What doesn't work in buy-side job search (and how to fix it)

It's no myth that investment management (the "buy-side") job openings are scarce and competitions are fierce. Based on interactions I had with aspiring candidates, I felt the need to lay out what doesn't work. Before I start, I will note two exceptions (that I can think of) to the rule: 1) the "idiot sons and daughters of clients / LPs" type, who can get to anywhere without conforming to my criteria below, but most of us aren't born rich, so read on 2) the type who broke in despite having fatal flaws, whom I believe will have limited longevity in the profession than the truly prepared. 

In my opinion, a candidate should possesses the "3Cs" below (cheesy, but for marketability of the article): 

  • Content: actionable stock ideas
  • Concept: frameworks to analyze and value businesses, and process to identify compelling ideas
  • Connections: a network of buy-siders who can refer you to openings

For reference, I really loved flaco 2x2 matrix concept that's related to how I am framing this:

I generally think of a 2x2 matrix (shout out to consulting friends) with passion for the work and talent (which is always subjectively measured) on each side. Low passion + low talent = don't bother. High passion + low talent = maybe you get your foot in the door at the junior level, but are found useless pretty quickly before getting into the money-making seats. Low passion + high talent = can probably string together a few nice years but then burn out. High passion + high talent = people I've seen with greatest longevity and success. It's not a uniform distribution of these combinations / outcomes, and there are obviously so many other factors that determine probability of success which I've mentioned in other posts. But it's always helpful to think objectively which bucket you fall in for any high stress / high reward job like this.

Candidates come in the following categories with their shortcomings: 

The Clueless

The worst candidates. They make no effort to understand the day-to-day of a research analyst and have no passion for investing - just here for the money and the prestige. They see buy-side as a career path where financial reward is limitless (true) and work-life balance is great (also true), but missing the complete picture of the deceptively many hours of personal time dedicated to better understanding the world, forming contrarian views to identify mispriced stocks to generate alpha and refining personal investment process. This is the same type who will most likely ask how much salary one makes at a hedge fund or which tiger cub is "better" (if you are asking how much people make on the salary side, it's the first telltale sign that you don't know where the action is in this business). I am not going to bother discussing them here, other than saying: you guys are not breaking into the buy-side. 

The Producer (not a good way)

Stock idea (content) matters, but how can one come up with a solid work product without a process of identifying ideas, analyzing industries and businesses, and finally valuing that business? This type of candidate needs to develop a toolkit to alleviate a hiring firm's concern about whether the candidate has a repeatable process to handle whatever stocks given to them. I suggest reading a few classic investing literature (think Seth Klarman, Phil Fisher, Joel Greenblatt, etc.) but don't overdo it, and then start looking at stocks and applying the concepts. There are always going to be more people who can recite famous investor names or quote jargon such as "margin of safety" and "Mr. Market" than people with the ability to generate real alpha. Become the latter. 

The Networker

Buy-side is more skill-based than other professions. It's a wrong approach to start networking without first developing the intrinsic skills. So before you start reaching out to people, produce real stock ideas, develop your own research process and rehearse your story of "why buy-side now, why this firm, why this style of investing". Trust me, you can know thousands of buy-siders, but if no one is willing to refer you when a good opportunity comes along, you are better off quietly grooming yourself as an investor first. 

The Theorist

I fall into this camp, hard. I self-taught investing by excessively consuming Buffett letters, investment books and hedge fund letters and it's not a good thing. Yes, I have a lot of frameworks, but in hindsight I should have spent more time on looking at different companies. As nice as it is to speak passionately about the theory of identifying, analyzing, and valuing stocks, funds pay me to apply concepts - make money. So there IS such a thing as too much reading. For those that think they might fall in this camp, remember to allocate enough time to studying more businesses and industries.

