Q&A: PE Associate to MBA to HF Analyst
Hi all - I'm a 1st year analyst at a concentrated, $1bn+ HF.
- Semi-target = > MM IB = > MM, Nichey PE (~$1bn AUM) => Top non-H/S MBA (think Columbia, Chicago, Wharton, NYU) => $1bn+ concentrated HF
- Throughout my career, I have doubled down on sector expertise in an industry that is both growing yet difficult for generalists to invest in (think HC services, software, fintech)
Questions I can answer:
- Hour and lifestyle at a concentrated HF
- General compensation at each level (with IB being 2015-2017 timeframe, PE being 2017-2020 timeframe) including my rough trajectory, as communicated to me by my bosses and told to me by older HF analysts in similar seats
- Why I think I've been successful (*cringe*)
- How MBA HF recruiting works
- What story I told during PE and HF recruiting that seemed to resonate
- Why I think concentrated HF is a good career bet to make and general outlook on the active investment management industry
Questions I won't answer:
- Anything more specific about my background
- Anything more specific about my fund
- Anything highly specific about my investment process
First of all, thanks for doing this. Would love to hear more about how the lifestyle is at your current fund, and how it compares to your time in PE. Also curious about your decision to pursue an MBA instead of direct to HF after PE - any insight on your thought process would be greatly appreciated.
Appreciate the detailed response - sounds like the MBA was well worth the investment. Could you elaborate on what the recruiting process was like, whether you landed interviews via on-campus recruiting or other channels (e.g., direct outreach, headhunters), and what story you told once you had your foot in the door? Thanks again!
Roughly how big is the fund (people)
How is coverage organized?
what's your edge?
how is your performance comp structured?
What are you looking at in terms of first year comp and your progression moving forward?
Sounds like a great gig. Congrats to you - graduated from a top MBA also, however doing something entrepreneurial.
First six month comp was fairly fixed for me at $175k. This is fairly typical for post MBA hedge fund analyst comp, though the mix of salary to bonus is all over the place. My target is $400-600k this year, with the vast majority in the form of a bonus. After that, it will be a relatively fast ramp (2-5 years) to $1mm per year. Getting past $1mm will require outperformance by either me or my fund.
Definitely top of the class $$$. Congrats again.
In the future, is it still entirely discretionary bonus? Or is there some sort of linkage to PnL? Curious to know how other concentrated SM funds handle this. Thanks!
Respectfully, I find it difficult to believe you'll have a straight forward ramp to $1m per year in the next 2-5 years. You'll be expected to generate real alpha through your ideas. I'd argue comp will be much more variable than you think. Again, respectfully, I'd recommend you start putting more hours in than 9-4pm. I'm in a similar seat as you and know no analyst who works <10 hours a day...there's many hungry folk looking for a HF seat. If your comp numbers are real, this is a legitimate HF and you should put the hours in to generate some money for your LPs. Else you'll eventually get canned.
Thanks for doing this. I will just ask this then:
Why you think concentrated HF is a good career bet to make and what's your general outlook on the active investment management industry?
My YouTube Channel
My take is that money is generally flowing into the antipodes of the investing world i.e. low cost, completely passive on one end and niche, unscalable strategies on the other. The guys in the middle (mutual funds charging 70bps to underperform their index 8 out of 10 years, massive long short funds that charge 2 & 20 for levered beta with 30%+ of their long book comprising FAMGA stocks) seem to be offering products that don't have a place in the allocations of LPs, whose decisions are increasingly based on modern portfolio theory. We've had LPs apply disaggregations of our returns backing into our alpha based on Citadel-like multi factor risk models, to prove that we can actually persistently generate alpha. The limited scalability of funds like mine means that we actually can produce alpha in our little corner of the market year in year out. Funds like Tiger and Coatue would not look good under such a lens.
