Interview with Simple As...Hedge Fund Analyst
Mod Note: Each day we'll be posting the top WSO forum posts of 2014. This one was originally posted on 2/26/14 and ranks #22 for the year by total silver banana count. You can see all our top ranked content here.
What is your current job title and a one-sentence description of your primary job responsibility?
Junior Stock Picker
What are previous positions you have held and how many years of experience do you have?
Corporate Strategy Analyst (~2 years)
Undergrad: Did you go to a "target", "semi target" or "non target"?
Non-target. On another note, I hate the term "semi target". Either your school gets recruited at or it doesn't.
What was the most useful thing you learned in undergrad that you apply in your current position?
I learned how to approach a question objectively. I do my best work under pressure, and, acting accordingly, I often wrote all my papers (often 10+ pages in length) the night before they were due. As a consequence I didn't exactly have a lot of time to go hunting around in obscure places to find sources/information that fit my thesis. Instead, I gathered as much information as possible the day before and then skimmed it for the strongest evidence of either side of an argument (most of the papers I wrote were position/policy papers). Obviously none of this is groundbreaking by any means, but it's surprising how many intelligent people are unable to disregard their personal beliefs when approaching a question or debate.
What was the most useful thing you learned in undergrad that helped you get where you are now?
I learned how to argue both sides of a question equally. My favorite professor used to make us write a position paper and then immediately write a paper taking the opposite side of the argument. Being able to understand and articulate both side of an argument is very important as an Analyst. If you don't know who is on the other side of your trade and why you're asking for trouble. I'm not sure where it originated from, but there's an old poker adage, "If you're at the table for 30 minutes and can't spot the sucker, you are the sucker." Know your enemy as you know yourself… or some shit like that.
What was your most useful class and why?
Presidential Rhetoric and Campaigns This class provided me with a useful foundation of knowledge on how to read people and understand framing, etc. Obviously this is helpful in speaking with management teams, other investors and understanding market psychology. It sounds kind of silly and slightly embarrassing, but because of my interest in behavioral finance I've spent a lot of time working on improving my thought and decision-making processes (read: I read a lot of self-help books).
During recruiting, how were you able to set yourself apart from other competitive candidates at your school?
I think what really set me apart was my ability to talk about the market and specific businesses intelligently. I was lucky enough to have the thesis for a few of my stock pitches play out pretty well during my interview process, so in that sense I was very fortunate and likely wouldn't have gotten the position without some serendipity.
What kind of internships did you have during undergrad?
Accounting, Consulting, PE
Grad school: Did you get an MBA (or MSF or equivalent) or are you considering it?
I am considering an MBA and a few other assorted Master's degrees for Fall 2015 matriculation. Definitely not sold yet, though. Rebranding would probably be great for my career, but knowing I wouldn't grow my skillset in an MBA program and the opportunity cost / time away from the market is holding me back from going all-in with regard to the application process.
How did you initially "break-in" to the industry?
I broke in through an online resume drop. A vast majority of buy-side hiring (at least at the junior levels) is done through headhunters. And unfortunately, they prefer bankers w/ a typical target school background because they're easier/less risky to present to a client. Bankers are a known commodity and are likely going to have the technical skills (modeling) to walk in and not slow things down too much.
The good news for people from non-traditional backgrounds is that in my experience the recruiting process is not very structured, making it possible (but certainly not easy) to break in. My suggestion is to begin building a network long before you attempt to make the jump. It's a small industry and everyone basically knows and talks to everyone, so if you impress a few guys and they know you're looking to make a move they may be able to pass your resume along to someone at another shop who is hiring if they can't push you at their own shop. This network can also be immensely helpful once you're an analyst in doing your job.
Disclaimer: It is incredibly difficult to land at a shop even through the traditional channels and becomes exponentially harder the farther outside the cookie-cutter background you go. I'm not trying to be discouraging, but it's necessary to come into the recruiting process with the right mindset and realistic expectations. I didn't even bother with contacting the Lone Pines and Vikings of the world because I knew I had as close to a zero percent chance as is humanly possible. And I hope it is evident in my posts here on this site that I feel incredibly lucky to have landed at my no-name, small shop.
