MM Case Study Question
Have a multi-manager case study coming up.
Several resources suggest the focus will be heavily on the P&L build and earnings drivers. From a fund’s perspective, would they expect a relatively simple EPS-to-share price framework using a target multiple, or a full DCF build?
Any insight into how platforms typically expect candidates to approach the valuation / target price component would be helpful.
For a multi-manager (MM) case study, platforms typically lean towards a practical and efficient approach rather than expecting a full-blown DCF build. Here's what you need to know:
EPS-to-Share Price Framework with Target Multiple:
Based on the most helpful WSO content, MM platforms often expect candidates to use a relatively simple valuation framework, such as an EPS-to-share price approach with a target multiple. This is because MMs prioritize speed and clarity in decision-making, and this method aligns with their focus on actionable insights.
Focus on P&L Build and Earnings Drivers:
Since the emphasis is on the P&L build and earnings drivers, your valuation should tie directly to the key metrics you derive from your analysis. Ensure you clearly articulate how the earnings drivers impact the valuation multiple or target price.
DCF vs. Multiples:
While a DCF can be a robust valuation tool, it is often not the primary method for MM platforms. As highlighted in WSO threads, DCFs are more commonly used in other contexts (e.g., long-term fundamental investing). For MMs, multiples-based valuation (e.g., P/E or EV/EBITDA) is generally preferred due to its simplicity and alignment with their fast-paced environment.
Key Considerations for Valuation:
Pitch Structure:
As suggested in WSO's top-rated threads, structure your pitch with clarity:
By focusing on a multiples-based framework and tying it to the P&L and earnings drivers, you'll align with what MM platforms typically expect. Keep it concise, actionable, and well-supported by your analysis.
Sources: Thinking Like an Investor, How would you approach a 4 hour case study?, Thinking Like an Investor, Notes for Technical Interview Questions, https://www.wallstreetoasis.com/forum/hedge-fund/the-hedge-fund-experience-good-bad-ugly?customgpt=1
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