In addition, funds like mine that take $100mm+ positions in mid cap and relatively illiquid large caps will do well because we're not actually dependent on any net new capital. We'd rather just keep the investor base we have while compounding our assets. Our investor base has been with us for decades. The redemption rates we see are far, far less than fundraising dependent long/shorts and inertia dependent mutual funds.
Thanks! Yeah, no need to make enemy with yourself by being bigger when you know your sweet spot. Kudos.
My YouTube Channel
Have you ever considered working for a quant fund?
How one should make the decision between quant funds and fundamental funds, any tips?
I have not as I don't have the requisite skill set to work at such a fund. I can't really speak to anything to do with quant funds really as I barely know what they're up to, certainly no more than the next guy.
What do you look for when someone interviews at your fund and is doing a case study (firm provided name)?
Can't speak to this as I haven't been part of an interview process.
how old r u and how much do you make?
Also, what is the square footage of your home? lol
What are the backgrounds of other analysts at your hedge fund? Are there any from nontraditional (e.g. non-IB or non-PE) backgrounds?
To reword the question, do you think there are any alternate paths to getting to where you are now?
Analysts at my funds have generally similar backgrounds as me. I've seen other hedge funds hire a) from sell side ER and b) hire people with very non traditional backgrounds e.g. investigative reporters. Things I haven't seen are corporate types, consultants, or auditors, which are all profile not rare in IB & PE.
What's your advice for someone who's just started out in banking (6 months into a role at an MM) and is looking to get into Private Equity? Thank you.
Getting into PE is pretty much the same as getting into IB: Simple, easy to understand story that is slightly memorable + crush the technicals + basic networking.
3.If it was a direct reach out did you speak with the juniors/seniors?
4.How early into your banking career did you start reaching out?
As a international, is there any way to break into? Especially if non-target school.
How to connect with someone if they aren't alumni and have no similar interests/background?
Not really sure about internationals. You're fighting a way uphill battle.
Get people's attention with unique research i.e. stock pitches and/or thematic research pieces. If its a stock pitch, don't just show me you know how to write a book report. Go and pound the phones and get some channel work that I don't want to do / am wary of doing because I want to avoid MNPI.
I figured as much. Really a shame that there's slim chances for europeans considering that we don't have that many HFs over here.
Thanks for doing this post. Interested to know why you think concentrated HF is a good long-term career and also what story you told during HF recruiting that seemed to resonate?
I somewhat answered both of these in other comments.
1. What were your thoughts on the skillsets learned in IB vs. PE? Was that typical path necessary for learn the fundamentals for your current role at a HF?
2. When recruiting for MM nichey PE, did you do oncycle or did you diligence the PE firm you were going to based on sector expertise/culture of fund
3. Do you think doubling down on sector expertise has greatly helped your recruiting for PE/HF? Would you say its best to pick a growing sector and stick with it to see the true "gains" later down the line of your career instead of jumping around sectors?
4. What do you mean by HF recruiting was much better in a MBA? Was this because you had internship experience or a matter of funds coming on campus to recruit? Or was this because you doubled your alumni reach by going to undergrad + b school?
5. At a HF, there seems to be the perception that funds "blow up" and then you're out of a job and trying to hop to the next pod/fund so wondering what your thoughts on this and how you thought about picking a good fund and the criteria for that.
6. Did you do the typical 2+2 IB/PE, MBA then HF? Do you think its necessary to follow this strict timeline for making jumps just because I was considering spending 4 years in IB before going to PE.
7. Why is HF a good career bet to make? What are the exit opps here if you have a bad HF track with picking wrong funds? Seems like IB+PE leads to Director Corp Dev roles, Strategic Finance roles, Startup CEO roles? How about for HF?
1: banking = Basic productivity skills, and basic financial / accounting fluency. PE = market diligence, process management, basic investing, and valuation. Not necessary to learn those skills but certainly efficient.