What were some of the main factors in getting the job position you have now? I can say with confidence that the only reason I made it past the resume screen is that I had some experience managing money for a few small businesses and they needed someone who was capable of hitting the ground running day one. I received the offer because of the quality of my pitches during the interview process and an ability to think outside the box. From resume drop to signing the offer the process took ~8 months and four in-person interviews, meaning that I had to pitch four different businesses over this time frame. Luckily for me, each of my theses played out perfectly over this period, certainly doing a great deal to impress the people at my current fund.
What are some of the specific things you do in your current position?
I read SEC filings/industry reports/SS research. I speak with management teams/industry experts. I talk with other buysiders and sometimes SS analysts. I have maintenance duty on positions I sourced. I occasionally field questions from clients. The research process thread I did a while back is a good example of the things I do as part of this job.
What is a day in your life like during the workweek? Can you give us an hour-by-hour run down of your typical day?
6:00am – Alarm
6:30am – Eat, shower, get dressed
7:00am – Drive to the office
7:30am – Check email / schedule, read the paper. Sometimes we have informal meetings to catch up on what's going on, etc.
9:30am – Market open. Start / continue / finish whatever research I'm working on
12:00pm – Lunch. Usually eat at my desk, but try to go out at least once a week
1:00pm – Meet with my boss and/or rest of the investment team / make calls to management or IR / talk with other analysts
4:00pm – Market close. Finish up notes from the day
5:00pm – Hit the gym
6:00pm – Print out a K and head home
7:00pm – Hang out/read/eat dinner
12:00am - Bed
What is your favorite part about the job? What is your least favorite?
My favorite part of the job is getting the opportunity to look at the "big picture" while also getting to deep-dive on a business. As a generalist who sources 95% of his own ideas, I get the opportunity to look at the market/economy as a whole and decide which themes/trends to follow in finding ideas while also retaining the job of doing the in-depth research on the company itself. I think this experience will be a huge leg up should I ever have the opportunity to become a PM.
My least favorite part of the job when I'm overruled by my boss on something I have high conviction. I look up to Stan Druckenmiller quite a bit and one of my favorite quotes is, "Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular…" So when I come to him wanting to really bet on something he often reels me in some, which can be incredibly frustrating. It's probably a good give and take between us, but it's hard to take sometimes because there's often a sentiment among the older guys in the business that no one south of 30 (or insert other arbitrary age) can have a good idea.
A recent example would be a company we owned in size (relative to our normal positions) that is probably most well known for making inputs for certain communication devices most all of us have. Sales of said communication devices have been a little lackluster and an expected expansion of the devices to a new market had not happened heading in to our holding's most recent earnings. About a month or so prior to earnings my boss informs me that he's going to be scaling down our position in this company on the expectation of less than stellar earnings. His assumption is pretty reasonable, but I believed that these issues wouldn't manifest themselves until later (for reasons I won't discuss here). He disagreed and began scaling down the position and come earnings the company did anything but disappoint.
In all fairness, I could just have easily been wrong, but given the quality of this company and it's businesses, a dip after an earnings miss would've only resulted in a buying opportunity in my opinion.
How did your background (life up until graduating college) best prepare you for where you're at now?
I'm competitive and self-critical almost to a fault. As an example, my parents love telling a story from my glory days playing HS football that helps to sum up my personality… In the 4th quarter of tied game my sophomore year, I broke a run ~60 yards for an "untouched" touchdown. However, during the run, I made a wrong "cut" that would have resulted in me not scoring had the other team's safety been of a higher caliber. On the ensuing kickoff I was lucky enough to make a solo open-field tackle on the returner, forcing a fumble that one of my teammates picked up and ran for a touchdown, effectively putting the game out of reach for the other team.
I probably should have been elated at the events that just transpired, but instead all I could think about was the fact I should've been tackled. On the game film you can see everyone celebrating while I walk off the field like someone just shot my puppy. I guess the point of my story is that it's not enough for me to just be right or win as judged by the outcome, but the process also needs to be perfect for me to feel as though the outcome is a win. If I'm long a stock with a price target of $70 and it hits my target for a reason that is not a part of my thesis, in my mind I feel like I just got halved. I think this is a pretty decent quality for an Analyst to have because to have any amount of longevity in this job your process needs to be repeatable. The Street is littered with one-hit wonders, but there aren't nearly as many guys that have been grinding it out year after year with consistency. Hopefully that part of my personality (and some good fortune) helps me to become one of those guys someday.
