Sometimes I go about in pity for myself, and all the while a great wind carries me across the sky
In reply to Ravenous
10/17/12
Ravenous:
slowdive:

#2 - I disagree with this. I always like to see people who are market junkies and really love what they are doing. Someone can nail all the technicals, but if they don't have the intangible attributes that makes a good HF investor (such as the aforementioned imagination and common sense), they'll never make it as an idea generator. I do think that simply asking why someone wants to be an investor is inviting a bullshit answer, but I like to ask about seemingly random parts of their background, and see whether they are passionate about investing from different angles. Not too dissimilar from coaxing the truth out of management teams.

That's kind of my point. If you have to ask, it's already over. It shouldn't even be a question because there is no way that someone can prove that they want to be an investor except by demonstrating it through the quality of their work, so all you're going to get is lame answers. The candidate knows they are lame but still has to provide a lame answer. Everyone loses.

A good interviewer will only ask questions that add value and improve their understanding of you as a candidate in a very specific, targeted way. If they start asking you stuff like "Why did you go to X college?" or "Why do you want to be an investor?" it shows that they either don't know how to think or didn't prepare properly (especially evident if they're reading your resume on the spot). There are exceptions if you're coming from left field with a very unusual background, but basically, those questions should never be asked.

I totally disagree with this. Passion for investing shines through in more than the quality of someone's work. The intangible factors that I seek can subtly show up in the course of a casual conversation. Sometimes I will ask about random hobbies they have listed on their resume, sometimes I will ask them what they think about certain companies, or events in the news. Like everything else in this job, I rely on my instincts to lead me to the goodies. When interviewing people for more senior positions, measuring pure competency becomes more important, but for junior guys, I value their overall feel as a candidate more than anything tangible they can put on paper. Case studies and whatnot are still important, but frankly it is difficult for junior guys to differentiate themselves with those things. I care about what they can grow into, not where they are today. It sounds like you take a different approach, I have no need to convince you that my style of doing things is better.

10/17/12

I disagree that working on the sell side is a bad idea. It's obviously not necessary for everybody, but I do know that there are a lot of investments (in long/short) I've seen where the experience of working corporate finance is definitely a big value add. Personally, I can think of at least 3 positions that are in my team's current portfolio that I wouldn't have been able to analyze if I hadn't spent some time in an investment bank.

Also, working on the sell side can sometimes help you get to a better fund to start out at. This matters only because the PM you work for is your rabbi, and you will learn so much from him/her and the senior analysts on the team. The smarter they are, the more you learn. It's nice to think that you can learn everything by reading books etc, but when I look back at the way I pitched stocks during my initial interviews (after reading all the books out there) and the way I started thinking about them just 5-6 months later, the difference was pretty shocking to me.

But your mileage will vary.

In reply to slowdive
10/17/12
slowdive:

Passion for investing shines through in more than the quality of someone's work. The intangible factors that I seek can subtly show up in the course of a casual conversation. Sometimes I will ask about random hobbies they have listed on their resume, sometimes I will ask them what they think about certain companies, or events in the news. Like everything else in this job, I rely on my instincts to lead me to the goodies.

Would be interested to hear some specific examples.

Sometimes I go about in pity for myself, and all the while a great wind carries me across the sky
In reply to Going Concern
10/17/12
Going Concern:
slowdive:

Passion for investing shines through in more than the quality of someone's work. The intangible factors that I seek can subtly show up in the course of a casual conversation. Sometimes I will ask about random hobbies they have listed on their resume, sometimes I will ask them what they think about certain companies, or events in the news. Like everything else in this job, I rely on my instincts to lead me to the goodies.

Would be interested to hear some specific examples.

It's tough to say, can be anything. One time I was interviewing someone, and in the midst of our conversation he asked me a question about something I had briefly mentioned. It was a challenging topic, and I launched into a rather technical explanation, jumping quickly from point to point. Most candidates would have slumped back, their eyes glazed over, but instead he became enraptured in curiosity when I started to delve into things that he didn't know. It reminded me of myself, back when I was trying to get in this business. These are the kind of things that you can't bullshit your way through.

In reply to slowdive
10/17/12
slowdive:
Going Concern:
slowdive:

Passion for investing shines through in more than the quality of someone's work. The intangible factors that I seek can subtly show up in the course of a casual conversation. Sometimes I will ask about random hobbies they have listed on their resume, sometimes I will ask them what they think about certain companies, or events in the news. Like everything else in this job, I rely on my instincts to lead me to the goodies.

Would be interested to hear some specific examples.

It's tough to say, can be anything. One time I was interviewing someone, and in the midst of our conversation he asked me a question about something I had briefly mentioned. It was a challenging topic, and I launched into a rather technical explanation, jumping quickly from point to point. Most candidates would have slumped back, their eyes glazed over, but instead he became enraptured in curiosity when I started to delve into things that he didn't know. It reminded me of myself, back when I was trying to get in this business. These are the kind of things that you can't bullshit your way through.

Fair enough. So basically he had a strong intellectual curiosity. True that there is no direct question that you could ask to uncover that.

Sometimes I go about in pity for myself, and all the while a great wind carries me across the sky
10/18/12

Happen to know from personal experience, having even just a little bit of experience on the sellside goes a long way for many hedge funds. It's a universally recognized skillset, work ethic, and test of toughness. I do know at least one person who went straight to buyside, then HSW, then an elite hedge fund, was unfortunately laid off during the crunch, and had a harder - not impossible, but it was an issue - time getting back because many dinged him on the fact he'd never worked on the sellside.

This is just anecdotal of course but in my opinion unless it's really a great offer think hard before passing up a little experience on the sellside. Building some connections on the sellside is a great way to be resourceful later to a fund (ex. "Oh yeah, I was an analyst with the VP who's now on the restructuring - let's give him a ring.")

Interesting thread.

if you like it then you shoulda put a banana on it

10/18/12

A more apt question than "Why do you want to be an investor ? or Why are you here ?" is

"What is your investment philosophy (aka thesis)?

I really don't believe you will be asked to recite your memorized story on the one or two stocks you wish to pitch, but rather you'll be asked on one picked for you. This way they separate the wheat from the chaff...

Ex.: What do you think of FB ? (I just picked it at random, I don't care about FB). If you can't think on your feet, you don't stand a chance.

"I like money (as do most females) but love is...great :)"-student
"Perhaps you've failed to take into account my hidden assets"-007
Omnia

In reply to frgna
10/18/12
frgna:

Happen to know from personal experience, having even just a little bit of experience on the sellside goes a long way for many hedge funds. It's a universally recognized skillset, work ethic, and test of toughness. I do know at least one person who went straight to buyside, then HSW, then an elite hedge fund, was unfortunately laid off during the crunch, and had a harder - not impossible, but it was an issue - time getting back because many dinged him on the fact he'd never worked on the sellside.

I find this a little hard to swallow. Was there a certain skillset or knowledge base he was lacking, or was the problem just that he didn't have a big bank's name on his res? Because if it's the latter, then it's really only the connections that would matter, and even then that's a subtle intangible benefit at best. I don't see how any value fund / fundamental investor would care that you spent 100 hours per week making colorful pitchbooks and creative DCFs while trying to get the recalcitrant printer to work and being screamed at from all directions.

Sometimes I go about in pity for myself, and all the while a great wind carries me across the sky
In reply to Going Concern
10/18/12
Going Concern:
frgna:

Happen to know from personal experience, having even just a little bit of experience on the sellside goes a long way for many hedge funds. It's a universally recognized skillset, work ethic, and test of toughness. I do know at least one person who went straight to buyside, then HSW, then an elite hedge fund, was unfortunately laid off during the crunch, and had a harder - not impossible, but it was an issue - time getting back because many dinged him on the fact he'd never worked on the sellside.

I find this a little hard to swallow. Was there a certain skillset or knowledge base he was lacking, or was the problem just that he didn't have a big bank's name on his res? Because if it's the latter, then it's really only the connections that would matter, and even then that's a subtle intangible benefit at best. I don't see how any value fund / fundamental investor would care that you spent 100 hours per week making colorful pitchbooks and creative DCFs while trying to get the recalcitrant printer to work and being screamed at from all directions.

Hi Going Concern - he had actually worked at a BB (Morgan or Goldman or JPM) on a desk out of undergrad pre-MBA, so it certainly wasn't the lack of a name, and his MBA and post MBA work was of course tops. And it wasn't even a specific skillset, really.

The way he described it, it was more like "We just generally want people who've also been on the other side of the deals and more rounded" - it's subtle and weird but important to some funds, and all else equal I guess they prefer those who have it and they can afford to be selective that way. He landed fine on his feet at the end, so again it was not a huge issue but it was a hindrance I'd say.

I guess the way to illustrate it is to imagine you have two identical 4-5 yrs experienced candidates looking at the same fund opening, but one spent his first 2 yrs at a top analyst program working hard - it's not super straightforward and I'm biased having worked in banking, but I think I'd lean toward the ex banker and here's why: at a junior level (2-3 yrs exp), you're gonna know that the sellside banker has (probably) put in more hours and seen more/deeper situations than a similarly seasoned buyside analyst (from what little I know of what entry level buyside analysts do - I plead complete ignorance here) and learned to handle pressure situations/deadlines on more occasions, and you know the grammar and punctuation will be perfect. With an ex banker, you kind of know what you're getting, where with a more esoteric buyside entry level analyst, unless you really know the fund, how they invest, how many times they turn over their assets in a year - you could be looking at a much wider band of experiences/training. Just my theories and madness though, curious to hear your thoughts.

if you like it then you shoulda put a banana on it

In reply to frgna
10/18/12
frgna:
Going Concern:
frgna:

Happen to know from personal experience, having even just a little bit of experience on the sellside goes a long way for many hedge funds. It's a universally recognized skillset, work ethic, and test of toughness. I do know at least one person who went straight to buyside, then HSW, then an elite hedge fund, was unfortunately laid off during the crunch, and had a harder - not impossible, but it was an issue - time getting back because many dinged him on the fact he'd never worked on the sellside.

