Hi, I am a ultimate year student interested in working in hedge fund in the long run. However, I was wondering if starting my career at an hedge fund is necessarily the best choice. I understand that most buyside firms are lean in structure and don't have the manpower to train junior people. As competitive as it is, junior level position at hedge fund might give graduate big prestige given the competition, yet from a long term perspective, would it be more wise to build up one's modeling skills and market insight from a sell side Equity research team where the training could be more rigorous if I am not wrong? Any experience sharing is welcome.
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Speaking as a guy in ER, trying to move to a mutual fund / hedge fund: NO!!! Take the buyside offer!
If you want to end up on the buyside, and have an offer at a good buyside shop, go there. It's not like the modelling you do in ER is different than the buyside. And the "formal training" offered by banks is hardly revelatory. If you actually worked through the Breaking into Wall Street modules, you'd be ahead of somebody who just took the training offered by the bank.
Now, if it is "ER vs 50m AUM hedge fund", I'd probably take the bank just to manage career risk and get a known name on my resume. But if it is "ER vs Fidelity", get to the buyside.
Everyone is different. Depending on the shop, buyside clients will borrow the sellside models and play around with them.
If you can get a good buy-side job, take it. If your motivation is to learn how to invest, that's where you need to be. Equity research tends to focus a lot more on managing relationships between banks/funds/management teams of companies they cover (i.e. providing "corporate access"), providing incremental data on quarters, and so forth, but not really thinking about whether a business is intrinsically overvalued or undervalued. That said, many hedge funds don't recruit out of undergrad because they don't want someone so raw -- they'd rather have someone that has been through an IB or ER training program so they don't have to spend much time handholding. However, people that are truly passionate about investing before college graduation can and have gotten hedge fund jobs. By "passionate," I mean that concepts such as value investing, intrinsic valuation, economic moat, ROIC, free cash flow generation, earnings quality, and stuff like that should be already familiar to you.
Hope this helps.
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