Top Hedge Fund Gigs Out of Undergrad
I just wanted to know what people who actually work in the industry and who have gone through these programs think are the very best fundamental HF gigs out of undergrad.
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interning at p72 academy; think the training here is top tier
alright guessing my experience isn't a popular one lol
your answer wasnt detailed at all and sounded boastful
Could you go into some detail regarding your experience? How is the classroom setting? Are you tested along the way? More info!
As someone who started their career in HFs I would say avoid it and do a more traditional program in banking/S&T/ER. You likely won't have a good sense of what asset class or investment philosophy suits you. There's little to no risk spending two years on the sell-side compared to starting at a fund.
Best case you have a great PM to mentor you and you learn quickly, save time, and have a clearer ramp to higher comp in your mid/late 20s. Worst case, your team/manager underperforms and you aren't trained well, leaving you to fight a lot harder to get your next seat. Risk-adjusted doesn't make too much sense for the average person. Coming from a MM risk taking seat, if I wanted to find a job outside of this space now there's no way I could find anything that pays even 25% of my comp. Don't close off doors until you're sure you're doing what you really want to.
Agree that spending two years at a bank first *might* give you a better understanding of which area you'd like to specialize in for your career.
But of course that advice is hard to follow if you get multiple offers now. If you're graduating college and get one offer from Citibank and one from Citadel that pays significantly more now, then well, it's real hard to turn down the Citadel offer now with the expectation that maybe the offer will still be there in two years after touring a bank first.
Matrix
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Farallon hires undergrads? Wow.
Yeah but it’s almost all Harvard kids
I know for MBA, Farallon hires only from HBS and Stanford GSB. If I had to guess, getting a job at Farallon is probably one of the toughest gigs out of undergrad, along with Citadel, jane stree, two sigma, de shaw.
Farallon is like the Suits firm of HF
Yeah aside from the quant funds, definitely one of the toughest funds to get into, along with Baupost, Elliott, Tiger, Coatue, D1, a few others.
Damn Baupost? Never even had the impression that they were even on the radar for funds considering breaking into, at least for junior hires. Seth doesn't talk much. I seriously wonder who tf are the analysts - same goes for Buffett. Who tf are Buffett's analysts? How does he run a one-man show? That's why I subconsciously had the impression that Baupost doesn't even have analysts lol, like Buffett
Todd Combs at Berkshire has an analyst he hired from Columbia MBA (Todd is also an alum) - that's the only one I know of.
Cool! Insane value investing program they have there.
Why do they want such an incredibly lean team lol. And back in the old days - how did Buffett do everything himself
I think Buffett doesn't want a lot of people hence the lean team. Their strategy also doesn't require it. Frankly, I think the only reason Combs hired an analyst is b/c he's spending a lot of his time running GEICO these days so doesn't have the bandwidth to be doing investment research full-time like he used to.
Berkshire is very focused on quality and has incredibly low turnover. Buffett (and Combs until recently) also famously basically reads in his office all day and doesn't have to deal with LPs/refuses to talk to advisors except in a crisis. I think the bar for new ideas is incredibly high, which means that they look at a lot of stuff but quickly come to a decision on it and move on. Combined with their focus on high quality management I think you wind up with businesses that you certainly need to keep up to date on once you own them, but that you don't necessarily have to worry about blowing up in your face so can spend your time looking at potential new things. That plus sticking to the famous "circle of competence" means Buffett is only looking at things he understood well and ignores everything else... do that for 30+ years (many more in his case) and I'm sure you become very efficient at identifying things that are attractive/unattractive and coming to quick decisions if you need to. I bet Buffett can look at something and within a couple hours be 80-90% of the way towards an investment decision in the case of something he likes, and probably is able to pass on things within 1-2 hours or shorter.
Incredibly helpful and thoughtful response to a broad question. SB
A far cry to the hedge funds of today. Buffett essentially ran a hedge fund, but he was the analyst, the PM, the IR guy, the back office, everything. Why the dichotomy of today? I know in those days info was scarce and you could get a serious advantage by just being willing to put in the work, run screens and be literally faster than others, but still
It's a good question. I think you hit on a big part of it but if I had to summarize my view:
- hedge funds weren't really a thing back then - Buffett was basically running friends and family money and I don't think he had to spend much time explaining the strategy to them because they didn't care as long as he made them money, which is obviously not true of institutional LPs today
- you touched on this but there was a much lower bar to gain a competitive edge, markets functioned much differently and smart people who were diligent arguably had a much easier time doing well. Today that's just not true, particularly in the more trafficked parts of the market (which I would say is small-mid caps and up but I'm sure many would disagree or say something different... FWIW Buffett claims he could still do incredibly well today if he got to look at the small/micro cap names he used to invest in but can't b/c of size... Joel Greenblatt has said something along these lines in the past as well)
- Buffett Partnerships had a different investment strategy that was arguably more quantitative in nature and probably didn't require as much legwork on understanding business quality as his strategy at Berkshire - back then he was still doing the Graham-style purchases of incredibly cheap companies where even if the business was mediocre to bad investors would do well. These days most of those opportunities have been screened away and what remains are value traps, but I imagine there was a lot of low-hanging fruit in this bucket that Buffett made a lot of money in back in the day
- It's literally all he cares about. The dude lives and breathes investing. He spends all his time doing it. People bitch about working 80-100hr weeks, he probably was naturally doing that because he enjoyed it... I think there are a lot of people out there who are not as passionate about it as they claim to be, and certainly not as passionate as Buffett. The dude was obsessed with fucking compound interest when he was like 12 years old. Some people are just wired differently, he is one of them.