The Directionless

There are infinite ways to skin a cat as an investor. You cannot be a jack of all trades, so the buy-side search becomes a balance between breath and depth. Obviously you don't want to be too limited to a niche where there are five funds in the world that perfectly suit your personal style, but you also don't want to be stretched too thin by trying to please, for example, both a multi manager and a long-only. The solution: talk to investors from many styles, read a survey book (John Train's "Money Master of Our Time" is the best one, "More Money Than God" by Mallaby is another good one), and assess for yourself what styles you resonate with, and then it's your decision of how big of an opportunity set you want to target, which directly impacts how many stock ideas you need to produce. Finally, remember that as long as you are not the portfolio manager, perfect alignment does not exist, so you should focus on finding a firm where you don't have to adapt (or bend yourself) too much. 

The Flawed Personality

Just like any job, the buy-side role has a selling component: convincing a PM to allocate capital to your stock ideas (or to give you the job, that's the first sale!), asking the right questions to get what you need from company management / investor relations / sell-side analysts, and so on. You need to interact with many external parties and that requires strong written and verbal communication skills and being a good human being. Both arrogance and social awkwardness can hurt but I view arrogance as a much bigger deterrent because in a typical hedge fund small team environment, if you fail the "airport test", tough luck getting in or surviving the job. With that said, there are tons of a-holes and antisocial types in this business at the top, so maybe it's not as big of an issue as I think. 

The Mentally Unprepared

In a profession where most jobs are filled without ever hitting a job board or a recruiter, it can be frustrating for candidates who get rejected, not knowing when the next opening comes up. I've been there and have the following suggestions:

  • First, accept the reality that it's not a fair game - for every opening, you could be competing with someone who has 3-5 years of real buy-side research experience. From the hiring manager's perspective, a plug-and-play is always better than having to train someone, no matter how much potential you have.
  • Second, it is a numbers game and it's a cliché but it's true - you only need one job, this search is as much about the ability to get back up than about getting in. Stay persistent. 

When I was in business school, I wondered why Carol Dweck's book "Mindset" appeared on a reading list for an investment management club. After reading the book and going through the journey myself, I wholeheartedly put Carol Dweck's on the top of my investing reading list as well. For those who have read the book, remember that growth mindset can help you stay resilient. So, if you get rejected for that long-only role, pick yourself up and remember it does not invalidate your competence and you just need to keep getting better and eventually someone will give you a chance. 

The One Trick Pony

As previously mentioned, job openings are hard to find. If you have trouble knowing where the job openings are, think outside of the box. I have written about the various channels to source jobs (check out my previous piece). Use as many channels as you can: start a Substack, start a twitter account and interact with real investors on it, submit your write-up to Value Investor Club and SumZero; Hell, submit your stock pitch to Sohn Conference Competition (what's the worst outcome? You don't hear back, but you got nothing to lose, rest is all upside, you could be that Wharton undergraduate who got hired by Ruane Cundiff). Continue to use the more traditional methods as well - cold-email (or LinkedIn) associates and PMs on the hiring team, applying on career website (worst method, going back to my philosophy of "avoiding HRs at all cost"), and applying on other independent job boards (or closed-loop job boards at your business school or undergraduate school). Make sure to get a buy-sider to "bless" your stock idea before building your brand on the more public channels like Twitter, Substack, VIC and SumZero because you should start off on the right foot (especially if you decide to use your real name) when building an online presence. Always assume everything you have published online is permanently searchable.

If you are in the journey for the buy-side search and hit a wall, I hope this piece helps you map yourself into one of these buckets and devise a plan of improvement. Life in general is about continuous improvement but I recently learned one also needs a short-term win from time to time. So keep improving and score that dream buy-side job (for that short-term win), but don't forget to continue on a lifetime process of learning and improving. 

Comments (42)

Jul 26, 2021 - 8:52am
Brightcake, what's your opinion? Comment below:

Thanks for writing this up, very helpful. It's good to know that the difficulty of making this move isn't just me hah.

