Q&A - Tiger Cub Analyst

I do utilize my PE skillset occasionally since I work at an l/s fund, however, I don't think it provides a major advantage over those who come from IB since public and private investing are fundamentally different (and have very few overlaps).

Despite this, the top SM funds hire exclusively from MF/UMM PE / Business School / other top SMs because of the amount of talent within the 3. They don't really have an incentive to recruit from IB and generally prioritize those with buyside experience. For that reason I discourage staying at a sellside role if your goal is to eventually transition over to a top SM HF.

The interviews consist of primarily stock pitches (both long & short), technicals, and behavioral questions (won't go into more detail than this). You're also expected to demonstrate your investment acumen throughout the process. 

I work in the investments team, so I don't have too much interaction with the research side (PMs send requests) so I'm unsure of specifics, however I can provide some insight. My funds' research team consists of regulatory/policy researchers and a few industry specific researchers. The proprietary research team is quite lean, and we generally conduct the majority of the research within the investments team before reaching out for specifics. 

Sure thing, I'm happy to help!

1. For the sake of preserving anonymity, I don't want to go into detail too much as I work at a fund you mentioned or a fund very similar to the ones you mentioned (won't specify which). The "similar process + scale + resources + talent = success" part is pretty accurate though.

2. We spend anywhere between 2 days to a month depending on the idea and how much research we have to put into it. On average, it is around a week to 2 weeks before we decide whether or not to proceed. Idea generation is a whole different beast though. To be frank, my ratio is currently around 85/15, meaning I research PM's or colleagues' ideas 85% of the time and look into my own ideas 15% of the time. I usually come up with 2-4 generally actionable ideas a quarter, but the names that my PM gives me are normally extremely under-researched (as I'm expected to handle the brunt of the research), and as a result, often not as actionable. I typically cover 10-15 names, and I get extremely deep - we do tons and tons of DD. 

3. Prior to joining my current fund, I had zero l/s equity experience. I worked at a high frequency prop shop while in college so discretionary trading was very foreign to me. However, I did put in a lot of effort to learn the ropes quickly, and I'll quickly summarize the approach I was taught. For long investments, look towards: restructured companies (often due to new management) that undertake cost cutting, selling/ceasing operation of non-core businesses, and share repurchases; high earning, and reasonably valued, companies that have relatively predictable growth, high capital returns, and sustainable competitive advantages; and lastly, highly cash-generative companies which, although may have limited growth, are using their cash effectively for debt reduction, acquisitions, or share repurchases. I can pm you my philosophy on short investments as well later (excluding it as it'd make this post too long, and I don't feel like typing it all out now anyways).

4. Both quality of pitches and your potential. My fund specifically (can't speak for the other tiger cubs) doesn't care about whether or not you're familiar with investment processes since you'll be trained anyways. They prefer to identify talented candidates, and there are many questions throughout the interview process to probe whether you can think outside of the box and bring new perspective to ideas. 

5. There is little to no modeling in the in the interview process, it is mainly just classic technicals to assess your basic fundamentals. 

Varies fund to fund but it is quite volatile. My fund is essentially the closest thing to a meritocracy so the best performers get the highest comp while the worst ones are usually laid off after a bad few quarters to year(s) (depending on how long they've been with the fund). Many also tend to forget that people fired from elite SMs still have quite a few opportunities at other great funds most of the time.

People leave PE because of how slow and boring most of the deals are. So many big deals take years to come to fruition, and additionally, so many of the companies that you're analyzing are mind-numbingly boring. At the end of the day, you'd be happier doing something that you enjoy even if it's a little more volatile than its alternative (unless you're extremely risk averse). I prefer the competition and intensity from the adrenaline of working at a HF compared to the emptiness I felt while in MF PE.

Comp at most tiger cubs and other elite l/s SMs blows PE out of the water on good years. You can make a lot of money at HFs early on in your career, but it takes so much more time at PE shops especially if there isn't a direct path to partner.

Also, ambition and the desire for a new challenge/goal plays a big role.