PE to SM HF
Hi everyone,
Ignore title. I’m a second year analyst at a lower-tier EB going to a UMM/MF next year. I did PE recruiting because everyone else was doing it and didn’t spend much time (didn’t really have much time to think before on cycle) about what I want to do. As I dwell more, I think public equities are where I want to build my career. I’m not a fan of the relationships aspect of banking / pe and dont think I would be very good as a senior in pe (my firm doesn’t have high rate of internal promotion either). I’ve always enjoyed deep analytical quantitative work, and I find myself constantly reading about stocks when I get the chance.
How does one go from PE to SM HF? I have become increasingly disenfranchised with the idea of PE and would ideally want to leave within one year. Is it mostly through HH or should I do my own outreach? When should I start?
Based on the most helpful WSO content, transitioning from PE to a single-manager hedge fund (SM HF) is a well-trodden path, but it requires a strategic approach. Here's what you need to know:
Timing Your Transition:
Headhunters (HH) vs. Direct Outreach:
Positioning Yourself:
Preparation:
Networking:
Next Steps:
By combining headhunter engagement, direct outreach, and thorough preparation, you can position yourself effectively for a move from PE to an SM HF.
Sources: From Private Equity Associate to VP in Private Equity, My Private Equity Recruiting Process, HF -> MF PE, Q&A: Former Strategy& associate, Q&A: I am a Hedge Fund recruiter
SM HF are structurally impaired and secularly out of favor.
It’s a common misconception that you don’t need people/social skills in the HF game. You 150% do.
You need a rich network and circle of smart people that are willing to share ideas and info with you. You need to build relationships with management teams so they like you, pick up the phone when you call, and are happy to spend time with you at conferences/events and one-offs. And to some extent, you also need to build a relationships with sales people and research analysts.
It’s also a common misconception that you’ll be doing deep fundamental quantitative work in the HF game. You’re largely focused on 1-2 bullet points of a thesis and 2-3 KPI metrics. The lions share of stock movement is from 3rd and 4th derivative deltas. Not based on revenue growth, not based on degree of QoQ revenue growth acceleration/deceleration, but based on magnitude of beat on bps of acceleration/deceleration vs. historical/expected bps of beat on acceleration/deceleration.
Even though everyone will tell you there are short-term and long-term oriented approaches, the market takes an entire long-term thesis and prices it in in an instant. And when that outlook is modestly changed, it prices all of that in in an instant.
So the job is really just doing some cocktail napkin math, talking a a bajillion people, and being able to stomach volatility so you’re not on tilt and doing dumb things.
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