Many people seem to plan on going into hedge funds after 2-3 years in IB (not S&T). I never understood this transition--how does what you do in IB have anything to do with trading (especially quantitative trading strategies)? PE makes some sense, but do people actually get into top HFs after a few years on the sell-side?
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fundamental HFs take ex bankers bc they know how to model and understand financial statements, traders dont. big diff bt trading strategies and fundamental
1000 threads on this, search.
Best background for fundamental HFs is probably in equity or credit research- either as a published analyst or desk analyst (e.g. IG, HY, prop, etc.) Structured credit is an extremely quantitative area; IBD and MBA types don't generally have the skillset for it. A friend of mine from undergrad started in a Big 4 valuation/tax group, went on to forensic accounting and then moved to an equity long/short fund with about 2-3B AUM, so there's really no set path to get to the buy-side.
Quant funds recruit almost exclusively from grad schools in math, stats, physics and CS, though I've seen a bunch of people with fluid mechanics (actually computational fluid dynamics.) Post-docs in these fields are also very marketable.
The sell side quants who build pricers for the vol, exotic rates, structured credit, FX and commodity derivatives desks are all top-notch obviously.
Pretty accurate on all accounts. I would just add that many hedge-funds hire from the sell-side, particularly those which are specific to an industry.
and neither are ER guys - they are hired as analysts to research the companies, model them out, and create investment pitches. HFs usually hire guys with actual trading experience to trade, i.e. sell-side S&T guys.
I agree that the transition from equity research to a fundamental long/short fund makes more sense than from IB, but keep in mind that there are many more junior IB guys than junior ER guys, and the quality of experience can vary greatly in the latter group. If you are a junior ER and have experience building and maintaining models, writing notes, and interacting with company mgmt, then you will be a great candidate for HFs, but not every junior ER gets this type of experience. The junior IB experience doesn't vary too much and for the most part they all get great training, so HFs like them.
bumping for informative posts
HFs prefer IB analysts over S&T / equity research types because of the advanced skillset and greater work ethic of IB analysts.
Typically top students go into IB, and guys who don't get into IB go into equity research. Top buy-side firms prefer top talent.
I would say IB people are on average smarter, but don't actually ever have the smartest. People who go to IB from Wharton are generally people who I lump into the "did well bc they worked hard" category.
I've noticed that the intelligence variance in trading is much higher. The smartest people I know at Wharton are into trading, but so are the dumbest.
Hahaha, that is such a joke.
Not sure why this is a joke.
Just stating my personal experience as someone who went from IB to a HF. You can take my opinion into account, or you can listen to some college junior on this board who really does not know what he is talking about.
Obviously I'm just considering candidates graduating from business, not phd physics / math, which would obviously be better suited for more quantitative roles at hedge funds.
Yeah, who does go into trading? And what are the exit options for S&T? Everyone knows people go from IBD to HF's and PE, but where do the traders go?
Hahahaha..
that one was good!
though the process is noisy, my sense is the top people tend to go:
Rentec, DE Shaw
Citadel, BB derivatives trading, quant, top HFs
then -> steep drop off here...
BB banking (industry group)/ER/credit research/some prop shops
BB flow trading/sales
most prop shops
So much misinformation in this thread. Obv. this is the IB portion of the board but come on.
In HFs, the PM usually comes from a research analyst background, since the traders just do execution, right?
People at HFs tend to hire people from the sell-side because they themselves cut their teeth at IBD analyst programs. Is the ER skillset more relevant for fundamental HFs? Yes. But since when has recruiting on Wall Street been completely rational?
The only thing funnier than the content of this thread is the names of some of the posters in here.
Yung Gekko, aaaaaaaaaaaaayyyyyyyyyyyyyyyyyyyyyyyyyyyyy
BB ER is actually the most common entry path to an industry analyst at a less fancy long/short hedge fund, while IB is obviously big too for certain types of hedge funds (merger arb or funds with an activist slant)
Going to a top BB ER division, working hard, getting experience learning about certain strategies and industries, and being around respected senior analysts is a pretty good pathway to HF.
Also, I never liked to think of an IB person as smarter than an ER person. While in 2006-07 an IB analyst made 60+60 1st year and an ER person made more like 60+40 1st year, an IB analyst probably worked 70-75 hours average and ER person worked 60-65 hours average...just sayin...those marginal 10 hours are huge. An extra 2 hours of sleep per week night.
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