2. Off cycle, focused on doubling down on my niche. Also didn't have an on cycle pedigree.
3. Yes, people want to invest in my sector and know that its not something you can just pick up without bringing in the expertise of someone who previously did it. I tried to / ended up sticking with my sector but see the arguments for moving between sectors.
4. Better job opps for MBA than for ad hoc PE associate hires, at least in my experience.
5. I did significant diligence on funds track record and, to the extent they'd tell me, LP base. If they wouldn't tell me anything pre case study then I wouldn't do the case study. Also, funds with long only / net long mandates are often not fully invested and don't use much margin (both actual margin and de facto margin i.e. funding their longs with a short book) and therefore are generally less likely to "blow up". I am a little bitch so don't want to work at a fund that can be down 30%+ in a month.
6. Not exactly 2+2 but pretty close. Not necessary for HFs generally, have plenty of success stories of friends who had different backgrounds but seemed like a big leg up for concentrated fund investing.
7. Don't want to give any more personal information but I have a good backup plan in case HF doesn't work out. I agree that stock picking is a hard skill set to pivot. I still think I could walk backwards into a corporate development role in my sector if it came to it because my intelligence, sector knowledge & pedigree would shine through. I have zero interest in corp dev though.
Thanks a bunch for doing this. Gonna fire off a couple questions here:
At what point did you realize you wanted to do an MBA, and when did you actually start preparing for the admissions process?
Do you think going to a MM PE fund makes it severely more difficult to attend H/W?
Why did you decide on a HF exit post-MBA?
Genuinely I didn't know I wanted to get an MBA until it felt like the only way to get where I really wanted to go i.e. after getting a bunch of mediocre HF job opportunities. If I could have done it without an MBA I would have. Then it was mental gymnastics to justify the ~$150k out of pocket + ~$500k opportunity cost.
I was shocked when I didn't get into H&S but in retrospect, I don't think H/S admissions people really love people like me. There's too much silver, not enough gold on my resume. Their loss IMO. Are there impressive H/S graduates? Yes but there are also a lot of empty suits. At my UG my graduation year, the people who went to H/S were the student government, volunteer work, good looking useful idiots. If you want neurodivergent weirdos that are going to take big risks and get big paydays, you probably have to look outside of those schools. PE cares about MBA pedigree though so not going to H/S kind of meant I'd have to take a step down if I wanted to recruit for PE.
I chose hedge funds over sticking it out in PE because I love investing and hate process work. I also think its more meritocratic. I again did a ton of mental gymnastic to convince myself that the HF / PE trajectory of the 2010's was going to reverse. Am I positive that HFs will still be awesome places in 10 years? No but I'm not positive PE funds will be either. Better to make a fund specific decision than an asset specific decision IMO.
Thanks for being very helpful in all your responses so far. My question to you is if you've seen anyone go from asset/wealth management -> MBA -> HF? If so, what's the desired route/niche to do so. Top AM? PWM? CFA? M7 Schools?
Thank you so much for doing this.
How would you advise regarding GMAT and application consultants?
How did you manage to study for the GMAT and prepare for the apps during busy work time?
How long was the prep? Did you at some point feel like GMAT was harder than expected or was just a cake-walk for you? Given your background, assuming you are from an over represented group, I assume you needed about 730 or beyond to better make your case.
Any advice on how you picked consultants if you did?
I self studied for GMAT during a light month and didn't use any test prep service or consultancy service. I took it once after 1 week of prep, got a score that maybe would have sufficed, then studied hard for a month and crushed it. Standardized tests have always been easy for me (which I realize isn't helpful advice).
Thanks for sharing! Good luck to you
If you are 31 years old graduating a the top of your class at a community college, what would my path be to break into investment banking, then private equity, then to a hedge fund? Is it even possible? Should I get my undergrad degree, then a top MBA? Should I even bother because I am so old....
Did most of your classmates with prior relevant finance experience (IB/PE/HF/AM/ER) who were looking to land in a public markets buy-side seat (whether HF or LO) end up getting one?