I find this a little hard to swallow. Was there a certain skillset or knowledge base he was lacking, or was the problem just that he didn't have a big bank's name on his res? Because if it's the latter, then it's really only the connections that would matter, and even then that's a subtle intangible benefit at best. I don't see how any value fund / fundamental investor would care that you spent 100 hours per week making colorful pitchbooks and creative DCFs while trying to get the recalcitrant printer to work and being screamed at from all directions.

Hi Going Concern - he had actually worked at a BB (Morgan or Goldman or JPM) on a desk out of undergrad pre-MBA, so it certainly wasn't the lack of a name, and his MBA and post MBA work was of course tops. And it wasn't even a specific skillset, really.

The way he described it, it was more like "We just generally want people who've also been on the other side of the deals and more rounded" - it's subtle and weird but important to some funds, and all else equal I guess they prefer those who have it and they can afford to be selective that way. He landed fine on his feet at the end, so again it was not a huge issue but it was a hindrance I'd say.

I guess the way to illustrate it is to imagine you have two identical 4-5 yrs experienced candidates looking at the same fund opening, but one spent his first 2 yrs at a top analyst program working hard - it's not super straightforward and I'm biased having worked in banking, but I think I'd lean toward the ex banker and here's why: at a junior level (2-3 yrs exp), you're gonna know that the sellside banker has (probably) put in more hours and seen more/deeper situations than a similarly seasoned buyside analyst (from what little I know of what entry level buyside analysts do - I plead complete ignorance here) and learned to handle pressure situations/deadlines on more occasions, and you know the grammar and punctuation will be perfect. With an ex banker, you kind of know what you're getting, where with a more esoteric buyside entry level analyst, unless you really know the fund, how they invest, how many times they turn over their assets in a year - you could be looking at a much wider band of experiences/training. Just my theories and madness though, curious to hear your thoughts.

Also to be clear, I am not saying that entry level buysiders don't work hard - I really just have no idea what they do - I don't mean that facetiously at all, I really just have no experience with it.

if you like it then you shoulda put a banana on it

In reply to frgna
10/18/12
frgna:

The way he described it, it was more like "We just generally want people who've also been on the other side of the deals and more rounded" - it's subtle and weird but important to some funds, and all else equal I guess they prefer those who have it and they can afford to be selective that way.

The traditional value fund isn't going to be that focused on "deals". I guess if you have a fund that focuses on certain types of situations/events, like M&A for instance, then a banker's deal experience could at least bring something to the table. My guess though is that your friend was dinged because the places he was interviewing at were populated with ex-bankers who were biased towards scooping up more of their own kind.

Sometimes I go about in pity for myself, and all the while a great wind carries me across the sky
In reply to frgna
10/18/12
frgna:

I think I'd lean toward the ex banker and here's why: at a junior level (2-3 yrs exp), you're gonna know that the sellside banker has (probably) put in more hours and seen more/deeper situations than a similarly seasoned buyside analyst (from what little I know of what entry level buyside analysts do - I plead complete ignorance here) and learned to handle pressure situations/deadlines on more occasions, and you know the grammar and punctuation will be perfect. With an ex banker, you kind of know what you're getting, where with a more esoteric buyside entry level analyst, unless you really know the fund, how they invest, how many times they turn over their assets in a year - you could be looking at a much wider band of experiences/training. Just my theories and madness though, curious to hear your thoughts.

With an ex-banker you definitely know what you're getting, not that that's a good thing. I'd say having put in more hours isn't a good thing (nor is it a bad thing really, except maybe burnout potential), and unless the buyside position is shitty I can't imagine a situation where the junior analyst who worked at a BB is going to have a deeper understanding of companies or potential investments. Deadlines are nonexistent at an investment firm, and if my own experience as a semi-retard in the grammar field have any weight, nobody cares about grammar or punctuation either.

One thing I'd stress that WH didn't really touch on is that if you want to work at an HF one day and your two full-time options are GS IBD and Bumblefuck Asset Management, you'd probably do better to choose GS. But if you have a shot at a name-brand gig on the buy side, even something like Fidelity or any of the other large structured analyst programs, I suggest going that way. You'll learn 1000x more and will have a much better work/life balance as well. The pay is probably a little less but with what I've been hearing about bonuses lately I'll guess the pay gap is converging a bit. Don't have an ear to the ground on comp at the junior levels anymore though, would love to hear what people are seeing out there.

I hate victims who respect their executioners

10/18/12

Hi WhiteHat and Ravenous, I am an undergraduate and would LOVE to do exactly this. Please check PM's I've sent you.....thanks in advance!

In reply to TheKing
10/18/12
TheKing:
WhiteHat:

1. Have two stocks to pitch. And know everything there is to know about them.

If this sounds hard, you're not actually as interested in investing as you thought you were. If it sounds fun, keep reading. You should be able to explain exactly what these companies do in very simple terms (if they don't already know them), be able to paint the picture of why the market is divided on the stock, identify the catalysts in the short and long term that make this a great business that will eventually realize its intrinsic value, and provide some intelligent thoughts on valuation and why the stock is worth investing in today. I'd stress illustrating the long-term growth profile of the company over anything else, and make sure you highlight what the drivers are of that growth. Analysts want to know that you look at all aspects of a company, so mentioning management, industry economics, and company-specific competitive advantages are all essential. On valuation, you don't have to be an absolute wizard but you should know the typical industry multiples, show where the company is undervalued relative to competitors, and have some insights into how the company manages its cash flows and if there is a shareholder-friendly focus coming from management.

Obviously having one stock to pitch is always important, but I strongly recommend two. In a standard superday you'll most likely be talking to several analysts individually, and pitching them all on the same thing isn't a bad thing, but knowing just one business is something anyone can do. If you mix it up, it's that much better. You're likely not going to be asked for more than two ideas in any interview, so knowing three or four is probably not as beneficial as the jump from one to two.

This times a billion. So many people "want" to work on the buyside at a hedge fund but don't really want to, if you catch my drift. If you're thinking about hedge funds and aren't already doing this to some degree, you probably don't really want to work for a hedge fund.

Nothing wrong with that, btw. Not ever job is for everybody.

OK that makes sense. Is it impossible then to get into PE, even boutiques (again, I don't really care about megafund), from a non-target? I've had no luck getting into bulge brackets and so far boutiques haven't bit on my resume. I think I'm at least competitive for regional boutiques if someone actually gave me a chance, but can regional boutiques still lead to boutique/MM PE, or do you have to go to a bulge/elite boutique?

10/18/12

To be fair, when we are defining the universe of hedge funds as long-short equity funds, a lot of this is probably applicable. However, different types of strategies almost require you to start out on the sell side. Also, banking would be completely useless for most of those types of strategies.

We deal mostly with derivatives at my firm and it would be impossible to imagine hiring someone from banking without other derivatives experience. Someone fresh out of college would be easier to hire if they had a highly quantitative background than someone from banking, because they would be at least as useful as the banker, but cheaper.

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

10/18/12

There are times when taking the buyside gig in a no-name city can be a disadvantage. Obviously, if you have an offer at buyside firm that has been heard of you can take it and will likely be fine. The line becomes a little blurry as you move to no-name firms in no-name cities.

Case in point: I currently work at an unknown firm in a midwest state. We are institutionally funded by Fortress (I say this because you probably will still not be able to figure out what the name of the firm is). We chase deals alongside CarVal, Colony, GS, Carlyle, etc.

I still heavily doubt that I would get two looks by any of those firms (or headhunters for that matter) simply because they would see the name of my firm, my non-target background, and toss that shit out. It is just the reality of top firms. They like IB backgrounds but will happily take you if you went to a decently reputable buyside shop too. But if you work at Westminster Financial doing lower middle market LBOs, you would be better off having any MM/BB IB firm on your resume.

My comp is 20% less than NY/SF IB and is +20% after cost of living adjustments. Avg work weeks <60 hours. I am two inches from a promotion that will put me above 2nd year IB. But the buck stops there, as the firm does not have the standard VP, SVP, D, MD promotes afterwards. And that is when that brand-name IB matters.

In reply to sk8247365
10/18/12
sk8247365:

But the buck stops there, as the firm does not have the standard VP, SVP, D, MD promotes afterwards. And that is when that brand-name IB matters.

Then what? What can you do, and what would you like to do at that point? I'm probably not the only one who would like to hear more on this, if you could elaborate.

And when you say, "that is when that brand-name IB matters," do you mean that if you had Morgan Stanley IBD on your CV, you could move up faster at your small midwestern shop?

