Equity L/S SM HF Interview Questions
Hi guys. I have an interview coming up for a SM HF investment role. This will be one of my first interviews for SM type investment roles (this is with an investor on the team, having already spoken to HR on background etc.). I have tried getting an idea of the types of questions/areas I should focus my preparation on, but anything I have found online has been quite vague/generalised.
The fund in question is a L/S SM HF with a medium-long term holding period with a generalist investment style. This role will be focused on both the long and short book from a generalist perspective (sector wise), coming in at the junior level.
My background is non-traditional, in that I am not coming from IB or ER, rather I have experience in asset management and data science (3-ish years total experience post college).
I am aware I will need to be ready to prep a long and a short stock pitch. However, I wanted to ask, based on your past experiences, how detailed should this pitch be, am I expected to know everything about the company, how should I think about preparing for follow-up questions, does the pitch have to be based on this time period or can I discuss a pitch I had from a couple of months ago, etc.? Additionally, is it typically okay for me to have a one pager summary to aid me when discussing the pitch?
Outside of the stock pitch, what sort of questions should I be ready to answer? I assume I will get some more behaviourals (any nuances I should be aware of?), and some technical financial questions. Is there anything else that they typically focus on?
On the technical financial questions, how deep do they typically go on them, do they typically ask follow-up questions into the technicalities? (Assuming they ask on accounting and DCF modelling, etc.). Are there any other financial/technical questions I should prepare outside of accounting and modelling?
I appreciate this post is filled with quite a few questions, and that most processes will differ somewhat, but I would be most thankful for any thoughts or guidance based on other users experiences through similar processes (from either an interviewers or candidates perspective)
Many thanks
There are youtube videos on Pershing square stock competition that's held at Columbia uni I believe, search them and you'll get an idea of how to pitch and questions asked. Search up the Graham and Dodd Newsletter that Columbia releases, they have a two-page stock pitch included, also Sohn Conference will have past stock pitch/presentation winners on its site as well.
Thank you. Had a quick look. The Pershing Square pitched seem quite detailed, i.e. the students talked to senior management in the competitors of the companies they were presenting. It seems like they prepared these in teams over a longer period.
During a typical L/S interview would the pitch / follow-up questions be as detailed, or are they typically kept quite high level? Want to get a sense of what I should be prioritising prior to the interview.
You should know any name you're pitching inside and out. Ideally speak to other funds to get a sense of how others think about the name and your variant view, or at the very least sell side. You should absolutely speak to the company (at least IR) if you can.
You are in asset management so I would put at least as much diligence into your HF pitch as you do for the names you're already working on.
Interesting, so if I am pitching 2 Longs and 1 Short, I should have that much detail on each?
Any input on the type of technicals I should be preparing, or should I focus all of my time on pitches?
Just trying to gauge what is expected of junior analyst at interview stage (in terms of knowledge and skillset).
My experience is it depends and can be all over the place - solving for the specific needs of any individual investor can be difficult at times, and there are a lot of nuances that the hiring person can look for.
Some general advice is to avoid "book-reporting" it. Don't go crazy with background detail on what the company does in each segment, why the business is of superior "quality", etc. Need a concise elevator pitch to catch them at the hook, so that after the first few sentences it is clear what the "investment idea" is and why we are talking about.
I'm making everything here up, these numbers are not accurate, and I know absolutely nothing about ALGN...but an example:
"ALGN saw outsized growth at +25% CAGR from 2015-COVID, but has since faced revisions lower below management's LT guidance of a 20%-30%. It is currently growing HSD-LDD as headwinds materialized from increased competition, softening consumer health, and the law of large numbers pushed up against their TAM penetration rate. As the sector's inventor and market leader, new product launches (along with recent competitor failures) are likely to drive new case starts back above trend in the next 2 yrs, which will drive upward revisions, and drive the street back closer to mgmt's LT 20%-30% growth target. I have a variance of 10% and 12% to FY25/FY26 EPS, with a +30% 3YR IRR and see a risk/reward of 4:1"
Then you can dive into the details afterwards, but it needs to be clear up front why the opportunity exists, and what the "idea" is. From there, you focus on the key points/drivers, weaving numbers and math into the narrative (what is embedded, why does the opp. exist). You still need to know every detail about the biz, but pitching doesn't require you to do a primer on every nuance - it should come in pieces through the Q&A and thesis points.
End of the day, it depends on the firm. Know your audience is rule #1. I'm sure some firms have a preference for "before you start, explain what this business does? what are its margins? what is the end market?". Have to solve backwards here a bit, but I think in general the above still applies.
Thanks very much! That’s very helpful.
In your experience, have they placed a large emphasis on the numbers, or was it more qualitative (in terms of how you thought of the business)? Any tips of prepping for follow-up questions?
From your experience, outside of the pitch, what sort of questions were you faced with?
Hi…would you mind tell me which headhunter were you using for the role?
I'm not sure how you can frame the opportunity without the numbers. Now if you vomit every number and figure, none of it registers and no one will comprehend what you're talking about. On the flip side, you need numbers to quantify and illustrate the opportunity otherwise it sounds like noise + conjecture.
The idea shouldn't only be conceptual. "I like NVDA because AI is going to be huge and CUDA is a really great moat " is not a thesis. How much growth is priced in? How much more do they need to grow for you to make +20% IRR over 2 years? (Assuming a "med-long term investor). How did you get to those numbers? Why is the street/market getting it wrong? How do you quantify the upside and downside?
Your ability to craft an interesting and compelling story is almost as important as the quality of an idea
I can't think of any Q&A prep that exists outside of whatever work you did on the idea... They are going to challenge whatever the key parts of the thesis are. If they already know the company very well, be prepared for a deeper grilling... If you'd like you can fire me a DM and I can try to provide some hypothetical push backs (not that I'm some expert here)
Other questions I've been asked:
-Explain your investment process + philosophy? (most of the conversation is here; easier when you can pull from past examples of why it works; expect to be challenged on why you think this works)
-Fav sector? What other stocks do you like/dislike in that sector? What are your views on what's happening in market/ that sector?
-Most influential investors / books?
-Why this firm?
-Why this style of investing?
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