What are they like for hedge funds? I know the PE ones are straight up 3 statement LBOs but for hedge funds, is it just 3 statement + comps/multiples/DCF to get to share price for a stock or is there something else I'm missing?
Thanks!
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What type of fund? This is too broad to answer.
HF Modeling Case Studies (Originally Posted: 05/03/2011)
I have an onsite modeling case study in two days for an event driven long / short fund - does anyone have any tips or courses I could take to ramp up my knowledge? I have zero clue what to expect.
Any input would be greatly appreciated
I guess more specifically I have no idea what they are expecting with respect to granularity on revenues, costs, etc etc. (or even what industry the company will be in).
If it's onsite you're not expected to build a super-granular model. You're most likely just going to be building a very simple operating model combined with a DCF, comps, etc. Beyond that, you need to understand what the company does, why it is or isn't a good business, what the key issues are and a position on valuation.
Right, so does that mean it's going to be coming to EBITDA and thus free cash flow using high level assumptions i.e. just assuming a percentage based on past performance on research estimates for revenue growth, EBITDA margins etc.?
I'm confused by 2 things here:
1) Why are you modeling out anything for an event driven fund? Your analysis should be more qualitative than quantitative. Think Equity Research analyst vs M&A analyst...
2) You need more clarity. Inquire about what you will tested on. This "modeling" test sounds so vague.
I'm not sure why they've asked me to do a modeling test, just stating the facts. I figured it was standard for the process. Any input Kenny (and others) of your experiences and how I could prepare myself would be greatly appreciated. I've built many models before but obviously building one from scratch over a compressed time period is different than cranking one out over a few days (and drawing on examples / old models). Any suggestions on things I could practice / focus on would be greatly appreciated.
Tough to say, PM me if you feel more comfortable sharing details that way.
The modeling test is easy... it's more of a pass / fail grade than an A to F type thing. On the other hand, you need to spend a lot more time understanding the investment case / business. That's where you can differentiate yourself from other candidates.
I've worked with models before, and as an analyst at a HF, I think it depends more on what your function is/will be. Also, I did not say that Equity Research Analysts do not build models. But the functions/roles/responsibilities are dramatically different in juxtaposition to an M&A analyst. Being asked to construct a model, and being tested on the implications of select inputs are very different. The former being much more difficult.
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