In reply to BlackHat
10/18/12
BlackHat:
frgna:

I think I'd lean toward the ex banker and here's why: at a junior level (2-3 yrs exp), you're gonna know that the sellside banker has (probably) put in more hours and seen more/deeper situations than a similarly seasoned buyside analyst (from what little I know of what entry level buyside analysts do - I plead complete ignorance here) and learned to handle pressure situations/deadlines on more occasions, and you know the grammar and punctuation will be perfect. With an ex banker, you kind of know what you're getting, where with a more esoteric buyside entry level analyst, unless you really know the fund, how they invest, how many times they turn over their assets in a year - you could be looking at a much wider band of experiences/training. Just my theories and madness though, curious to hear your thoughts.

With an ex-banker you definitely know what you're getting, not that that's a good thing. I'd say having put in more hours isn't a good thing (nor is it a bad thing really, except maybe burnout potential), and unless the buyside position is shitty I can't imagine a situation where the junior analyst who worked at a BB is going to have a deeper understanding of companies or potential investments. Deadlines are nonexistent at an investment firm, and if my own experience as a semi-retard in the grammar field have any weight, nobody cares about grammar or punctuation either.

One thing I'd stress that WH didn't really touch on is that if you want to work at an HF one day and your two full-time options are GS IBD and Bumblefuck Asset Management, you'd probably do better to choose GS. But if you have a shot at a name-brand gig on the buy side, even something like Fidelity or any of the other large structured analyst programs, I suggest going that way. You'll learn 1000x more and will have a much better work/life balance as well. The pay is probably a little less but with what I've been hearing about bonuses lately I'll guess the pay gap is converging a bit. Don't have an ear to the ground on comp at the junior levels anymore though, would love to hear what people are seeing out there.

Not to be a tag-along, but I completely agree with WH and BH.

To add, I feel the reason people are objecting is that most of the people on this sight go to the sell side with the intention to go back to the Buyside. I wouldn't blame people going to SS, it is an easier path to go down in that it is a road more traveled and there is a level of certainty in taking it. Also, the coveted IB BB positions are a lot more visible to the top graduating seniors because the IB positions are not as fragmented as the Buyside positions(particularly HFs). The "target" candidates know its there and know what they are going for (like OCR) . Bankeralla touched on this subject before when and why she chose to go IB.

Fear is the greatest motivator. Motivation is what it takes to find profit.

In reply to prospie
10/18/12
prospie:
sk8247365:

But the buck stops there, as the firm does not have the standard VP, SVP, D, MD promotes afterwards. And that is when that brand-name IB matters.

Then what? What can you do, and what would you like to do at that point? I'm probably not the only one who would like to hear more on this, if you could elaborate.

And when you say, "that is when that brand-name IB matters," do you mean that if you had Morgan Stanley IBD on your CV, you could move up faster at your small midwestern shop?

To elaborate, we have a very "upside-down" triangle structure. It looks like this (title; age): Analyst (23), Analyst (28), Associate (31), 8x Director (avg. 48), President (~60).

Previous analysts have left largely because they could not make the leap to director. His words were "why would they give you that job when they can hire someone with 15-20 years experience?" So I take that as little chance of moving up after 2-4 years as an Associate.

This is where having brand name can matter. If I want to stay in my industry but move to an Associate/VPish role somewhere reputable, I foresee difficulty. Or even if I want an Associate gig at a firm in SF/NY.

If my resume goes MS IB 2 years - unknown buyside 2-4 years, the recruiter will see two things: BB experience and buyside experience. Very strong candidate.

Maybe I am wrong, but if they see 2-4 years at unknown buyside in midwest, 9.8/10 they will give the interview to 2nd year MS IB. Unless I networked in and they had a very good feel for what I do. Then, sure, the odds are in my favor.

As of now, if I can not make the jump to director I am hoping to network into a large fund. I'll scale down "large" until I get in somewhere.

"...do you mean that if you had Morgan Stanley IBD on your CV, you could move up faster at your small midwestern shop?[/quote]

Once you are in, all that matters is skill and your firms promote culture (i am sure you would agree).

10/18/12
10/18/12
In reply to Ben Shalom Bernanke
10/18/12

If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

10/18/12

The King said "A couple major shops recruit straight from undergrad, but their target school list is VERY small"
Hi The King can you or anyone else for that matter name which PE firms recruit straight from undergraduate and which target schools are on their target school list?

First post on WSO

Many Thanks

In reply to hsv
10/18/12
hsv:

The King said "A couple major shops recruit straight from undergrad, but their target school list is VERY small"
Hi The King can you or anyone else for that matter name which PE firms recruit straight from undergraduate and which target schools are on their target school list?

First post on WSO

Many Thanks

Silver Lake
Bain
TPG

Wharton, Harvard.

I hate victims who respect their executioners

10/18/12

Oh, get a buyside job out of undergrad? Just get a buyside job out of undergrad? Why don't I strap on my buyside job helmet and squeeze down into a buyside job cannon and fire off into buyside job land, where buyside jobs grow on little buyside jobbies?!

In reply to Ravenous
10/19/12
Ravenous:

This is a pretty good post, +1 for you sir.

#1 I don't agree with however. You don't need to know everything about the stock, you just need to know why others are wrong and the current price is not an accurate reflection of future performance, and then identify the (hopefully large) delta between fair value and current. It is far, far better to have a crisp, well reasoned thesis than to have a rambling dissertation about a name (I know you weren't saying to have a dissertation). It's kind of disappointing to interview someone from HBS / GSB / Wharton and get a 50 page slide deck on a stock only to realize they don't actually have any clue how the company works or why it would be a good investment. Like, at what point during your rambling 50 page presentation should you have realized that you have no idea what you're talking about?

It's also a question of return on time. If I can cover five names in the time it takes you to cover one, I'm going to win over time if I can hone in on the key points consistently (which I can).

Something approximating 90% of the people on the buy side have no idea what they are doing (true story). It took me a while to come around to that fact, but having met with over 200 management teams, read through countless conference calls with retards asking retarded questions, and having interviewed with many firms, I know that's a true statement.

#2 This is unnecessary. It doesn't matter what your reason is as long as you're good and can make money for the firm. "Why do you want to be an investor?" is a retarded interview crutch question for retarded interviewers who don't know what to ask. It's a red flag if anyone asks you that. Real interviewers only need to ask 3 to 5 questions depending on the candidate (each of which may have follow up questions).

#3 I agree with this completely, but you have to realize that this is beyond the scope of the vast majority of the people entering this business. I spent 4 years working directly for a PM with a top 3 track record among long / short funds over the last 15 years. Tell me how that's worse than working for some moron running a billion dollar fund where I would have made twice as much in the short run.

#4 This is true. But West Coast hours are terrible.

This post contains some ridiculous stuff including all the language about you being so much smarter then everyone...Seriously dude you need to get over yourself. On #1 no junior kid that I hire is going to make me money other then by grinding away at ideas that I give him to explore...so questions that gauge passion for the business displayed through knowledge and questions about fit are very important. To be honest when I hear an investment pitch from a junior-type I am really more concerned with what it says about how he would work and how much hunger he has to suceed as opposed to whether the trade is actually one I would put on. If you are hiring a kid in his early 20s to actually make investment decisions I seriously question what is going on where you work....

10/19/12

What about getting into buy-side sales (institutional sales) and then going to b-school and ending up as a Research Analyst? How would you recommend that?

S18H01D06

In reply to FranciscoDAnconia
10/20/12
FranciscoDAnconia:

I personally know of some people who chose very good sell side offers over decent buy side ones because they wanted to to end up at an "elite" (subjective) PE/HF that didn't necessarily recruit undergrads or, if they did, took like 2 analysts from H or W. With PE and even HF recruitment becoming more structured, I would say an argument could be made for starting in the sell side. Curious to hear your opinions though.

Agree with Francisco: I was considering the option of returning to the VC fund I interned my last summer of undergrad; that fund was good (probably second quartile) but not great. Also, my skillset was spotty then (scientific major) and I decided to take a bulge bracket offer covering the same industry as I did in VC. I learned a ton. Fast forward three years, I got an offer from a top quartile VC fund which would have been out of my reach without the formal banking training and deal execution experience (the latter is not relevant to HF, only to PE/VC).

But again, if you've got your skillset already up there (finance major or similar), you don't believe you'll learn much in banking, and you got an offer from a top fund, absolutely take it. But think twice: If you can land a buyside job at a decent fund out of undergrad, imagine what you could get after being top-ranked 2 or 3 years in a row at a bank and interviewing at even better funds.

Last point to consider, you'll create a network during your banking program (top students at world's top universities). If your fund implodes, or you realize that the job is not for you, you can leverage that network to get other opportunities. Working 80-100h a week together, eating together, partying together... that creates strong bonds that last beyond banking, and the vast majority of the analysts in your class will be very successful.

Aei ho theos geometrei

In reply to Themistocles
10/20/12
Themistocles:

But think twice: If you can land a buyside job at a decent fund out of undergrad, imagine what you could get after being top-ranked 2 or 3 years in a row at a bank and interviewing at even better funds.

Or imagine what you could get after being top-ranked 2 or 3 years in a row at a top fund, and imagine how those years of experience demand much higher compensation than an entry-level analyst fresh from the sell-side. And imagine the network you'd build from the analysts you'd meet along the way, co-workers, sell-side analysts, etc. that you couldn't get in banking. And the track record you could establish that could get you credibility.

Not saying one's better than the other (though it's usually the case depending on your background) but let's not pretend you're missing out on some professional opportunity by skipping banking that you can't make up for in the same time on the buy side.

10/20/12

How could you be top ranked at a fund considering the less # of analysts in your experience level? Not to mention you probably wouldn't have a discernible track record so it would be hard to tell if you're actually good.