What is the company culture like at your firm? What is the size of your firm? I guess the best way to describe the culture would be "laid back – intense." We all like to joke around and shoot the shit with each other. I wear jeans a lot and blare rap music way too loud on a regular basis. But, things can (and do) turn serious pretty quickly. When you're picking winners and things are going well your eccentricities are pretty easily overlooked, but when you're not doing so hot the mood and people's demeanors change quickly. My picks affect everyone else's bonuses just as much their picks do, so when I blast my Kid Rock/Eminem mix from my office it's all good unless I'm making mistakes. 10-15 people total
What type of person (what background / knowledge / experience / personality) is best fit to do your type of job?
A good Analyst really enjoys sifting through a ton of information to understand a business really well. Adults used to describe me as "inquisitive" when I was a kid, which is basically a nice way of saying I was always going around messing stuff up to figure out how it worked. When I was like five or six I completely disassembled my dad's computer in a misguided effort to figure out how it worked. Let's just say he wasn't too happy.
Did you ever have a mentor and who were some other influential people who helped you along the way?
No, I've never had a true mentor in the sense that there's been one person who has helped bring me along professionally and guided my career so far. My parents have been a positive part of my life, I have a pretty decent relationship with my boss and there are certainly some older guys that I respect and talk to quite a bit. But, good or bad that's not exactly my personality. It's probably held me back some, but I really love that part of my personality and don't think I would be the same Analyst today if I was different (I'm not implying I'm a great analyst by any means). It's really hard to explain, but I think and go about things a little differently than most people I've come across (only time will tell if it's a good or bad thing). Maybe that makes me not conducive to being a mentee or no one has liked me enough to be my mentor, but it's not something that really worries me.
Are the sacrifices you've made to date worth the benefit realized by you so far in your career?
I'm not sure that I've made any real sacrifices so far in regards to my career. But leaving my corporate job to join a small – ish, unknown hedge fund (my current shop) was one of the toughest decisions I've made to date and so far it's definitely paid off. I knew that I would enjoy the work betterand I had had a decent amount of success managing some money for a few small businesses, but didn't know how well I would do as a true professional investor. So leaving a steady paycheck at a great company in which I had already established myself for something I really didn't know how well I'd do was nerve racking to say the least. I ended up deciding to take my current job after my girlfriend, quite literally, said I was being a pussy for second guessing a decision I had worked so hard to put myself in the position to make (by this point I had had ~25 interviews with like 10 different shops). This is just one of the many times she's backed me up / put things in perspective / kicked my butt into gear and I still have no idea why she even begins to care so much.
If you weren't working in finance, what do you think you would be doing?
My lifelong dream was to be a Navy S.E.A.L. and I went to college with the notion I wanted to be a collegiate football coach. It's actually kind of a funny story, but I didn't even want to attend college when I was a junior/senior in high school. I was pretty much dead set on enlisting in the Marines right after graduation and only entertained the idea of college because I was being recruited to play football. I was actually at the recruitment office ready to sign my enlistment papers when I saw how distraught my parents were about my decision. They were really supportive of my decision to enlist, but it had always been very important to them that I go to college. So I decided no to enlist and now here I am today. I guess I'm living proof that when one door closes another door opens. So don't get discouraged about the things that don't work out exactly as you planned, there's a good chance something even better is just around the corner.
What keeps you motivated?
I get to learn something new everyday. Whether I'm researching a new company, talking to an industry expert/management team or just experiencing something new in the market everyday is a little different. I think PTJ was quoted once as saying something like, "If life ever ceased to be an educational experience, I probably wouldn't get out of bed." I agree wholeheartedly with his assessment.
How much does money motivate you?
I guess probably like 50%. There are a few things I'd like to do at some point in my life and they all require a little bit of money. That being said, I always like to joke that I'm one bad call from being back in my hometown running a small family business, which is a little bit of an exaggeration, but at the same time isn't and I'm perfectly fine with that if it becomes reality. I never had any money or cool stuff growing up so by virtue of not knowing any different I'm pretty low maintenance and don't feel like I need a whole lot. And I genuinely love what I get to do everyday and wouldn't complain about doing it for a fraction of what I make right now.