I understand that a lot of this is geared towards equities. Would you have any insights how someone trying to move into the FI (credit for example) or global macro investing space would be able interact with PMs and generate/post ideas? Materials and data are a lot more sparse for these styles/ asset classes so would appreciate any ideas.

Most Helpful
  • Investment Analyst in HF - Event
Aug 20, 2021 - 10:15am

Thanks for writing this up, very helpful. It's good to know that the difficulty of making this move isn't just me hah.

I understand that a lot of this is geared towards equities. Would you have any insights how someone trying to move into the FI (credit for example) or global macro investing space would be able interact with PMs and generate/post ideas? Materials and data are a lot more sparse for these styles/ asset classes so would appreciate any ideas.

Credit guy here. Because of access to info flow/resources, it is more important to already have a seat to get a seat than in vanilla equities investing. Sounds unfair, but it also works to your advantage once you make it in as the barrier to entry is higher. As opposed to equities, where you can credibly generate pitch ideas based on public info, you really want to get your foot in the industry. Try to find a smaller shop, maybe less name brand, and just start getting in the flow. Then you are much better positioned to formulate ideas that you can pitch to bigger and better shops and upgrade your career. 

Aug 22, 2021 - 1:52pm
Brightcake, what's your opinion? Comment below:

Yeah thanks for the answer. I'm already around 3-4 years into my career, would I have to start from the entry-level if I do make that jump?

  • Analyst 1 in Research - Other
Jul 26, 2021 - 10:19pm

Wondering how important you think it is to define you idea generation process?  In my case I generally do not have a a set process I go through when evaluating an investment idea/trying to find my view, it feels more free form if that makes sense? Once I have the trade I am fine explaining and pitching it but the actual idea generation part of the process is extremely unstructured/hard to define for myself.  

Jun 17, 2022 - 1:50am
theghostofthestreet, what's your opinion? Comment below:

Use comps or unique generated metrics as a first pass. Come up with a thesis at a very high level, then determine what metric could capture that effect and then spread that metric for a list of names in the sector. Pair the list down and then dive deep. This is what has worked for me. The top down thinking part is an art that you need experience for to generate true creativity.

Jul 27, 2021 - 12:05am
anon3315, what's your opinion? Comment below:

Thank you for your post!

1) I was wondering if you could share some investing books you found helpful. I've realised few of them do look bit outdated in terms of content.

2) How do you develop a view different to consensus on few key drivers? eg. coming up with online penetration % that aren't anchored/biased to broker figures 

Jul 28, 2021 - 9:45pm
dickthesellsider, what's your opinion? Comment below:

1) Reading list: https://dicktoad.substack.com/p/dicks-reading-list

2) No set formula, one example would be sell-side is lazy and modeling linearly but your variant view is the forward growth will be exponential (such as, number of units going up, but average spend per unit is also going up), then consensus is forecasting 5% growth, but you come out at 9% because you are incorporating 4% per unit spend growth. 

Jul 27, 2021 - 6:26pm
OracleofBromaha, what's your opinion? Comment below:

I just want to say (as a fellow professional and someone who went through a rigorous job search to get to the buyside) that this is all absolutely golden advice. Putting in time to improve my stock pitches really paid off in convincing the people I met to take me more seriously, and I've seen that work for others.

Jul 28, 2021 - 1:38pm
westcoastbum, what's your opinion? Comment below:

GREAT post. Wish I had seen this while I was recruiting but can vouch for everything mentioned here as someone who broke into L/O AM right out of undergrad from a nontarget. This is a must read for anyone looking to get into the industry; It's not an easy move to make but nothing worth having in life is supposed to come easy I reckon. Added Mindset to my reading list as well. Best of luck to you in the future, look forward to seeing more content from you. Perhaps an AMA? :)

Edit: You already did one, which actually helped me a lot with recruiting. Another must read for folks interested in AM!

  • Research Analyst in AM - Equities
Jul 29, 2021 - 3:26pm

Nice post. Any advice for somebody already on the buy-side with 3-5 years experience that is looking to make a move? 