In reply to HarvardOrBust
10/20/12
HarvardOrBust:

How could you be top ranked at a fund considering the less # of analysts in your experience level? Not to mention you probably wouldn't have a discernible track record so it would be hard to tell if you're actually good.

Lol for the first part I was just following on with his top-ranked comment, didn't actually mean anything by it seeing as nobody ranks analysts that I know of... And as for the second part, hopefully you've contributed a few ideas 2-3 years into your analyst stint. If not your fund is either a super badass zero-turnover fund with 8 sickeningly good businesses in it or you probably suck/didn't get the responsibility to actually source. So hopefully you'd have some ownership of ideas by then, which is what I mean by a track record.

In reply to WhiteHat
10/21/12
WhiteHat:
Themistocles:

But think twice: If you can land a buyside job at a decent fund out of undergrad, imagine what you could get after being top-ranked 2 or 3 years in a row at a bank and interviewing at even better funds.

Or imagine what you could get after being top-ranked 2 or 3 years in a row at a top fund, and imagine how those years of experience demand much higher compensation than an entry-level analyst fresh from the sell-side. And imagine the network you'd build from the analysts you'd meet along the way, co-workers, sell-side analysts, etc. that you couldn't get in banking. And the track record you could establish that could get you credibility.

Not saying one's better than the other (though it's usually the case depending on your background) but let's not pretend you're missing out on some professional opportunity by skipping banking that you can't make up for in the same time on the buy side.

Agree with what you mentioned if everything goes according to plan. It's always good to protect your downside with the other unquoted points I made in my post: Broader network and skillset both leading to wider choice of options if things go south at your fund. All in all, while your decision making process should consider all of the above posts, your judgement should supersede them as you only have all the variables in sight to make a choice. If the fund is good (track record, reputation, team... -- make sure you do your due diligence), I wouldn't see why you wouldn't take the offer.

Aei ho theos geometrei

In reply to WhiteHat
10/22/12
WhiteHat:
HarvardOrBust:

How could you be top ranked at a fund considering the less # of analysts in your experience level? Not to mention you probably wouldn't have a discernible track record so it would be hard to tell if you're actually good.

Lol for the first part I was just following on with his top-ranked comment, didn't actually mean anything by it seeing as nobody ranks analysts that I know of... And as for the second part, hopefully you've contributed a few ideas 2-3 years into your analyst stint. If not your fund is either a super badass zero-turnover fund with 8 sickeningly good businesses in it or you probably suck/didn't get the responsibility to actually source. So hopefully you'd have some ownership of ideas by then, which is what I mean by a track record.

WhiteHat, I sent you a PM regarding this topic. Please take a look when you get the chance...would greatly appreciate it. Thanks again!

10/24/12

1. Have two stocks to pitch. And know everything there is to know about them.

If this sounds hard, you're not actually as interested in investing as you thought you were. If it sounds fun, keep reading. You should be able to explain exactly what these companies do in very simple terms (if they don't already know them), be able to paint the picture of why the market is divided on the stock, identify the catalysts in the short and long term that make this a great business that will eventually realize its intrinsic value, and provide some intelligent thoughts on valuation and why the stock is worth investing in today. I'd stress illustrating the long-term growth profile of the company over anything else, and make sure you highlight what the drivers are of that growth. Analysts want to know that you look at all aspects of a company, so mentioning management, industry economics, and company-specific competitive advantages are all essential. On valuation, you don't have to be an absolute wizard but you should know the typical industry multiples, show where the company is undervalued relative to competitors, and have some insights into how the company manages its cash flows and if there is a shareholder-friendly focus coming from management.

Obviously having one stock to pitch is always important, but I strongly recommend two. In a standard superday you'll most likely be talking to several analysts individually, and pitching them all on the same thing isn't a bad thing, but knowing just one business is something anyone can do. If you mix it up, it's that much better. You're likely not going to be asked for more than two ideas in any interview, so knowing three or four is probably not as beneficial as the jump from one to two.

Very informative and from my experience half the jobe is done if you can defend a stock well

6/26/13

How would you adapt this info for a fund investing in fixed income (mostly public debt)?

6/26/13

sk8247365:

There are times when taking the buyside gig in a no-name city can be a disadvantage. Obviously, if you have an offer at buyside firm that has been heard of you can take it and will likely be fine. The line becomes a little blurry as you move to no-name firms in no-name cities.

Case in point: I currently work at an unknown firm in a midwest state. We are institutionally funded by Fortress (I say this because you probably will still not be able to figure out what the name of the firm is). We chase deals alongside CarVal, Colony, GS, Carlyle, etc.

I still heavily doubt that I would get two looks by any of those firms (or headhunters for that matter) simply because they would see the name of my firm, my non-target background, and toss that shit out. It is just the reality of top firms. They like IB backgrounds but will happily take you if you went to a decently reputable buyside shop too. But if you work at Westminster Financial doing lower middle market LBOs, you would be better off having any MM/BB IB firm on your resume.

My comp is 20% less than NY/SF IB and is +20% after cost of living adjustments. Avg work weeks <60 hours. I am two inches from a promotion that will put me above 2nd year IB. But the buck stops there, as the firm does not have the standard VP, SVP, D, MD promotes afterwards. And that is when that brand-name IB matters.

I hate you because you could not describe my situation any better regarding everything mentioned.

I've found it extremely hard to get my foot in the door despite what I think has been a better experience. I've had to learn everything ravenous posted by myself (and almost everything he says is correct in my view). I'm currently part of the 90% that doesn't know shit at the moment but at least I know it and know the path to get to that 10%.

On the bright side, when I do get my foot in the door I seem to crush.

@BlackHat: I think WhiteHat's assessment of junior comp is correct/in-line based on my contacts / interviews. Probably a tad light.

6/26/13

Bondarb:

Ravenous:

This is a pretty good post, +1 for you sir.

#1 I don't agree with however. You don't need to know everything about the stock, you just need to know why others are wrong and the current price is not an accurate reflection of future performance, and then identify the (hopefully large) delta between fair value and current. It is far, far better to have a crisp, well reasoned thesis than to have a rambling dissertation about a name (I know you weren't saying to have a dissertation). It's kind of disappointing to interview someone from HBS / GSB / Wharton and get a 50 page slide deck on a stock only to realize they don't actually have any clue how the company works or why it would be a good investment. Like, at what point during your rambling 50 page presentation should you have realized that you have no idea what you're talking about?

It's also a question of return on time. If I can cover five names in the time it takes you to cover one, I'm going to win over time if I can hone in on the key points consistently (which I can).

Something approximating 90% of the people on the buy side have no idea what they are doing (true story). It took me a while to come around to that fact, but having met with over 200 management teams, read through countless conference calls with retards asking retarded questions, and having interviewed with many firms, I know that's a true statement.

#2 This is unnecessary. It doesn't matter what your reason is as long as you're good and can make money for the firm. "Why do you want to be an investor?" is a retarded interview crutch question for retarded interviewers who don't know what to ask. It's a red flag if anyone asks you that. Real interviewers only need to ask 3 to 5 questions depending on the candidate (each of which may have follow up questions).

#3 I agree with this completely, but you have to realize that this is beyond the scope of the vast majority of the people entering this business. I spent 4 years working directly for a PM with a top 3 track record among long / short funds over the last 15 years. Tell me how that's worse than working for some moron running a billion dollar fund where I would have made twice as much in the short run.

#4 This is true. But West Coast hours are terrible.

This post contains some ridiculous stuff including all the language about you being so much smarter then everyone...Seriously dude you need to get over yourself. On #1 no junior kid that I hire is going to make me money other then by grinding away at ideas that I give him to explore...so questions that gauge passion for the business displayed through knowledge and questions about fit are very important. To be honest when I hear an investment pitch from a junior-type I am really more concerned with what it says about how he would work and how much hunger he has to suceed as opposed to whether the trade is actually one I would put on. If you are hiring a kid in his early 20s to actually make investment decisions I seriously question what is going on where you work....

This. 1000x this. Ravenous, this must be the 5th post I've read about you hating on target school kids. This is clearly something personal, stop hating.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

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6/26/13

Great read! I like the look from the other perspective.

6/26/13

This is the dream. Great post. Glad it got brought back up to the front or else I wouldn't have ever seen it.

I have a pretty strong predisposition toward quality of life when thinking about the future... Let's say that I was going to be a rockstar analyst (though I'll probably be far from it lol) would it be detrimental to start out at a smaller shop and just staying there/ working my way up? Or should I definitely try to break in to one of the more well known shops?

The only thing that worries me about option 1 is that turnover is low and it seems like progression could be pretty slow. i.e. Even if I'm killing it at a smaller shop it could take a long time to make the jump to a decision-making position and, bc of the lesser prestige, I'm kind of limiting myself in external opportunities.

6/26/13

Starting on the buy side means you better love that shop and/or it be highly regarded because wherever you go next will likely be breaking the mold by not taking an IB analyst...

6/26/13

skeam-c:

This is the dream. Great post. Glad it got brought back up to the front or else I wouldn't have ever seen it.

I have a pretty strong predisposition toward quality of life when thinking about the future... Let's say that I was going to be a rockstar analyst (though I'll probably be far from it lol) would it be detrimental to start out at a smaller shop and just staying there/ working my way up? Or should I definitely try to break in to one of the more well known shops?

