How to get to a HF without doing IB?
Current rising sophomore and I have dreamed of working at a HF since high school. I have a passion for public markets, I enjoy reading stock pitches, creating investment theses, and I find the investment process very intellectually stimulating. I've been keeping a watchlist of 8 names that I cover and have been updating my models quarterly, listening to earnings calls, and trying to learn as much as I can about their respective industries. I would also say the competitive nature of the HF industry is what entices me the most.
I have always wanted to do fundamental L/S equity (either a pod shop or top SM, depending on which process/strategy I learn to enjoy more down the road), which I understand recruits mainly from IB or, in the case of SM's, from the 2+2 path. I struggle with the idea of going into IB. The idea of working consecutive 120 hour weeks, aligning shapes on powerpoints, and grinding out excel models makes me wanna blow my head off. I don't wanna waste 2 years of my life doing something I am not passionate about. I am not trying to come off as someone who knows exactly what the job entails, but all the threads I have read on it pretty much echo what I stated above. I understand that you gain useful technical skills and a certain attention to detail, but all of the HF analysts on this forum say the only useful skill gained is modeling, which I feel can be learned without IB. I feel as if doing IB only with the goal of going to a hedge fund is the wrong reason to go into it.
That being said, IB is the most efficient path to take to a HF. I've seen people on LinkedIn leave for a hedge fund after 1-2 years. And if my goal is to get to a hedge fund as quick as possible, my plan and thought process is to go through with the IB recruiting process and see what happens. Yes, there is ER, but most people that do that seem to leave for HF's after 5-7 years. And yes, there is the Academy, Citadel's Associate program, and Millennium's 2 years of ER at UBS, but I am not at a top target, not a math olympiad, and do not have the resume to even compete for those roles.
I am hoping to receive some advice and/or recommendations on alternative paths out of undergrad that can get me to a L/S HF. My main thought is to network and try and land an internship, then FT position at a small <$2 billion AUM L/S equity fund, hopefully crush it there, earn a track record, and then try my luck at maybe a pod shop or try and switch to a top SM (tiger cub, etc). But, like I said earlier, I would like to try and make that switch as soon as possible, preferably something in line with the 2 years it takes from doing IB. All insights/advice are appreciated.
Bump
I followed the 2+2 path and work at an SM, but have friends across the industry with different backgrounds so can provide some insight.
1. Do NOT join a small SM out of undergrad, this is one of the worst mistakes you can possibly make. You will not learn the fundamentals at a SM with no formal training program. I’ve seen extremely smart kids from top schools that went to SM out of undergrad and were looking for new jobs 18 months later. The probability for you being successful enough in that role to follow the path you outlined is >10%. Additionally, your plan likely wouldn’t work unless you’re a genius-level investor as MMs recruit primarily out of IB/ER and ‘top’ SMs do the same out of 2+2 or b school - not ‘unknown’ small SMs. Don’t mean to offend you but this advice applies to 99.9% of people, including myself.
2. Your best bets, unfortunately, are IB, ER, or P72/Cit and maybe MLP training programs. I would personally push you towards IB because of the modeling reps and optionality to exit into non-pod funds.
There isn’t a secret shortcut to get into a HF, following the tried and true blueprint that works is my advice to you. Happy to answer any followups you may have.
I really appreciate your advice. Couple of follow up questions:
- Are there any specific banking groups that hedge funds are attracted to? My guess is that they prefer coverage groups because you start to learn an industry really well.
- Also, how much does banking group prestige matter? Like I said, I am not at a top target so EVR M&A, PJT RSSG, CVP, etc are out of the question for me.
- Do most of the top SM's only recruit from the 2+2 path? Or is it possible to get to a tiger cub (Viking, D1, Coatue) from IB?
- Why do you prefer the SM model? Do you have any desire to try your luck at a pod one day or are you satisfied with the investment approach of your fund? I have read that SM's is more fundamental, long term stock picking while pods are more focused on trading within quarters
Absolutely, happy to help.
1. Not really, the better the group the ‘easier’ it may be to place, but not always the case since candidate matters much more than group at most funds. A TMT pod may prefer someone from a TMT IB group, but ultimately it is just what the PM prefers.
2. The pod shops don’t care, but specific top pods within a pod shop might (depending on PM). The well known SMs that sometimes take kids from IB do generally care about prestige, however. This isn’t like PE though where prestige trumps everything though. If you are talented enough to convince a fund to give you a shot, you can land at 80% of places despite your bank/group.
3. Coatue is doable, but would not want to work there straight out of IB. The other tiger cubs and similar funds, no. Would also not obsess over tiger cubs, not the best places to work and there are plenty of more attractive funds out there.
4. Initially joined SM for both the stability and since it was so rare for a seat to open at my current place that I couldn’t pass up the opportunity; have been here for ~4 years now. Would rather not join a pod since I feel fairly compensated and intellectually engaged at my current place. The vast majority of SMs that market themselves as ‘long term’ investors are anything but that. They oftentimes follow pod trading patterns but with slightly longer hold durations. There are lots of things wrong with this but I won’t get into it.
I'm curious, would asset management at one of the BBs or starting as an analyst at places like Fidelity, T Rowe, Pimco, Wellington be considered a viable stepping stone as well or not?
Hard to make the switch from LO to the kinds of SM HFs that OP is interested in, but the top LOs you mentioned are very desirable and competitive seats out of undergrad. Would absolutely not go for BB AM out of school. Not sure what the appeal is besides the increased name recognition?
How small is too small?
Literally in the same position as u, sophomore recruiting for ib that doesn’t really want to do ib, not at top school and not a math genius , have models on names and trade my own PA, such a tough situation , let’s chat
For sure. PM me.
Ignore title - at a large SM HF
I agree that frankly the best bet is still IB or the MM training programs. Job market is pretty efficient, branding + training matter for your first job out of college
But my overarching advice is that true passion for investing is pretty rare even among Wharton --> EB kids so if you have that, you'l get a lot further ahead in the world than you might think. Keep on learning and soaking up everything you can. My PM likes to tell me there's no substitute for experience in markets & following the same stock over multiple cycles.
Feel free to DM me, but can't promise I'll get back to you right away
Best bet given your background/preferences is a structured program like Academy/CAP/Millennium UBS ER. Don't need to be anywhere near WHYP math olympiads to get in, I've been involved in the recruiting process for one of them in the past. Some of these programs are actually non-target heavy and don't care too much about pedigree given their meritocratic scrappy nature.
Would rank them as Academy > CAP >>> Millennium UBS ER.
Also look into Bridgewater's investment team summer internship, but have heard anecdotally it's quite a bit more competitive than Academy/CAP/Millennium
I was in the same boat as you. Made it into one of the undergrad programs at Cit/P72/BAM/Millennium. PM me
I was in the same boat. Got lucky enough to get into an undergrad program at one of the big MMs. Cit/P72/BAM/Millennium. PM me, happy to chat
PM sent
You are not qualified to work at an HF if you don’t go through certain jobs beforehand to pick up the necessary skillsets. Period end of story.
How does that logic apply to the MMHF grad schemes then lol? Which are arguably the best paths for prospective hedge funders.
It doesn’t. Obviously the training academies will equip you well. But OP’s path wouldn’t work
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