How much does someone in a role like yours make per year (base + bonus)?
I won't discuss my compensation directly, but a junior analyst (~2 years out of undergrad) can probably safely expect somewhere between $100 – 150K base salary and a discretionary bonus of 0 – 100% of base depending on several factors, usually most important is the fund's / team's performance. A junior guy coming directly out of undergrad (very rare) can probably expect a base salary of $70 – 100k with a discretionary bonus of 0 – 100% of base.
Have you ever considered leaving your job to start your own company?
That's the dream and hopefully I'm headed in the right direction to make it happen. However, I'm enjoying the journey and if it doesn't happen or I end up as a #2 guy at a good shop I think I'll be more than happy. As a side note -- I think it's often overlooked that a solid track record is only half of what it takes to build/start your own shop. Fundraising is a whole different animal and not everyone is cut out for it or cares to deal with it. I know I got into the business to be an investor, not a salesman, so that would be something I would really have to think about if the opportunity ever came about.
What is the one tip you would give to current students (undergrad and/or grad students) to help them succeed? Find something at the intersection of your talents/abilities and what you enjoy doing/are passionate about and follow it. Just being talented is enough to be successful in the vast majority of situations. The NFL is littered with uber-talented people who couldn't cut it because the passion wasn't there. JaMarcus Russell, Jeff George, Todd Marinovich and Ryan Leaf are just a few who come to mind. Don't be afraid to bet on yourself. If you don't, how can you expect anyone else to?
What are some tips for moving up and becoming "the boss" (i.e. a department head / managing director / partner)? Moving up the Analyst food chain is very performance-driven in my experience. I'm sure there are individuals that have gotten in and managed to get dragged up the totem pole because of who their daddy is or something like that, but there's just too much money at stake and too many talented individuals out there for it to be a regular occurrence, in my experience. I could definitely be wrong or not have a large enough sample, though. The jump to PM from Analyst is something I am not as familiar with and don't feel as comfortable espousing on. I can confidently say that a great Analyst will not necessarily make a great PM nor does every Analyst necessarily want to become a PM. Most PMs spend less time doing deep research on specific companies and more time thinking big picture – recognizing themes and constructing the portfolio to exploit said themes with the best risk/reward profile. They're also much more client-facing than their analyst counterparts, which is very personally dependent as to whether it is good or bad.
Any specific cold-emailing or cold-calling tips you can pass on? Keep it short and direct.
I am a [insert year] at [insert school] studying finance and underwater basket weaving. I am hoping you would be willing to answer some questions about your experiences in the. I understand you have a busy schedule, but any time you can spare would be greatly appreciated. I have experiences in [insert internship] and [insert something else relevant] and am very interested in a career in investment management. Thank you for your time; I am looking forward to hearing from you soon.
On another note -- If you're not confident in your ability to network, start by contacting people at smaller shops and as you get more comfortable/better work your way up to the places that you'd really like to work, etc. Sometimes you gotta run through like 10 or 20 hood rats before you can move up to the upper echelon type ho.
you can pass on?
Just be likable and persistent. Most of the guys who will actually return your email in this business are investing junkies, so if you show that same passion/drive and are decently likable they'll love you.
What is a memorable experience you have of how someone got your attention? (for networking / internship / job purposes)
I don't think anyone has done anything really memorable, but the best thing you can do is be able to actually carry on a conversation about a business or the market in general. You'd be surprised how many kids trying to network or people interviewing aren't able to do that.
What are unique things college students and young-professionals can do to separate themselves from the crowd? You want to separate yourself from the crowd with your passion for investing and knowledge of the market/businesses. In every other way you generally want to be just like the crowd. The "crowd" means kids from top schools w/ good grades andbanking programs on their resume.
What are some ways (in general) someone could best prepare for an upcoming internship or ft job at a firm like yours?
Assuming this is the time between the offer and start date, just keeping doing what you've been doing and be ready to work hard. You're not likely to get hired in the first place if they're not confident in your ability to do the job on day one so the most important thing is having the right mindset. Come in ready to learn and work hard and you'll likely be more than fine.