The only thing that worries me about option 1 is that turnover is low and it seems like progression could be pretty slow. i.e. Even if I'm killing it at a smaller shop it could take a long time to make the jump to a decision-making position and, bc of the lesser prestige, I'm kind of limiting myself in external opportunities.

Even if you're "killing it" at a small shop? You're contradicting yourself. If you're "killing it" at a small shop it implies that you are making profitable/good decisions right?

Also, long time to jump to a decision-making position at a small shop? Are you kidding??? Even though I will never be the final decision maker at my current firm my ideas generally go through and I am dictating when we should initiate / add / sell positions. It took me 1-2 years to get the hang of things with limited guidance but now I definitely affect portfolio positions and construction in a big way.

Out of my last 5 stock picks, my boss has never even looked at 4 before. I have built a track record which I put on my resume (I use a lower number of +5% b/c the actual number I'm getting is just stupidly high ~20% excess return vs. S&P, probably 99% luck since I haven't been wrong in a major way over the last year).

I'll say that the PM gets much more comfortable with your picks if you do well. My stock picks have been going through much easier last year as some of my highest conviction picks have panned out really well (ex: GME last August). It was a brutal to pitch but everything has panned out almost exactly like I expected (better). That took a while to get through, but as a result of that plus another few picks my last relatively high conviction pick got through in 1-2 days. I think he's super open to my ideas now since that one is +30% vs. S&P.

So in essence, if you "kill it" at a small shop and know what you're doing you will be driving decisions. Sucks when you want to lateral and comp probably won't follow as well as your performance but it is really cool to be in the driving seat (albeit with oversight).

6/26/13

SirTradesaLot:

To be fair, when we are defining the universe of hedge funds as long-short equity funds, a lot of this is probably applicable. However, different types of strategies almost require you to start out on the sell side. Also, banking would be completely useless for most of those types of strategies.

We deal mostly with derivatives at my firm and it would be impossible to imagine hiring someone from banking without other derivatives experience. Someone fresh out of college would be easier to hire if they had a highly quantitative background than someone from banking, because they would be at least as useful as the banker, but cheaper.

I think for a lot of people on this forum HFs are basically synonymous with long-short equity because that is the only strategy that college and high school students know of and can relate to. It is easy to visualize how long-short investments work, all you need to do is pick some stocks and decide why you love/hate them and ergo want to long/short them. On the other hand, said students would be hard pressed to come up with a plausible investment thesis for a trade for say, structured products or global macro strategies.

Incidentally this is also the reason why it is so hard to generate alphas with long short equity strategies since there are hundreds and thousands of mutual funds, hedge funds not to mention individual stock pickers all scourging the same universe of stocks. It is hard to find and maintain an edge in an environment of virtually no barrier of entry.

And to echo BondArb's point, these people are not morons. There are plenty of smart, hard working people in that space who are just smart and hard working as I am (probably much more so in fact). I just don't see how more a handful of them can consistently beat the market.

For true alpha generation one is better off specializing in some niche field that most people have not heard of and can't easily get into.

Too late for second-guessing Too late to go back to sleep.

In reply to floppity
6/26/13

Despite the harshness of the first two paragraphs, thanks for the info lol
+1

In reply to brandon st randy
6/26/13

brandon st randy could not have said it any better. There are asset classes and strategies where the MEDIAN manager beats their benchmark/index by a substantial portion every year. These are the areas you want to be in...

6/26/13

floppity:

sk8247365:

There are times when taking the buyside gig in a no-name city can be a disadvantage. Obviously, if you have an offer at buyside firm that has been heard of you can take it and will likely be fine. The line becomes a little blurry as you move to no-name firms in no-name cities.

Case in point: I currently work at an unknown firm in a midwest state. We are institutionally funded by Fortress (I say this because you probably will still not be able to figure out what the name of the firm is). We chase deals alongside CarVal, Colony, GS, Carlyle, etc.

I still heavily doubt that I would get two looks by any of those firms (or headhunters for that matter) simply because they would see the name of my firm, my non-target background, and toss that shit out. It is just the reality of top firms. They like IB backgrounds but will happily take you if you went to a decently reputable buyside shop too. But if you work at Westminster Financial doing lower middle market LBOs, you would be better off having any MM/BB IB firm on your resume.

My comp is 20% less than NY/SF IB and is +20% after cost of living adjustments. Avg work weeks <60 hours. I am two inches from a promotion that will put me above 2nd year IB. But the buck stops there, as the firm does not have the standard VP, SVP, D, MD promotes afterwards. And that is when that brand-name IB matters.

I hate you because you could not describe my situation any better regarding everything mentioned.

I've found it extremely hard to get my foot in the door despite what I think has been a better experience. I've had to learn everything ravenous posted by myself (and almost everything he says is correct in my view). I'm currently part of the 90% that doesn't know shit at the moment but at least I know it and know the path to get to that 10%.

On the bright side, when I do get my foot in the door I seem to crush.

@BlackHat: I think WhiteHat's assessment of junior comp is correct/in-line based on my contacts / interviews. Probably a tad light.

I was going to mention something on the 90% of l/s guys don't know anything. Ravenous/Blackhat/Whitehat: how do you guys know that you are in the 10% (or whatever) that actually knows their shit? Is it just looking at your past track records? You all seem to have a lot of conviction that you are the best of the best in a very competitive field? (Just curious on this. Not hating at all as I've picked up a lot from all three of you).

6/26/13

Vagabond85:

brandon st randy could not have said it any better. There are asset classes and strategies where the MEDIAN manager beats their benchmark/index by a substantial portion every year. These are the areas you want to be in...

Thanks for your compliments. One thing to bear in mind is that with the less liquid strategies (e.g. special situations, distressed debt) the LPs actually expect you to beat the relevant index by a margin to compensate for perceived additional risk of illiquidity.

Too late for second-guessing Too late to go back to sleep.

In reply to Vagabond85
6/26/13

And which areas are those?

In reply to brandon st randy
6/26/13

Definitely. I was speaking more to my experience in the long only space. I think you touch on a larger point though. A lot of people without top tier backgrounds (school, work exp whatever) are trying to get in the game through the traditional obvious channels (IB or L/S generalist). Instead, they should be picking a niche and learning it in and out (hopefully something they enjoy and/or have a comparative advantage in). Examples could be industry specidic (energy, financials), geographically specific, or asset class specific. In my own experience this "expertise" (or at least commitment to this niche) can level the playing field versus more pedigreed candidates.

In reply to brandon st randy
6/26/13
6/26/13

Someone ask about firms that recruit straight out of undergrad (from my undergrad days):

Audax Private Equity (Harvard, Dartmouth, Princeton probably the other Ivies and MIT)
Bridgewaters (Harvard, Dartmouth, Princeton, Yale, MIT)
Bain Capital Ventures (Harvard, Dartmouth, Princeton probably other Ivies)
Bain Capital (Harvard, Dartmouth, Princeton probably other Ivies)
Silver Lake (Wharton and Harvard)
Blackstone (Harvard, Dartmouth, Princeton probably other Ivies)
Polaris (Harvard, Dartmouth, Princeton probably other Ivies)
TPG (Harvard, Yale and Wharton but mostly for HK office)

6/26/13

Also
Citadel (Harvard, Princeton, Wharton)
Renaissance (Harvard, MIT)
Some very smart guys from my undergrad made it to Cerberus and other funds (like two others) though informal recruiting but the names above actually came to campus

In reply to Vagabond85
6/26/13
In reply to brandon st randy
6/26/13

Also helps that there is more exposure to L/S via activist shops (Pershing Square, Third Point, Greenlight) that frequently show up in the news. Students who do read financial news have more exposure to Loeb and his actions with Sony than with what a distressed credit investor might be doing.

6/26/13

ElRusoAdomaitis:

Someone ask about firms that recruit straight out of undergrad (from my undergrad days):


Audax Private Equity (Harvard, Dartmouth, Princeton probably the other Ivies and MIT)
Bridgewaters (Harvard, Dartmouth, Princeton, Yale, MIT)
Bain Capital Ventures (Harvard, Dartmouth, Princeton probably other Ivies)
Bain Capital (Harvard, Dartmouth, Princeton probably other Ivies)
Silver Lake (Wharton and Harvard)
Blackstone (Harvard, Dartmouth, Princeton probably other Ivies)
Polaris (Harvard, Dartmouth, Princeton probably other Ivies)
TPG (Harvard, Yale and Wharton but mostly for HK office)

Blackstone PE and Polaris recruit from Wharton as well. So do Leonard Green, Angelo Gordon & Co, Sankaty Advisors (Bain Capital's Credit arm), Warburg Pincucs, and CCMP.

Other HFs - Silverpoint, DE Shaw, Two Sigma (latter two recruit more from engineering/quant focused).

Apollo and Ares recrurit for SA positions, but I am unsure about full time.

6/26/13

Wharton is the winner for undergraduate recruiting for buy-side but I can also imagine the competition being insane.

My guess even at Harvard and Princeton if you have less than 3.9 you wont get selected for the interview at any of these joints.

In reply to ElRusoAdomaitis
6/26/13

Don't underestimate the benefit of reaching out to alums. To the extent you've been working on putting together the whole package (grades, internships, clubs, personal interest in investing, etc.), that can be the piece that really gets you traction. While Wharton and Harvard may have the greatest number of grads working on the buyside, plenty of other schools have representation amongst the very senior ranks of prominent and successful firms. Don't at all think that you need a 3.9 at Wharton to get looked at for an interview (though it helps). You need to pass a certain threshold on paper, but the business isn't rocket science (especially at the junior level), and Wharton / Harvard by no means have a monopoly on smart 22 year-olds with hustle and interest.

