I've done extensive research on moving into hedge funds, and it seems that common methods are moving from IB or directly into HF work. Assuming you could actually achieve any of these, would it be more beneficial to get a BB/EB IB Analyst job to get the modeling and training and potentially allow you to start in a very reputable fund or would starting directly in the HF industry (at a lower tier HF) set up your career best for HF work?
I realize that landing any of these jobs is extremely difficult; I'm just wondering if starting at a lower tier fund would limit your career growth. Thank you in advance for all helpful responses!
IB first, the hiring pipelines are well entrenched. No need to re-invent the damn wheel.
Thank you, so 2 years banking > 2 years lower hf experience?
Go with IB. You'll have more career flexibility. You may realize in a couple of years HF is not for you.
If equity L/S or event-drive funds are what you want to get into, definitely do your utmost to go through IBD recruiting. You may end up getting smaller HF contacts along the way but that's a longer shot than a BB IBD job.
Would the same apply to HY corporate credit on the buy-side?
I can see how working for a large cap l/s equity fund may allow someone fresh out of school to miss out on intensive modelling skills. They can still add value looking at sell-side research and basic accounting due diligence along with the usual analysis; so all except modelling from scratch.
But if you are in a small HY fund doing corp. credit, I feel a fresh grad will be forced to go deep because there is no getting by skipping modelling. The seems to be so much more focus on fundamentals. So may be for HY, working straight for buy-side may not be a bad option?
Working in a HY issuance/research/trading group at a BB offer good training there too. Restructuring might be helpful as well.
It's certainly not impossible (and there are reputable places like Sankaty or Silver Lake which hire out of undergrad) but foregoing BB recruiting because you absolutely want to start straight from the buyside is a bit foolhardy.
And I'm saying this having never worked in IBD.
Your logic seems to be a bit backwards.
Either way, both would require basic modeling. Modeling for HY isn't that complicated and I don't see any fundamental difference from how equity guys would model a company.
Only thing I think that is substantially different for credit is knowing how/why something trades. It's a bit more dynamic than buy with PO of $10.
That, and knowing how to look at covenants, etc.
I went straight to a value-oriented L/S equity fund and when people ask me I tell them do two years of banking first. I was lucky but the two years of banking give you the training/networking/branding.
and is IB better than ER to go to hedge funds? When would funds look for ER guys to fill positions over IB guys, and vice versa?
@"FutureWaller" depends on what you want to do. ER is sector focused so you'd come into a HF most probably covering the sector you worked with in ER. The modeling in ER is also different but people from ER leave for HF all the time after a few years in fact its one of the most common exit ops. So ER guys are looked at when filling something sector specific, I think it'd probably work similarly in IB especially if you're in coverage banking
Looking for a future role at value fund, L/S, some event driven. more of a generalist rather than a sector specific role per se. So would a generalist role at a IB a better route? (these roles are generally only at smaller shops) or are HF's generally split into sectors and not having a expertise in one a disadvantage? Contrary to popular belief, I just feel ER would give you a better skill set for HF due to the in depth industry knowledge, idea formation, etc.. Why is IB said to be the better route?
I personally don't think IB is the better route if you're set on HF after a few years. ER gives you industry knowledge and focus within a subsector, but also slightly constrains you to that subsector (biotech within healthcare for example). If you're a coverage banker, you cover the entire industry rather than 20-30 names within a subsector so you get broader exposure
IB hands down. There so many exit opps available to you after 2 years.
Would a quantitative fundamental stat arb perspective be helpful here or are you looking for something a little less geeky? I know you're looking at banking so I'm guessing you're going more traditional HF, but when I think hedge fund I think DE Shaw, Citadel, Kepos, etc and a bunch of Math, Econ, andFinance PhDs.
While it's not the path that I'm intending on taking, it'd be very interesting to hear about your perspective coming from a quant fund!
I can see how banking would give you insight into a few companies or perhaps an industry if you worked in a coverage group. But I think the ER guys get more opportunities and are often better cultural fits for more groups. They can work well at an SAC, and they can work well at a DE Shaw. I'm trying to imagine quants and bankers working on a project together, and I have this image in my mind of Paul Krugman and Mitt Romney getting into this holy war of an argument.
I think whatever you pursue, it's nice to have a specialty of some sort. It's good to get staffed on a few different deals at first just to figure out what you want to do and who you like working with, but you need to spend a good 18 months- ideally more- covering one industry or perhaps becoming an expert on one interesting product (EG corporate bonds.)
We are always looking for industry experts who aren't afraid of getting their hands dirty on some code. And my suspicion is that even if you take the quant strategies part out of it, the traditional funds are always looking for industry experts, too. You can definitely become an industry expert in IBD, but if you know you don't want to be a PE guy, and you prefer having an occasional life outside of work for the next two years, I suspect you can do just fine in ER or even Fixed Income Research.
Now, should you take the hedge fund role or an IBD role? If this is a firm that people within finance would recognize nearly as well as the IBD role you're considering, and you think they're going to have you become an expert on an industry or a product, I'm not sure there's anything wrong with going to the hedge fund. The caveat is that you're selling your options for PE and arguably consulting and C-level executive roles. On the other hand, you're getting your life back for the next two years. There are bankers out there in their 40s who would pay millions of dollars to go from having had a 100 hour/week job in their 20s to having a 50 hour/week job. (We had an MD from a major BB- seat on the board of directors of the firm- say that he loved working on deals but he'd give up 90% of his fortune to get a life outside of work during his 20s back.)
Finally, one last question is whether hedge funds are the place to be. Have you read about CalPERS' decision (the largest retirement fund in the world) to pull out of hedge funds? I think CalPERS is wrong, but you need to give it some thought before you stake your career on the hedge fund business.
Everyone is pro-IB b/c WSO is heavily weighted towards current/future/ (mostly) wannabe bankers.
I say: it depends on the hedge fund opportunity you get. If you have an opportunity at a fundamental-focused hedge fund that is willing to 'train' you (i.e. ease you into things for ~6 months while you're learning), then I'd do that instead. You will learn a lot more than in IB. Your 'exit opps' outside of finance might be relatively restricted - but I suspect you won't want to work for anyone that values IB skills (drudgery and some analysis) over fundamental hedge fund skills (analysis and some drudgery).
One thing you should definitely ignore is all the talk of 'getting trained' in IB. This is the kind of bs that is constantly peddled by risk-averse path following types. The best training for being an investor? Investing. Second best (maybe)? Equity Analysis. Everything else isn't worthwhile. What you'll learn in banking is largely irrelevant, though the 'brand' value of a top bank can certainly help when recruiting for some funds.
This is a prestige industry you are always well advised to work for the best brand you can.
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