Understanding that have a strong network be probably the best way, but being in a tertiary city for AM makes that a little tougher to build a good network. 

How do you find out about openings? Does having relevant experience help with the hit rate cold applying to job postings? 

Jul 29, 2021 - 6:58pm
dickthesellsider, what's your opinion? Comment below:

I have always lived in metro areas and still think networking is hard because there is not enough aggregating functions for the buy-side communities, but you can scale your network if you put your heart to it and build connections one by one. The good thing is: if you are good at networking, every connection you have gotten can be cultivated into lifelong mentor/mentee relationships (and no need to be hypocrites, they can be job leads too). 

I do not support cold applying to job postings, no matter how relevant your experience is. The best jobs are the ones that you are the only candidate because you got an inside track. So I am pretty confident the opening for my next move will come to me without me applying to anything or scrapping LinkedIn job posts (though a lot of hidden gems on LinkedIn for buy-side job posts) 

Aug 12, 2021 - 3:54pm
Mike.S.P, what's your opinion? Comment below:

Really appreciate this post. I'm working on formalizing my investment/thought process for my best long ideas for the first time and I'm debating between a couple approaches to the process. On one hand, I want to really sink my teeth into 1-2 great pitches that I can know inside and out for interviews. On the other hand, I feel like I'm starting to lean into the "theorist" camp if I don't start looking at more names and developing decent enough pitches for a broader diversity of ideas. Do you have any thoughts on which may be more beneficial to growing as an investor?

  • Analyst 1 in IB-M&A
Aug 22, 2021 - 5:27pm

amazing post! Currently ss er and now starting to make 2/3 in depth buyside pitches for LOs. For my pitch how much does the financial modelling count? I definitely feel that I've nailed the business analysis and 2/3 investment points for why they make great longs but numbers wise is a pretty simple IS and dcf/multiple derived valuation fine? I definitely intend on delving deep into their financial accounts to support my investment points but time wise it's quite a stretch doing a very detailed model...

Aug 26, 2021 - 3:58am
mmiiiii, what's your opinion? Comment below:

I just moved into a research role covering everything from money markets to equities (coming from corporate credit). Any tips how to do well in AM?

Aug 26, 2021 - 5:43pm
dickthesellsider, what's your opinion? Comment below:

So many tips, hard to generalize. Only thing you know about yourself is are you passionate enough for this profession? If so, passion drives behavior - you will go listen to podcasts and read good resources and grow smarter every day you wake up.

Let me throw stuff on you: 

  • Take notes, be super organized
  • Know the details, but deliver your message concisely (you need to know everything to know what matters, takes time, but pay attention to what your PM / senior focuses on. They are your customers)
  • Better to be slower and right, than to be fast and wrong (AM environment is easier on that front)
  • Think about what numbers mean and how they help decision making
  • Ask GOOD questions (if you can google the answer, it's a bad question)
  • Network a lot with like-minded and get mentors (if you surpass your mentor, get new one) - from this point on, you should get jobs only through referrals because of ppl vouching for you (took this from S-curve capital on Twitter)

I'm done rambling, for now. 

Aug 27, 2021 - 5:44am
mmiiiii, what's your opinion? Comment below:

Thanks for the tips. I do really need to take notes and be organized since there's really no structure (relative to doing corporate credit). I do have a handle on the equities side since I also worked on the sell side for about three years and I love doing the work; it's on the fixed income side of the job is where I feel I am lacking...

May 25, 2022 - 9:10pm
junius, what's your opinion? Comment below:

from this point on, you should get jobs only through referrals because of ppl vouching for you (took this from S-curve capital on Twitter)

I'm done rambling, for now. 

Interesting point: as someone just starting out, I appreciate the insight.

  • Analyst 2 in IB-M&A
Jun 5, 2022 - 7:25am

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Jun 6, 2022 - 10:25am
dickthesellsider, what's your opinion? Comment below:

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