6/26/13

Renaissance doesn't recruit undergraduates.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.
6/27/13

SonnyZH:

Renaissance doesn't recruit undergraduates.

They do..Very selectively from physics and math departments, so I am guessing you are right in that it is not corporate recruiting per se

6/27/13

ElRusoAdomaitis:

SonnyZH:

Renaissance doesn't recruit undergraduates.

They do..Very selectively from physics and math departments, so I am guessing you are right in that it is not corporate recruiting per se

Though to be fair, unlike the other places, I never saw the posting and someone could jut have been pulling my hair.

6/28/13

I would try for Sell side first. It's actually quite simple, on buy side there are less deals and it's more of an evaluation process then actually analysis (Unless it's a HF, even so, there are lots of HFs that only evaluate ideas from from Sell side), which leaves you at a low wage with limited expirence.

In reply to wso1234
6/28/13

Very true. H/W have a monopoly on the formal on campus recruiting processes, but there is nothing stopping you from securing a great offer by reaching out to your own alumni (albeit could even be more effective than formal recruiting). I have met brilliant non-target guys (one from the University of Minnesota was a very, very sharp dude) and there are kids at Wharton that after having taken finance 100 cannot telll you the relationship between bond prices and interest rates.

6/28/13

WilsonP:

I would try for Sell side first. It's actually quite simple, on buy side there are less deals and it's more of an evaluation process then actually analysis (Unless it's a HF, even so, there are lots of HFs that only evaluate ideas from from Sell side), which leaves you at a low wage with limited expirence.

Um wut.

I hate victims who respect their executioners

6/28/13

BlackHat:

WilsonP:

I would try for Sell side first. It's actually quite simple, on buy side there are less deals and it's more of an evaluation process then actually analysis (Unless it's a HF, even so, there are lots of HFs that only evaluate ideas from from Sell side), which leaves you at a low wage with limited expirence.

Um wut.

Hhaahahaahahahahha!

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.
6/29/13

WilsonP:

I would try for Sell side first. It's actually quite simple, on buy side there are less deals and it's more of an evaluation process then actually analysis (Unless it's a HF, even so, there are lots of HFs that only evaluate ideas from from Sell side), which leaves you at a low wage with limited expirence.

u wot m8

6/29/13

All I'm saying is that buy side (unless we are talking about a mega-fund like Blackstone) will not spend the time training you, instead they are going to use a grad as cheap labour. If you work hard and get into the right team, thats not a problem; you can grow, build contacts and make millions. However, if you are still cheap labour after 3 years, like most people that go straight into buyside, doing entry-lvl tasks then you could find yourself looking for employment with no brand name and an average skill set at best.

Your safety net is always your network, but to some extent, at the early stages of your career brand names can make your life alot easier and open the doors to keep you on track.

6/29/13

WilsonP:

I would try for Sell side first. It's actually quite simple, on buy side there are less deals and it's more of an evaluation process then actually analysis (Unless it's a HF, even so, there are lots of HFs that only evaluate ideas from from Sell side), which leaves you at a low wage with limited expirence.


http://www.youtube.com/watch?v=5hfYJsQAhl0
patternfinder:

Of course, I would just buy in scales.

See my WSO Blog | my AMA

9/8/13

Lots of great info in this thread, thanks to all who contributed meaningfully.

"When you stop striving for perfection, you might as well be dead."

7/19/14

What do you guys think of other non-major-financial-hub cities around the world? Think of Toronto, Amsterdam, Geneva, Shanghai, Seoul, Sydney, Johannesburg.

Not everyone is meant to make a difference. But for me, the choice to lead an ordinary life is no longer an option.

In reply to cheese86
12/17/15

What would you suggest I do to learn more about what some good 'measures' are for screening stocks?

12/18/15

I'm sorry, this is slightly different from PE though right - as a research analyst at a HF you ultimately are in AM/IM so wouldn't it be more accurate to say that those paths aren't the only way to HF/Buyside?

Article below elaborates the megafunds procedures on recruitment. I am sure the megafunds in IM are also the same. What type of buyside firm are you talking about here? Size / AUM
http://www.wallstreetoasis.com/forums/former-ms-ma...

12/21/15

Really helpful post thank you have been thinking about it for a while now.

4/18/16
4/18/16

what I like most about the job is that as a post mba associate, i can basically act like a banking md vis-a-vis all external parties, i.e. go home at 11 and dump an all-nighter worth of crap work on my bankers :-)

4/18/16

Money is one factor. Another is being on the buy-side you act as principal, not just as advisor. It's a mix of i-banking, consulting, and operations (helping the company grow, strategic decision-making, etc).

4/18/16

Buyside rules!!

Haha

They come to you, less structure, more freedom to make better decisions unobstructed by Bullshit and conflicts of interest.

4/18/16
dreemz:

Could any1 clarify exactly what buyside is?
And also why it's so favorable among a lot of you guys?
Is it purely a money-thing?

The buyside is simply the fund management side of wall st - in our case, we're usually referring to PE funds specifically. The money CAN be better on the buyside, but that's not the main reason.

In reply to zala rules
4/18/16

IM too. Some of the sweetest jobs in finance are being a top PM within a large IM company. Everything is taken care of for you and you don't have the day to day stress of deals.

And don't tell you me you don't make as much money. Please.

4/18/16

So where would you put Mergers & Aquisitions?
Or is that not classed as either

4/18/16
4/18/16

OK. I get it now. Thanks for clarifying.
I'm still trying to learn and take in as much as possible.
Would you say that M&A is an exciting division to be in?

4/18/16

Curious... is there a significant difference in salaries between buyside vs. sellside?

4/18/16

I think buy side is more "winner take all"

4/18/16

...the difference between the buy side and the sell side is that on the sell side you are involved in the process of selling securities (bankers originate them, salesman sell them, and traders execute the trades) whereas on the buy side your job is to buy (or sell) securities for the purpose of making money. For eg a banker goes to a company or government and creates securities to raise financing for that entity. Those securities are sold by the firms' salesman/traders to buy-siders (like a hedge fund or mutual fund) who evaluate the deal and decide whether they have interest. In terms of lifestyle it is generally agreed that people on the sell-side work more hours although that is not always the case. Buy-siders also can make much more money if they are stars. the downsides to buy side are that it is completely results driven, there is no BS or being good at politics...u are judged by your profit or loss on a quarterly/monthly/weekly/daily basis. Because of this it is extremely, gut-wrenchingly stressful. Having risk in the market is different then anything else on wall st., it will keep you up at night and take over your life if you are doing the job with the right level of commitment. You may leave at 5pm or before that but it is no less stressful then banking....in fact i would argue it is much more stressful then pecking away at an excel spreadsheet for 20 hours a day.

4/18/16

So what makes the buy-siders who are stars different from the rest?

i.e. Are these reasons for success due to the nature of the person or are they skills that they've been able to learn or pick up?

4/18/16

Balls of steel and cat-like reflexes

4/18/16

An unwaivering confidence in all aspects of the job
and an ability to respond in a fitting manner to any unforseen obstacle?

So it's kind of a mixture of intelligence and charisma?

4/18/16

...we could debate all night about what makes a great trader/money manager or whether great traders are born or made. In fact I think its something that is discussed/debated pretty often on most trading desks and many entire books have been written about the topic. I believe the one trait that is common amongst all great traders is absolute, iron-clad discpline....discpline to stick to their plan, to take losses properly, and to keep their heads in the right place while the market is moving. When risk is in the market and prices are moving many cannot act correctly and undesirable traits of their personality like impulsiveness, greed, or fear take over and their best laid plans are tossed out the window. Obviously other traits like intelligence and commitment are necessary but some very smart people just can't trade...they are great analysts but not good risk takers. Likewise, many people who i would not consider the smartest in the World are great, consistently profitable traders. So I would say a star trader on the buyside is somebody who thinks first, second, and third about discpline and money moanagement/position sizing and then a distant fourth is the ability to come up with great/unique trade ideas. I would say these are all traits that can be learned if a person has the right level of commitment. I can say that charisma has zero to do with it, except that people with a good sense of humor tend to be able handle the stress better (maybe a little bit at least).

4/18/16

Why do you want to go into the buy side rather than the sell side?

4/18/16

...read the one i wrote last night, its only 3 posts up!...I love u ivy leaguers! upsides to the buyside are the ability to make a ton of money and to set ur own hours...

4/18/16

Couldn't you say that you'd prefer to go into buy-side over sell-side because it's more performance-orientated/results-driven, therefore the area where you feel that you would be most challenged (and then rewarded if you excel)?

4/18/16

...you could also say that.

4/18/16

Are you currently in banking?

I noticed that you haven't put this info in your profile so you don't have to answer if you don't want to...

However I need someone with experience to tell me how feasible would it be to move straight from my degree to an MBa and then into an associate position at a BB firm...

Bearing in mind that i will have approximately 4 years work experience at Dow Jones. And as my uni is quite close to the London Bureau I should be able to maintain my full-time position here.

Any opinions?

4/18/16

I had friends who did just that. They work at premier shops, but they are not given the same exposure as other individuals who have IB/financial modeling experience.

They get relatively menial tasks in comparison with the work that the other individuals receive. Perhaps, they don't have good mentors at the shops...? It's your call to make your own judgement.

