London industrials IB to HF - how to prepare

To prepare for a transition from London Industrials IB to hedge funds, here’s a breakdown based on the most helpful WSO content:

Skills to Develop During Your Daily Job

1. Modeling Expertise:

   • Focus on building robust financial models with minimal errors. Hedge funds value analysts who can trust their numbers and build models efficiently.
   • Pay attention to valuation techniques, especially DCF, LBO, and public comps, as these are directly transferable.

2. Public Takeovers and Corporate Broking:

   • Public takeover experience is highly valued, as it demonstrates familiarity with regulatory frameworks and deal dynamics.
   • Corporate broking can be useful for understanding investor relations and market sentiment, but it’s secondary to modeling and deal experience.

3. Investment Thesis Development:

   • Start thinking critically about the strategic rationale behind deals. Why does a deal make sense (or not)? This mindset is crucial for hedge fund interviews and pitches.

4. Sector Expertise:

   • Deepen your knowledge of the industrials sector. Understanding industry trends, competitive dynamics, and key players will make you more attractive to industrial-focused PMs.

5. Regression and Data Analysis:

   • While not mandatory, familiarity with regression analysis and advanced Excel techniques can be a plus, especially for funds that value quantitative insights.

Process and Career Path Insights

1. Gatekeepers and CV Distribution:

   • Business Development (BD) teams at MMs typically match candidates with PMs based on sector expertise. If you’re in industrials, your CV will likely be sent to industrial-focused PMs first.
   • However, if you express interest and demonstrate capability, your CV could be shared with PMs in other sectors, especially if there’s a hiring need.

2. Industrials PMs in London:

   • While specific names aren’t listed in the context, it’s advisable to research funds with strong industrials teams. Use headhunters and networking to gather insights on which PMs or funds have a good reputation.

3. IB to HF vs. IB + PE to HF:

   • IB to HF: This route is more common for fundamental L/S roles in MM HFs and some SMs. It’s faster but may limit access to certain prestigious SMs or Tiger Cubs.
   • IB + PE to HF: This path can open doors to SMs with longer holding periods, such as Tiger Cubs or Citadel’s strategic equity team. PE experience adds depth to your investing toolkit, which some funds value highly.

4. Longer Holding Periods in MM HFs:

   • MM HFs are generally known for shorter holding periods due to quarterly performance pressures. However, some PMs within MMs may adopt longer-term strategies. It’s worth discussing this preference during interviews to find a team aligned with your goals.

Additional Tips

• Networking: Build relationships with headhunters and professionals in the hedge fund space. They can provide tailored advice and insights into specific funds.
• Stock Pitches: Start preparing long and short stock pitches. Focus on undercovered companies to showcase originality and deep research.
• Interview Prep: Familiarize yourself with hedge fund interview formats, including case studies and behavioral questions. WSO’s Hedge Fund Interview Prep resources can be invaluable here.

By focusing on these areas, you’ll position yourself strongly for a successful transition to hedge funds in London. Good luck!

Sources: From M&A to Hedge Fund, Transitioning from IB/ER to HF Series - Part 2: Where to Interview and Behaviorals, Q&A: HF Analyst @ $5bn+ Fund - Breaking In and Transition to Risk-Taking Role, Allianz Global Investors Graduate Programme vs IB?, Q&A - London IBD to megafund PE