What is your opinion on gaining relevant experience at a lesser-known firm vs. working for a brand name firm (with less relevant experience)?
It depends. In most cases I'd go with relevant experience, but can't make a blanket statement. If it'sand Ops, I'd go with MM IBD everyday of the week and twice on Sunday. But, if it were between MM M&A and BB coverage group, I'd probably go with the BB. There are too many variables to make a definitive statement, but this is where your network and having people you can trust comes in handy. There aren't too many unique situations when it comes to jobs and exit opps in finance so there's a good chance someone else has been in your shoes, find them and learn from them.
(If you are in a hiring position) What do you look for in a potential intern candidate?
Bearable to be around – We don't have to become best friends, but if I want to throw myself out the window rather than have lunch with you it's probably not going to work out. Being tolerable usually entails being able to carry on a conversation about something other than the market, being able to laugh, etc.
Autonomous – I want to be comfortable with giving an intern a ticker and saying, "tell me what you think by Wednesday" and not seeing or hearing from them until Wednesday.
Confident – This kind of goes along with autonomy, but the intern should be confident enough to "play to win instead of playing not to lose." I guess that means not to be afraid to be heard or assert oneself. You only learn by putting yourself out there, have some faith in your own abilities.
(If you are in a hiring position) What do you look for in a potential entry-level hire?
Passion for investing and evidence of a strong work ethic/desire to learn. We don't bring someone in for an interview if we're not reasonably confident they have the raw skills to do the job. So if a person makes it to the interview stage it's all about showing a passion for investing and work ethic/desire to learn. Your passion for investing and work ethic are usually most noticeable during the stock pitches and general market conversation. Desire to learn is evident in demeanor/tone and questions asked.
(If you are in a hiring position) What are your favorite interview questions you like to ask potential new hires? I usually play the "silent second chair" so I don't ask many questions, but I pay particularly close attention to the stock pitch and general conversation about the market. It takes all of about 5 minutes to figure out whether someone actually knows what he/she is talking about or is just in the interview because it's the next logical step after an Analyst program.
(If you are in a hiring position) What are some of the worst mistakes you've seen people make in interviews? The worst mistake I've seen people make is trying to BS their way through a stock pitch and/or general market conversation. "I don't know, but I'll find out and get back to you" is a much more acceptable answer than a made-up one. I don't know many interviewers that expect someone trying to get an entry-level job to know everything about a stock/the market.
If you review resumes (or have in the past) - what are some of the most common mistakes you've seen? The most common issue is blatantly overselling and overstating of experiences. Your resume is a collection of facts; there isn't any artistic license involved. It seems like every third resume I get these days has "CEO" on it. You were not the CEO of your lemonade stand, tutoring business or male escort service. Maybe this doesn't bother anyone else, but it's a huge pet peeve of mine.
If you review resumes (or have in the past) - what is something someone can do to make their resume stand out among the crowd? Your resume should show that you have the raw skills to do the job and that you've been using those skills at a high level. As an example, let's imagine there areM&A analysts in the same resume book, one went to Michigan the other went to Harvard... There's no worry about either kid's technical skills and they're both obviously intellectually capable of doing the job, but barring any glaring problems with the H kid, he's going to get the interview over the UMich kid 9 out of 10 times (probably all 10). Once you're in the interview you're (pretty much) on equal footing so it's just about proving you're the best of the qualified candidates. The objective when putting your resume together is to maximize your opportunities for interviews not to be the Dos Equis guy.
What are your thoughts on this statement: "Wall Street is a more meritocratic place than most. If you are a young person and you have good ideas, people will often listen to them, if you are in the right role"?
I can't speak for anything other than the fundamental equity HF part of the Street, but once you get in it is fairly meritocratic in my experience. You can slingshot up the food chain or get taken down a few notches pretty quickly based on your performance. However, getting in is all about fitting the mold of Top School w/ great grades > Top Bank/Group. So yeah, once you get in the buy side is a fairly meritocratic place, but one can certainly argue that getting in isn't all that meritocratic.
Any other interesting stories or wisdom you would like to share with the WSO readers?
Don't be afraid to grind it out and work your way up. Good things usually come with a struggle.