4/18/16

It is actually more common than you think, especially for math/science majors who go to quant funds. In regards to the above post, the larger the fund the less responsibility you will be able to get coming right out of undergrad. It might be a wise choice to seeks positions at the middle-sized shops in order to get the best experience. Contrary to what many will say on this board, you really dont need i-banking experience to be successful at a hf.

4/18/16

..yes i have never worked on the sell-side.

4/18/16

I know a bunch who have... big misconception is that you can't out of undergrad. Still very tough though

4/18/16

Good questions. I'm wondering the same thing.

4/18/16

Yes likewise, I've had some real difficulty choosing between my offers at KKR versus GS NY (TMT).

4/18/16
4/18/16

Do whichever you'll enjoy more.

4/18/16

ROFL @ Prestige whore. Bwahhahahahaa too funny

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

4/18/16
4/18/16

For many analysts (banking), the promised land is the buy side, the HF, the P/E firm and so forth. For others, investment banking is the ultimate goal, and for others, getting into B school with some money saved, and then figuring out the next plan (or starting your own company, etc) is the plan. Obviously you're concerned with the first category, so I'll focus on that. If you're ultimate goal is to break into P/E and you can break into P/E now, then you should absolutely skip banking and go straight to P/E. If you are wondering which firms to pass up on Goldman banking, that is entirely up to you. If you are a complete prestige whore, then only the top few players (you can look at other forms on here for a whole list of P/E firms ranging from top to very strong). If you are a prestige whore in the sense that you just want a to be a P/E guy at a solid firm offering career advancement potential, then obviously you can add several more strong firms to the list.

The other point that you have to consider is what if you don't get into Goldman or a top P/E firm, because, unfortunately, a hell of a lot of qualified candidates don't get offers to KKR or Goldman or Morgan, etc. What if you get into UBS and middle of the road P/E shop, what do you do then. I think what you need to do first is decide what are your ultimate goals - P/E, Banking, starting your own company, having a solid work/life balance, etc. From there, decide what your intermediate goals are (first profession after ugrad) - do you want to break into P/E, is that a goal, or are you looking for a strong skillset and marketable brand to be equipped to take on the next company. If your goal is to just be at the most prestigious company, then that should be pretty easy. Apply, interview, get accepted, and then look at league tables and hiring stats, and decide. If there is more to it, then you really have to go on a company by company basis, and figure out where you will be happy for 2 years or so, and then decide what will open more doors to your goals. In my opinion, if you want to do P/E, then do P/E, if you want the most opps after your analyst program, then go for prestige and look to the top P/E firms, then the top BBs, then it's up in the air again.

I know it's far from a perfect answer, but it's not exactly a question that someone can just say "take any P/E, or take any BB and the hell with P/E." At the end of the day, I think you should first focus on getting the offers, and then do your research and, if you want, pose the question with specific firms to gauge opinions.

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4/18/16

Because on the buy side, you are the client. On the sell side you're serving the client, which means they can call you at midnight and ask for a piece of analysis. This leads to longer hours, overly long powerpoint desks, and nasty cocaine habits.

A friend described the difference best - Imagine you're in a heated argument on the phone. On the sell side, you slam the phone down and yell "Fuck you!" On the buy side, you get to yell "Fuck you!" and THEN slam down the phone.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

4/18/16

How fucking tee'd up is this post, ready?

Why buyside? I'll tell your ass why.....

BUYSIDE, STRONGSIDE

In reply to CaptK
4/18/16
CaptK:

Because on the buy side, you are the client. On the sell side you're serving the client, which means they can call you at midnight and ask for a piece of analysis. This leads to longer hours, overly long powerpoint desks, and nasty cocaine habits.

A friend described the difference best - Imagine you're in a heated argument on the phone. On the sell side, you slam the phone down and yell "Fuck you!" On the buy side, you get to yell "Fuck you!" and THEN slam down the phone.

That gets a banana.

Also, would you rather be the hooker constantly servicing clients or would you want to be the client who gets to pick the hooker?

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."

4/18/16

I imagine there is also a degree of difficulty involved.

On the sell side you can sell utter shit (and I imagine you often do cause your side obviously doesn't want it) and as long as you are a good enough huckster you make your nut and everyone is happy.

On the buy side you have to really know your shit, because if you buy a loser your boss is pissed.

4/18/16

^^ On the sell side, you generate business. I've seen many analysts who's work is sht, but they're so opinionated, loud and fiery, that the buy side loves them. So while they might suck w/ their products and frequently are wrong, the buy side will always take meetings and do business through their institution leading to more commissions for the sell side analyst or sales person that covers that analyst. This does happen.

On the buy side, you have to be right much more than you are wrong. You're not a loser with a pissed boss if you're wrong.... you're out of a job. There aren't that many chances on the buy side.

4/18/16

THANKS!! I learned a lot and was able to tell interviewers why I would be interested in the buy side.

4/18/16

on the sell side you are paid to do, on the buy side you are paid to think

4/18/16

dogs chase cars and dont know what they'd do if they caught them, we think we are so different, when we have 97% similar genetics.

Incredible how arrogant we have become as a species.

4/18/16

You seem to think that working in PE/HF is the end all be all. You could be very wrong.

4/18/16

I'm stating this as more of a question...I don't believe this. It just came out wrong.

"Look, you're my best friend, so don't take this the wrong way. In twenty years, if you're still livin' here, comin' over to my house to watch the Patriots games, still workin' construction, I'll fuckin' kill you. That's not a threat, that's a fact.

4/18/16

You will bypass the misery of IB, but you will begin at a disadvantage because of the skills and networking you gain from banking. After you are in the business for a while it wont matter, but in the beginning it will be a disadvantage.

4/18/16

as a recent grad at a hedge fund you are below the janitor in the pecking order. In fact, I would sooner let the janitor touch my book then you because at least I have seen him show good judgement over a period of years. you have accomplished less then zero and 99% of the people in your spot will be gone from the business before they ever do anything of significance so dont worry you will be plenty challenged.

4/18/16

Well if you're at a hedge fund directly out of undergrad then you indeed be very very low in the pecking order, but if you work hard and move up you will be in the position to directly make the exotic investments you've always dreamed about and potentially make obscene amounts of money doing so, so there's that.

4/18/16

Bondarb can probably comment more on this - I don't think taking an entry level job at a HF/AM right out of college will put you on the track to be a PM eventually.

Compared to someone who did IBD/S&T/Research for 2 years and then transitioned to a HF/AM, you have about 0 useful skills. You'll mostly be doing fund reporting work (i.e. compiling statistics on performance, risk, and a bunch of other metrics) as well as random data entry/gathering/compiling work (pulling economic data from Bloomberg and various websites). This type of work is typically not very interesting to someone who aspires to be a PM someday, and you gain very few transferable skills; the only upside is that you are exposed to the industry and can soak up some general knowledge. VERY VERY FEW funds are going to give you a position where they train you on the investment side right out of college. If these positions exist, someone please let me know.

I have not seen a single PM come up from an entry-level gig at a HF right out of college (unless they got into a trading role - and that was only in the old days when the industry was smaller. Don't think it happens these days). So yes, you are on the "buyside" but you are not going to be a baller like John Paulson. It does eliminate the excitement when you realize you're not on track to be a Paulson either.

In reply to chewingum
4/18/16
chewingum:

Bondarb can probably comment more on this - I don't think taking an entry level job at a HF/AM right out of college will put you on the track to be a PM eventually.

Compared to someone who did IBD/S&T/Research for 2 years and then transitioned to a HF/AM, you have about 0 useful skills. You'll mostly be doing fund reporting work (i.e. compiling statistics on performance, risk, and a bunch of other metrics) as well as random data entry/gathering/compiling work (pulling economic data from Bloomberg and various websites). This type of work is typically not very interesting to someone who aspires to be a PM someday, and you gain very few transferable skills; the only upside is that you are exposed to the industry and can soak up some general knowledge. VERY VERY FEW funds are going to give you a position where they train you on the investment side right out of college. If these positions exist, someone please let me know.

I have not seen a single PM come up from an entry-level gig at a HF right out of college (unless they got into a trading role - and that was only in the old days when the industry was smaller. Don't think it happens these days). So yes, you are on the "buyside" but you are not going to be a baller like John Paulson. It does eliminate the excitement when you realize you're not on track to be a Paulson either.

Such funds do exist. I have a friend going to a HF right out of college and the track is to be a PM. Also, at the PE firm I worked at, I was told many times that they do not seek to churn and burn their analysts but rather want them to grow with the firm (i.e. in 20 years you will be a partner). Don't assume that because you go straight to buyside from college that you don't do meaningful stuff and have zero skills. Often, the kids going to the buyside is because they have managed to set themselves apart and have the same skills a 2nd year analyst at a BB does. It's very hard, but for example, I'd say about 5% of the Wharton class goes straight to buy side.

Consultant to a Fortune 50 Company

4/18/16

That's like saying, "oh you were the #1 pick in the NFL Draft...being in the NFL has always been your goal...now what?" What do you mean, now what? Go win the fucking Super Bowl. Already won it? Win it again!

Same logic, your goal is to be the most baller fund manager ever, get to the top of your firm (or launch your own), etc.

Consultant to a Fortune 50 Company

4/18/16

Yeah I probably should have clarified - if you don't have the skills to add value to the investing side the moment you come in (like you said, 2nd year sell-side analyst skill level), no HF is going to spend time teaching you that stuff from scratch. You either come in knowing it after working on the sell-side, or having taught it to yourself like alex said.