Also, it would be great to hear more about your different internship experiences.
Most but not all.
Can't say much more about internships without deanonymizing myself unfortunately. I will say I viewed them as chances to sample different styles.
For MBAs looking for HF seats, would candidates with IB experience only be at a large disadvantage vs. 2+2s? Thank you.
Where did those who didn't land buy-side seats end up? Sell-side research/IB?
Thanks for your post.
Just wondering, as a Canadian working on my business undergrad, what path should I take to get into American banking? Looking primarily HF or PE. I could easily get into top MBA schools here, or are those basically invalid because I am in Canada? Is it vital that I get an MBA from an American school to attract any attention from US based funds?
I'm a current student at uWaterloo. Just looking to get another outside opinion, really new to figuring this out.
no insights on any of this
sorry im confused, you are an undergrad, how tf can you "easily" get into top MBA schools?
I'm a genius.
Thank you for doing this!
A couple questions from me:
1. What are the common tasks for IB, PE & HF and what kind of person would enjoy working in each career?
2. What are some challenges in each career that are overlooked on this site?
How did you explain the move from PE to Public markets? What aspects/how do you find your work now more interesting? Thank you so much!
Thanks for taking the time to do this.
Did you ever consider pursuing Fixed Income post-MBA, maybe at one of the big LO shops or the smaller boutique players? Would be interested in learning what the thought process was like there.
Thanks so much for sharing. Quick 2 part question on the MBA route. How did you feel your analytical skills held up with 2 years out of the day to day grind? I've been in research for the 6 years I've been out of school and worry cutting out to do my MBA could set me back development wise. And secondly, how was the recruiting process different post MBA? Were the networks/hiring opportunities abundant or was it similar to pre MBA but you just had a better resume? Thanks so much for your insights.
Interested in this topic as well. Also to add to the recruiting question, did you find any funds that exclusively recruited from H/S? Or others that include W?
I've heard people say most of the big name tiger cubs (Tiger Global, Viking, Lone Pine, Maverick) only recruit from H/S though I interviewed at one of those names and know someone (granted, not a white/asian male..) who got an offer from one. I think each of the big funds have schools they're loyal to, which depends on the investment philosophy of the principal and personal connections e.g. Baron Capital, which is probably one of the best places to end up, recruits from Wharton & Columbia, as Ron's sons went to each.
I kept doing that sort of work throughout MBA so no the analytical skills didn't go away.
Its both having a better resume and a large amount of funds looking for an MBA hire.
Thank you for doing this.
Do you know any EU students/IB/PE professionnals that are working in concentrated HF ?
If not, what about EU IB/PE that went doing a top MBA in US in order to break in the HF industry ?
What would be your advices for a student coming from a EU target school for IB/PE, considering the fact that very little from their alumni's network are placing in hedge funds ?
I know a couple Europeans who went from European finance into solid US hedge funds.
With or without a top MBA (generally speaking) ? And more precisely, If you know any French folks in your head who have made it in the HF industry, that would be an awesome thing to know. I'm guessing most of the Europeans you've seen breaking in HF (in the US) are from the UK
Thank you so much for this post.
What would your advice be for a high schooler who wants to break into HF and who has a deep passion for equities?
forget about wall street for 3-5 years and experience an adolescence so that you're not insufferable as an adult
Hate to break this to you, but if you're not on the golden path by preschool, you're SOL.
On a more serious note... this is what I've observed from my friends' paths...
High School: Get into the best college you can-ideally HYPSMW+-by crushing your high school grades (aim for straight As in the hardest classes you can get straight As in) / the SATs / your letters of recommendation / your extracurriculars & leadership / your college essays.
College: Get a GPA there over 3.5 in a subject that's somewhat math-y or business-y (e.g. STEM / Finance / Econ / Business). Get the highest elected leadership position you can get in some organizations/clubs on campus you care about. Get any internship you can get your hands on after Freshman year. Get something closer to what you actually want to do after Sophomore year. Get your dream internship (or close thereto) after your Junior year. And try to convert that Junior internship into a full-time offer after Senior year.
