Your fund is hiring someone with 2 YoE. Would you be more likely to hire someone out of a solid IB coverage group (ie BofA, not GS TMT) or out of a research associate program at a solid long only asset manager (ie MFS, Lord Abbett, Brandes -- not Ruane Cuniff, D&C, Wellington)? Why?
(maybe specify what kind of fund you are. I am thinking mainly about SM fundamental equities)
| +84 | If and when to move to a pod? | 18 | 5h | |
| +80 | Best SM seats in 2024? | 66 | 26m | |
| +69 | Pod Shop Regret | 24 | 18h | |
| +23 | Understanding pod shop leverage & cash usage | 2 | 1d | |
| +21 | Intellectual Caliber of People in HF | 14 | 4s | |
| +16 | Are you making money these days? | 9 | 4d | |
| +12 | Track record to start a small hedge fund? | 7 | 15h | |
| +12 | Mid to Low Frequency Quantamental | 1 | 5d | |
| +9 | Suggestions for market structure analysis & better trades | 1 | 5d | |
| +8 | Opinions on Yipit and/or Mscience? | 11 | 5d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Are you asking me to decide whether I will hire someone with directly relevant experience and one who doesn't?
As someone hired out of u/g with both internship experience in banking and hedge funds, think it's so PM dependent but I'd prefer someone with banking experience FT but potentially having interned at a HF. Think too many people these days from banking go to the buyside with no real intention or desire to do any particular job, they largely realize that's the natural path. Someone who perhaps interned at an HF but realized the conventional route was via IB is probably the best bet. But I think being in a LO AM role, you're 1) largely exposed to an investing style early on and 2) may have a difficult time learning to short sell / have neutrality in a L/S setting. What I mean by this is: being exposed to a LO fund who's typically leaning bullish in all regards is just a very different method of investing than L/S is. LO AM also can vary deeply across value, growth, large cap, small cap, etc. I think studying under that role early on can teach you to be an exceptional investor, but there are limitations to transferability in L/S - so unfortunately disagree w/ Dick here.
In essence the better L/S analysts are just raw "company analyzers" mixed with a half trading, half investing style. Recall across L/S there's different styles and durations as well, but at the analyst level your job is to spot pattern changes and inflection points in companies and then profit in both directions. A LO AM guy has been taught to screen effectively across their strategy and allocate capital appropriately to assets they believe can outperform in the medium/long term. They've been taught what makes a good holding, not what necessarily makes a good trade. An IB guy has no pre-conceived notion about the public mkts and likely has spent very little time focused there. He or she will know the basic fundamentals of a PnL / cash flow statement and can understand what makes a company 1) profitable and 2) good at allocating capital. He or she will understand the strategy that goes into an M&A strategy. But they'll have little to no understanding of what makes a good trade or investment and as long as you, the PM, are willing to hold their hand a little bit to lead them through the woods in the public mkts; given they have the passion for it can be a worthwhile hire.
LO AM is arguably the best seat in finance. Comp will likely be higher in IB / PE / HF but nowhere else in finance do you have the combination of a) good comp (Analysts make anywhere from 300k to high-6 figures on comp alone, not including partnership), b) reasonable hours (50-55hrs per week run-rate) and c) intellectually stimulating work (lots of thinking, reading, creative work in excel, speaking with CEOs, traveling to interesting parts of the world)
These seats are incredibly few in number and because of above dynamics, there's very little turnover at the Analyst / PM level (why would you ever leave with this type of gig) so that limits the pipeline of opps. You also have more fee pressure and underperformers (majority of industry in Equities world) that are going out of business which further limits seats. Fee pressure is the big negative headwind so unless you're at a top decile manager I don't think it's worth getting into the industry as # of seats will keep shrinking every year. So the space has its challenges
As someone from the ultra long term / ultra concentrated end of the equity L/S spectrum and where even at the relatively junior level I would be looking for someone to be a stock picker / pitching ideas from day 1: I would 90% of the time interview the LO AM candidate over the IB candidate. IMO it's much more relevant experience and better training for thinking like an investor - when I've interviewed IB candidates they typically struggle with articulating a coherent investment thesis (i.e. why should I buy the stock now). I know the IB candidate is going to be better at building a model, but I'm looking for people that can identify the 2-3 debates that are going to drive a share price over the next few years and come up with a creative plan to research / get an edge on those 2-3 debates - in my experience people from an investing background do better at this in interviews / case study rounds. In a bigger fund with more internal training resource maybe there's more of a case for taking the IB person as a blank slate the PM can train up and mould to fit their own investment philosophy - not a luxury my team has.
Caveat I am based in London where (unlike in the US) the 'top SM funds' that are often namedropped (aside from the activists like TCI) are typically full of ex LO / ex ER people rather than ex IB/PE people.