Point is, how many kids know enough to teach themselves equity analysis and modeling? My post was more for those kids who are smart but don't have much finance knowledge or a built-out skillset. These kids are recruited specifically for non-investment track roles on the "buyside" because they are smart and are capable of doing that kind of work, but they'll find it hard to jump to the investment track if they don't acquire that skillset somehow.

In reply to Bondarb
4/18/16
Bondarb:

as a recent grad at a hedge fund you are below the janitor in the pecking order. In fact, I would sooner let the janitor touch my book then you because at least I have seen him show good judgement over a period of years. you have accomplished less then zero and 99% of the people in your spot will be gone from the business before they ever do anything of significance so dont worry you will be plenty challenged.

I don't think that's what he meant.

In reply to alexpasch
4/18/16
alexpasch:

That's like saying, "oh you were the #1 pick in the NFL Draft...being in the NFL has always been your goal...now what?" What do you mean, now what? Go win the fucking Super Bowl. Already won it? Win it again!

Same logic, your goal is to be the most baller fund manager ever, get to the top of your firm (or launch your own), etc.

He (the typical undergrad WSO poster) probably doesn't want to win, he wants to be perceived as a winner.

In reply to alexpasch
4/18/16
alexpasch:

That's like saying, "oh you were the #1 pick in the NFL Draft...being in the NFL has always been your goal...now what?" What do you mean, now what? Go win the fucking Super Bowl. Already won it? Win it again!

Same logic, your goal is to be the most baller fund manager ever, get to the top of your firm (or launch your own), etc.

So fucking true.

"Don't quit. Suffer now and live the rest of your life as a Champion" - Muhammad Ali

In reply to chewingum
4/18/16
chewingum:

VERY VERY FEW funds are going to give you a position where they train you on the investment side right out of college. If these positions exist, someone please let me know.

I have not seen a single PM come up from an entry-level gig at a HF right out of college (unless they got into a trading role - and that was only in the old days when the industry was smaller. Don't think it happens these days). So yes, you are on the "buyside" but you are not going to be a baller like John Paulson. It does eliminate the excitement when you realize you're not on track to be a Paulson either.

This is not true. Investment positions out of undergrad while rare, do exist. Not exactly hf, but off the top of my head,i know fido and wellington both hire a few ER associates out of undergrad a year. Also check out t rowe's investment fellow program, probably one of the best opportunities in traditional buyside directly out of undergrad. I am not as familiar with the hf landscape but I think I have seen quant investment research positions listed on the career service website during my undergrad years.

In reply to TNA
4/18/16
Bondarb:

as a recent grad at a hedge fund you are below the janitor in the pecking order. In fact, I would sooner let the janitor touch my book then you because at least I have seen him show good judgement over a period of years. you have accomplished less then zero and 99% of the people in your spot will be gone from the business before they ever do anything of significance so dont worry you will be plenty challenged.

Depends from fund to fund. A year out of undergrad, I was the primary analyst on sectors representing 35% of the index, and that number is up to 70% at the end of year two.

chewingum:

Compared to someone who did IBD/S&T/Research for 2 years and then transitioned to a HF/AM, you have about 0 useful skills. You'll mostly be doing fund reporting work (i.e. compiling statistics on performance, risk, and a bunch of other metrics) as well as random data entry/gathering/compiling work (pulling economic data from Bloomberg and various websites). This type of work is typically not very interesting to someone who aspires to be a PM someday, and you gain very few transferable skills; the only upside is that you are exposed to the industry and can soak up some general knowledge. VERY VERY FEW funds are going to give you a position where they train you on the investment side right out of college. If these positions exist, someone please let me know.

This is completely false. I have such a position and have many friends who do as well. Personally, I'd rather hire the smartest fresh blood I can find than some preening banker fuck who thinks he knows what he is doing. To me (and I see this shit first hand), IBD/ER modelling is little more than shitting on an excel sheet. That may work in the beta jockey PE funds (Blackstone/KKR/etc.) but that won't fly at HFs or at smart PE.

In reply to TNA
4/18/16
ANT:

You will bypass the misery of IB, but you will begin at a disadvantage because of the skills and networking you gain from banking. After you are in the business for a while it wont matter, but in the beginning it will be a disadvantage.

Side-comment: There's individuals, potentially your age or a little older, who are already building a track record due to their going to HF out of undergrad--as alex mentioned because they were the creme of their class, the top 5% (I also agree with that statistic). That successful track record they are building will earn them much more than what a structured 2+2 path can yield.

I guess we have to start distinguishing between dudes who are on the buyside because they are good investors and dudes who are on the buyside because of their banking stint and connections and not because they like investing or are any good at it, but merely because "it is the good thing to do" (for pedigree purposes, parents being proud, blindly following their analyst class, etc). Unfortunately for the latter group reality will catch up with them, and if their stock calls fucking suck they will be shitcanned and thrown out the effing window like a sack of shit regardless of pedigree.

In reply to chewingum
4/18/16
chewingum:

Compared to someone who did IBD/S&T/Research for 2 years and then transitioned to a HF/AM, you have about 0 useful skills ... I have not seen a single PM come up from an entry-level gig at a HF right out of college ... So yes, you are on the "buyside" but you are not going to be a baller like John Paulson. It does eliminate the excitement when you realize you're not on track to be a Paulson either.

You have an overwhelming amount of logic deficiency. Are you correlating John Paulson's success as an HF PM shorting synthetic CDOs and the $B he made on Citi to his stint @ Bear M&A and BCG? I don't understand, what point are you trying to make?

Also I didn't know there was a fucking "track" to be Paulson, as you confidently imply. No offense but you are coming off as naive.

In reply to chewingum
4/18/16
chewingum:

Bondarb can probably comment more on this - I don't think taking an entry level job at a HF/AM right out of college will put you on the track to be a PM eventually.

Compared to someone who did IBD/S&T/Research for 2 years and then transitioned to a HF/AM, you have about 0 useful skills. You'll mostly be doing fund reporting work (i.e. compiling statistics on performance, risk, and a bunch of other metrics) as well as random data entry/gathering/compiling work (pulling economic data from Bloomberg and various websites). This type of work is typically not very interesting to someone who aspires to be a PM someday, and you gain very few transferable skills; the only upside is that you are exposed to the industry and can soak up some general knowledge. VERY VERY FEW funds are going to give you a position where they train you on the investment side right out of college. If these positions exist, someone please let me know.

I have not seen a single PM come up from an entry-level gig at a HF right out of college (unless they got into a trading role - and that was only in the old days when the industry was smaller. Don't think it happens these days). So yes, you are on the "buyside" but you are not going to be a baller like John Paulson. It does eliminate the excitement when you realize you're not on track to be a Paulson either.

I am a PM at a hedge fund and I never worked on the sell-side. I sat next to really good traders on the buyside for quite a few years and watched them (while booking their trades, getting their lunch, etc) and that's how I learned the business. That experience is way more valuable then anything you can learn on the sell-side and because of this I have been trading at a big name fund for longer then just about anybody I know who is my age and went thru the sell-side. On the sell-side they are mostly teaching you to sell, whether you know it or not. As I have said many times before, to be a PM on the buyside I would rather be an assistant to a PM as a post-college jon then an investment banking analyst.

4/18/16

You should always be excited and striving to achieve the "next level." As an IBD analyst, you daydream about the day when you switch to the buyside and can finally have a social life. As a PE associate, you can't wait until you're no longer the lowest guy on the totem pole and someone else has to do all the shit work. As a PE Vice President, you're trying to work your way up to when you can lead your own deals and not have to report up to anyone. There is always something to work towards and you should never get complacent. Until you make it to the top there will always be someone watching over you and making sure you pull your weight.

CompBanker

4/19/16

Plenty of reputable hedge funds offer trader's assistant roles to bright kids coming out of college and there is no better way to learn the business than by sitting next to and being mentored by your PM or analyst on a daily basis for 2-3 years. These roles are designed to develop TAs into potential future PMs. There is no doubt that a sell-side analyst stint provides you with a defined skill set and a great opportunity to network but if you can bypass this step and go directly to the buyside you would be an idiot not to (unless you enjoy sales and client service type positions).

My goal, after being in the PE business over the course of the past 5+ years out of undergrad, is to see a full fund cycle and begin monetizing our existing investments so that I can start building an FU pile of cash. At the end of the day, most people join finance for the competition and money is the only way to keep score. I view money as nothing more than a way to buy free time, which at the end of the day is far more important than money.

4/19/16

Thank you all for coming out of the woodwork to expose my bullshit and show me how big a dumbass I am. Lesson learned. I will stop speculating about an industry and career path I know hardly anything about, and try instead to land a real job in finance first.

Bondarb:

I am a PM at a hedge fund and I never worked on the sell-side. I sat next to really good traders on the buyside for quite a few years and watched them (while booking their trades, getting their lunch, etc) and that's how I learned the business. That experience is way more valuable then anything you can learn on the sell-side and because of this I have been trading at a big name fund for longer then just about anybody I know who is my age and went thru the sell-side. On the sell-side they are mostly teaching you to sell, whether you know it or not. As I have said many times before, to be a PM on the buyside I would rather be an assistant to a PM as a post-college jon then an investment banking analyst.

What is the success rate for people who start out as PM assistants like Bondarb? What would do these people do if they fail to make PM? Book trades and get lunch for the rest of their careers?