ER vs IB? Best option for MM HF exit
Hey monkey's, have recently secured a FT role in ER at an UMM IB and have had my eyes set on Pod Shops for quite a while. My bank is fairly flexible when it comes to moving teams internally, just wanted to get a gauge of what's consensus for the best seat to be in for an exit to a MM HF? Seems that traditionally IB is the preferred route because of the talent pool that exists at a junior level, was thinking that I could do 2 years in ER then move to IB for 2 years before propping myself up for an ideal exit? Or should I stick to doing 2 years in ER and try recruiting then? Obviously would like to get out of the sellside as soon as I can but also want to prioritize learning and being a strong candidate - any advice would really be appreciated!!
Based on the most helpful WSO content, here's the breakdown for your situation:
Equity Research (ER) vs. Investment Banking (IB) for MM Hedge Fund (HF) Exits:
Your Proposed Path: 2 Years in ER, Then 2 Years in IB:
Alternative Path: 2 Years in ER, Then Recruit for HFs:
Key Considerations:
Final Advice:
Remember, the best path depends on your personal goals and preferences, but ER is a highly respected route for HF exits, especially if you leverage your experience effectively. Good luck, and keep crushing it!
Sources: https://www.wallstreetoasis.com/forum/private-equity/going-from-mm-investment-bank-to-mega-fund?customgpt=1, Future of Equity Research - 12+ Months into MIFID II, Future of Equity Research - 12+ Months into MIFID II, Q&A: I am a Hedge Fund recruiter, Q&A: Barclays IB to MM Private Equity
I've seen more IB guys at my firm. Anecdotally, when we hire, we exclusively look for people from our graduate program or IB + PE, not ER.
Thanks for the reply! Interesting point you make... what does the standard recruitment process look like then? Are you guys heavily reliant on HH's doing the first batch of filtering of talent of people who work in IB or PE? In that case, if a candidate from ER was to network with a certain pod and get along with the team well, are his/her chances not any higher because of the ER background as opposed to IB or PE? I'm assuming to some level the preference of IB vs ER is team dependent and a lot of the decision will hang on whether the candidate has a genuine interest/passion for markets - anything I'm missing from the picture?
ER probably prepares you better but I've interviewed with PMs during my grad process who explicitly preferred IB. Grain of salt tho
Despite my heavy love for research/that being what I did, the recruiting game really has changed over the last 10 years. IB really is superior for HF recruiting.
Unfortunately though, that's for analysts with 0-2 years of experience. You doing ER for 2 years and then IBD for 2 years, you will have "aged out" of the typical recruiting timeline.
At this point, grind it out at this UMM IB in ER. I'd start networking like crazy with buyside peeps to try and get looks because HHs are not going to be helpful.
Thanks for the insight! Could you deduce any reasons why the recruiting game has changed the way it has? From my understanding, people in ER are obv public markets facing and juniors get better exposure to modelling (albeit im sure this varies in technicality depending on lead analysts). I get the intense level of competition there is for breaking into banking but how applicable would you say their learning is first two years on the job vs ER? Curious to learn your perspective!
The blame for the recruiting game changing the way it has is 110% entirely due to headhunters.
I agree with you - ER is much, much closer to the job you'd be doing at an HF than IBD is. It's public facing, juniors get good exposure to the type of modeling you'd be doing at an HF.
The issue is that starting around the mid 10s (coincidentally right when I graduated undergrad), HFs decided to just latch onto the headhunter infrastructure around the IB-to-PE track for talent. Headhunters are disgustingly uncreative, and just select for "prestige" of banking group. So what they end up doing is just presenting HF opportunities to the same candidates they present PE opportunities for, and a lot of the times those candidates who's biggest interest in PE is because of the potential comp are open to those HF opportunities because of the potential comp there too.
Their learning the first two years on the job doesn't compare to the learning in ER, for sure. And that's a big reason why this shift is frustrating to me personally.
I have always seen a healthy mix of IB and ER in any buy side gig. In my experience, LO's predominately hire from ER while MM's have that mix. Check out the shops you want to target and see where their associates/analysts came from. If everyone came from JPM IB then chances are they want peeps from IB.
What's the rationale for the apparently strong preference for ib over er? The latter seems more applicable to investing in public markets
The only thing that comes to mind is that the pay disparity is such that stronger candidates are more likely to do banking
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