Why do LOs like MBAs so much?
Ignore title. I am a 2nd year Associate at a Large LO. I can't for the life of me understand of me understand why mine and other LOs prefer MBAs for analyst roles over their own associates. It can be pretty disheartening when you see your firm has a preference for MBAs with either no relevant finance or investing experience after 3 a three month internships, but will invest 3-5 years mentoring associates just to kick them out.
My firm does have a little visibility to getting an analyst promote, but it just doesn't make sense to especially considering that it seems like collectively the LOs don't hire associates from LOs to be analysts.
I truly don't get how taking me out of the LO learning environment and culture and shipping me to get an MBA where I won't have a shred of the resources I did as an RA will somehow make me a more competitive candidate and better investor for LO analyst roles.
Does anyone understand why LOs prefer MBAs?
Since most LOs don't beat their benchmark in ANY single year, their best bet: hire MBAs to show a brand and get their sales ppl to market the crap out of the products.
The oldies with mba were lucky enough (and it was generally easier) to get the jobs back in the days. Many of them take great pride in their mba credentials and often reinforce their egos by hiring graduates from business schools.
this is the right answer. in reality, the best education is solid experience. Full stop
credentials mean very little when it comes to investing. but if you have lots of AUM and don’t have to outperform the market to get paid — why not hire people to justify your own biases/past experience? hence - the MBA. can argue people in debt/recent hires are usually more hungry/hopefully fresh workers as well. i agree with OP it makes no sense
CFA is similar. it’s a small plus, fundraising/marketing tool large managers like
Anything to justify premium fees for negative alpha.
Ignore my title - maybe the fact that a lot of these MBAs from HSW actually have really solid work experience in IB/PE and bring a wealth of experience aside from just doing 2-3 years at a LO? I think clients like to speak with Analyst / PMs who have a broad range of experiences even before their time at a fund.
Not really sure if you read my post or what LO you work at, but I didn't say anything about the GS -> CD&R -> M7 MBA that has both relevant finance and investing experience. I'm referring to the 4 years in strategy consulting at big 4/Tier 2 -> M7 -> LOs. For example, my LO just hired an analyst from H/S that has less the 4 YoE and was in data analytics pre-MBA to be an analyst. No offense to this analyst, but I can't imagine that she was better qualified after a 3 month internship than the Senior associates that have been here for 5 years.
Also, idk what LO you're at that has a 2-3 year program. Mine and every other LO I've seen has a 3-5 year RA program with the later years being the senior RA timeline
I'm pretty sure the answer is that LO firms are not that clued in to the high finance job market because they don't have to be. Fund-level performance is important but for a lot of firms AUM growth is driven by superior distribution. So in that sense, the MBA window-dressing is helpful.
Some firms do live and die by performance (these tend to have a partnership model vs publicly traded) and these firms tend do better at junior talent, but still not perfect.
It's also tough because the LT effect of hiring a shitty analyst is minimal: if the analyst pitches stocks at random, they will track the benchmark on average. Also, a good PM will either not execute their trades or size them smaller so their weighted impact on the overall portfolio will be tiny. At some point, this analyst will get pushed out, which is fine for the firm because not every analyst can make PM anyways.
tl dr: the consequences for hiring shitty analysts are insignificant and delayed
I like this answer and I agree +SB.
The very top LOs tend to bring on interns who did IB PE top MBA ( or strong public experience) and the ones who got offers from this background moving to publics tend to be very talented. Why do the best HF jobs fish in the same talent pool for high 000s to 7 fig guarantees in year 1? If you did IB strong PE and got the strongest recs from PE firm to get into top schools from that funnel you are usually (not always) very sharp. These funds are asked about turnover by LPs a ton so mba internship is perfect way to vet fit/performance for 3 months from a talented pool. It does help that they tend to be more polished to put in front of clients but that is secondary. Explaining their viewpoint but there are some very strong pre-MBA analysts who should be in the mix.
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