If you want the most common conversion career path to a top Hedge Fund that Junior year internship should likely be Investment Banking at a top group -> Converted to FT Offer for 2 Years in an Analyst Position -> 2 Years in an Associate Position at a Top PE fund (ideally a Mega Fund) -> (Possible 2 Year MBA ideally at HSW) -> Top Hedge Fund.
(Note, though, that this career path is just the most commonly well-known path to the best-of-the-best single manager hedge funds. There are many other possibilities that aren't as clearly defined such as... PE/IB Junior Year Internship -> PE Analyst role -> HF // or // Equity Research -> HF // or // network directly to a startup HF right out of undergrad // etc. However, not knowing anyone personally who has followed these alternative paths, I don't feel as qualified to comment on them in more detail.)
Oh... and most importantly, learn how to talk to people and be a fun, nice, interesting, likable person. It may sound silly, but if people don't like you and don't want to hang out with you at work 16 hours/day, it doesn't matter how good your technicals are-they just won't hire you. Basically, this comes down to the consulting airport test.
What's your take on HF vs LO?
OP, appreciate the post and time spent offering detailed answers to folks here. But do yourself a favor, step back and realize you are only a first year HF analyst. Notwithstanding your prior experience, there is a ton you still don't know and frankly you come off as arrogant and complacent, both of which will kill you one day.
Impedit et cum iste maxime nulla quod. Odit nostrum eveniet quia iusto asperiores. Dolorem magnam et veritatis dolor iste adipisci laboriosam corrupti.
Dolores repellat maiores ut aut voluptas voluptates modi. Molestiae earum laudantium dolor corrupti aut explicabo qui. Atque dolores earum ut rerum vero corporis.
Pariatur architecto rerum laborum et animi velit est. Est in maxime molestiae odio. Possimus dolor nulla quia labore earum praesentium sed.
Molestiae alias consequatur distinctio. Voluptate non quasi soluta unde itaque voluptatum. Facilis consequatur aut accusamus non quo animi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Accusantium voluptas nam nam qui. Facilis rem quis ex sapiente mollitia est alias. Voluptatem iusto aut aut delectus dignissimos quae. Asperiores et voluptatem voluptatem a similique itaque autem.
Ut non sed nulla facilis atque eligendi. Esse enim sit est similique et quas. Consectetur nihil magnam assumenda. Inventore rerum ut ad et et et. Aut sint et non corrupti error dolores repudiandae. Ut reiciendis impedit dignissimos non possimus reiciendis suscipit. Facere adipisci ea et qui.
Unde molestiae rem eum aut sunt quis et officia. Repellendus fugit inventore inventore architecto harum harum inventore itaque. Eos corrupti quia distinctio delectus voluptate non.
Et reprehenderit magni vitae ut reprehenderit qui. Debitis autem possimus rerum eos voluptas molestiae. Temporibus consequatur autem in nihil laboriosam sit. Ullam consequatur ullam ut corporis enim. Pariatur et non provident magnam vel libero eum aut. Numquam ut nihil et culpa voluptatem tempore. Optio ipsa delectus earum porro itaque.
Debitis et et reiciendis voluptas. Beatae laboriosam mollitia fuga maiores molestias incidunt quis. Omnis voluptatem nihil rerum animi quia voluptas architecto officia. Assumenda eos commodi vitae laudantium magni et. Et aut aut aut omnis beatae odio impedit. Aut veniam eum non dolorem quis.
Itaque tempore iste distinctio fuga et et. Magni ducimus quos molestias veniam fuga perferendis reiciendis.
Excepturi est dolorem voluptatem excepturi. Sit nisi qui expedita quasi suscipit iure natus. Assumenda ea id dolorem qui est. Consectetur et et consequatur.