Solid points, the point about Buffett not having to explain shit to institutional LPs explained a lot, I did not consider that before and is a huge evolution in the industry
I'd like to touch on points 2 and 3:
- To answer the returns question, his partnership compounded at 31% vs. 20% for Berkshire (obv. Berkshire over a much longer period and with more capital vs. 11 years for partnership). So evidence suggests that he did better under the former format and the opportunity set was better when he was buying smaller companies.
- I think you're conflating being a value investor vs. the investment style/strategy Buffett and Greenwald/Columbia VI types tend to preach, which more focused on compounders/GARP-y companies. So I guess I'd say I agree in the sense that you're less likely to find GARP-y compounders in small/micro-cap land if you are saying you want to own things that can compound over long periods of time, it's probably more likely that you will actually begin to gain conviction in those types of names as they get much larger and have proven business models (caveat being that once you notice that, so has everyone else which is where the difficulty comes in). The challenge is really understanding the business better than everyone else and gaining conviction to hold it over a very long period. On the flipside, I think the opportunity for returns in small/micro-cap tends to be more special sits-type investments that due to their size/liquidity just aren't as picked over as the broader market. Maybe the business models themselves aren't as good, or they don't have tremendous growth potential, but maybe there's a hidden asset that the market doesn't see, or some path to value realization that isn't well appreciated. There are probably more of these in terms of sheer number, but fewer in terms of dollars you can actually put to work, and the downside being you have a much higher velocity of ideas because portfolio turnover will naturally be higher, so you have to constantly be generating new ideas. This is how Greenblatt/Buffett started and how a lot of L/S funds these days operate to varying results, but as you gain size you naturally are forced more into GARP territory because you can't fill a portfolio with niche special sits types things. My point here is that both of those styles are value investing! One just tends to be more popular because it is more scalable, though the data show that very few people are capable of compounding capital effectively.
- I don't know enough to say a lot here but I think there's difficulty in every strategy, so don't know if you can paint in a broad brush RE: quant vs. fundamental. Quant arguably is value too in many cases, just doing it in a systematic way. I know Cliff Asness has argued this is the case. So no I think both strategies are tough and intensely competitive, the key is to pursue whichever one resonates with you and that you feel you can be successful doing. None of these jobs are chill; sure maybe fewer hours on buy side AM vs. banking but the flipside is if you aren't generating returns, you get to deal with an entirely different kind of stress. You are paid a lot in HF/AM world but that's an insurance policy for poor job security in a shrinking industry.
Hmm yeah true. Get caught up sometimes. But I'd argue that the style that Buffett and Columbia/ Greenwald preach, is a modernization of value for contemporary times. Graham and early Buffett looked for cigar butts and famously net-nets which rarely exist now. Some people still stick to deep value and I absolutely love that philosophy, but it's probs hard to scale that deep value for a large AM. Not a surprise that people still practicing deep value today are lean deep value funds and sophisticated individual investors (Deep F**king Value). So I think I can safely summarize your second point to deep value vs 'contemporary value'
Hmm, Buffett and the value academics are GARP (-y) investors? I'd have thought GARP was an entirely separate school by itself, sitting within a hybrid within pure value and pure growth. Wasn't Lynch a GARP investor? He's certainly not included as part of the conversation with these guys. I'm not familiar with Lynch's process (GARP), so does he place a huge emphasis on intrinsic value and mean reversion? The fact that he holds more than a hundred positions is already suggestive that he differs from those guys (concentrated modern value)
If I understand Greenwald correctly, asset-based value (reproduction cost analysis) and earnings power value comes first, and you'd be pinched already to find strong franchise value within that framework (EPV - ABV). Growth within the franchise (the 3rd source of value) is just the cherry on the cake that most investors would dream of, but unrealistic to actively screen for since they're so rare
For me, the big question is whether moats can exist at all in small/ micro caps
Yep, have read that paper before
I think we are abstracting things too much to the point of academic analysis and semantics regarding classifications. I get what you are trying to say and it is not wrong, but nothing is black and white, there is crossover across all styles, and each investor has had a unique approach (even multiple different approaches across different times periods as you mention) so labels will never fit nicely.
Almost every fundamental investor wants to buy things at a discount to intrinsic valuation (obviously). From there it becomes a philosophy regarding how to exploit expectations and the market's perception of value. Sometimes investors prefer to exploit companies that are growing at high rates when the market struggles to understand the implications/disruption/TAM/etc. ; sometimes it is when the market dislikes companies for "xyz" reasons (generally reflected in lower absolute multiple levels) and you can find what is overlooked, underappreciated, etc. ; sometimes it is when the market struggles to accurately assess what they should pay for companies that have durable competitive advantages that are not easily modeled in and expand over time / through M&A (the perpetually expensive compounders!). The thing is, each of these situations cross over with each other, because at the end of the day we are always trying to determine what the market fails discount in a business. We can debate the styles and value/growth camps, but ultimately they are just styles of situations that investors prefer to fish in for the same ultimate goal.
These labels help us to understand common fishing grounds, but I think it gets messy when we try to read into things deeper than that and classify investors into specific camps, opine on what scales/doesn't scale, and more dangerously, only aim for situations that fall into easily definable boxes.
I was referring to hedge funds in general, not just the ones that hire undergrads. Baupost doesn't do undergrad recruiting.
Why you say that
Getting a job at a hedge fund right out of undergrad can be challenging, but not impossible. Here are some top hedge fund gigs you could pursue:
Analyst: As an analyst, you would be responsible for conducting research on potential investments and providing recommendations to portfolio managers. This role can be a great way to learn the ins and outs of the industry and develop analytical skills.
Trader: As a trader, you would be responsible for executing trades and managing risk within a portfolio. This role requires quick decision-making skills and the ability to analyze market trends.
Quantitative analyst: As a quantitative analyst, you would use mathematical models to evaluate investment opportunities and manage risk. This role requires strong analytical and programming skills.
Investment banking analyst: While not technically a role at a hedge fund, working as an investment banking analyst can be a great way to gain relevant experience and network within the industry.
Operations analyst: As an operations analyst, you would be responsible for managing the back-end processes of a hedge fund, including accounting, compliance, and risk management.
thanks chatGPT
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I am surprised at how easy it is to spot a comment written by ChatGpt
What is the rush to get over to HF? A top banking job opens up a lot more options.
not really I mean even at a good banking job what are the odds you land a good HF seat? I'm at a HYPSM school and many of my peers are pursuing the HF space directly, whether through MM's or SM's
ye idk why ppl advocate banking so much; if you know what you wanna do and have the capacity for it just pursue it. This get a job to get another job culture is asinine.
What is SM and MM?
This has already been covered in another thread
https://www.wallstreetoasis.com/forum/hedge-fund/list-of-hfs-that-recru…
It's fun to make a list of the best hedge funds and already start agonizing about whether you'll accept RenTech or Citadel; but realistically, most of the funds are not going to interview you, let alone make an offer. No offense, but your question is like asking "who is the top supermodel I should try to date".
Just send a resume to every fund that come interviewing at your college, cause even if they're not "the top" funds, you may as well talk to them since you don't yet know if you'll get other offers. You can try submitting resumes to other funds too if you want (just read other posts on this board and you'll see all the funds that everyone else seems to dream about). Make your decision *after* you get offers. No point even thinking about it before then. Good luck!
rentech does not recruit out of undergrad. They don't recruit in general
Isn't that exactly what I said in my post?
For L/S: Farallon, Matrix, Maverick, DE Shaw, Baupost
Citadel / P72 / Millennium for a grad is not a great idea. Learn how to make money first.
Isn't DE Shaw super similar to Citadel or P72?
Don’t think so. Was under the impression their L/S strategy was more SM than MM.
Any thoughts on attractiveness of Matrix, Maverick and Baupost after 2022? I know Farallon, DE Shaw and the pods held up well.
interesting that the only hedge funds that seem to know how to make money from your list are Citadel/Millennium/Point72/Shaw. In other words the pod shops
people that start out at p72 academy are more likely to stay with the fund longer; 60% are still w the firm. Given the high turnover at MMs this is a pretty big feat; especially when the only funds making money are the podshops. In other words, if you want to learn how to make money, you're better off starting out at P72 at least.
Is your investment process as retarded as your critical thinking?
you clearly went through the academy and are v.defensive. Also really naive to group people working at pods as ppl who are making money. The vast majority of people at pods don’t make money consistently. Your dumb 60% stat is of such a small historical set.
lmao sure, Baupost is L/S. Geez, man
Baupost is long only.
Thoughts on Silver Point Capital? I have a shot at an analyst spot out of school through my network and want to see if people think this is worth putting a lot of time and energy into?
Bump
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