The answer may be "this doesn't exists" but was curious if there were any roles within PE / GE / VC / HFs that does not require deep hairy financial modeling. For example, my sense is that a lot of VC is light financial modeling with a hire focus on due diligence + sourcing as key tasks required. Are there any other?
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Private credit - obviously still need to build models, but they are generally less complex and time consuming than on the PE side where you're extensively sensitizing every line item given where you are in the cap stack.
not sure whether i would private credit called as modelling-light (more like modelling-moderate); it certainly depends on what kind of funds you are working for (i.e. MF credit arm etc).
otherwise, on the private credit, you still have your cases which are limited to two options: (i) base (ii) and downside case with a focus on your CF generation which can be quite detailed.
Being in private credit for over two years at a firm that invests cross capital structure (including equity), that's a fair statement - however, any real buyside role will have an element of modeling to it. Whether that be sensitizing S&*A and FTE's across various divisions and building in growth cases to assess equity upside or running downside cases on top-line growth or run-off analyses in private credit.
Further, I would not say CF models are extremely detailed by any means, potentially depends on your definition of detailed - if you are in IB or PE, the models are not difficult and can be picked up relatively quickly, but if you are a student or not in a front-office position where you are running operating models, then yes it can be complicated to ramp up and learn.
Early stage VC does virtually no modeling.
The earlier in a company's lifestyle you invest, the lighter the modelling. Early-stage VC, and even into Series A/B is pretty lightweight.
SPAC funds. There is nothing to model on the front end, and when you do PIPEs for the VC/growth equity type targets there is nothing to model on the back end :)
Something like a FoF company should involve relatively less modelling
following
Sac capital(point 72) or galleon group.
Don't need to model. Most of the alpha is from illegal tips. Why waste time modeling complicated tax adjustments or something when you can get market moving intel prior to public disclosure?
You still need to build a model to cover your tracks and make it look like you did "work"
What's ironic is that is the reason sell side models are built. No one really cares what the sell side model says(buyers do their own model as well), but it helps justify fees and cover mds careers if the MA deal fails years later and litigators go after the bank.
HF - L/S Equity
Models need to be simple, with a deep understanding of the underlying business and a very well-tuned understanding of market psychology.
Interesting. Can you say more?
Better to be *generally* correct than precisely wrong.
Varies by industry of course, some require much more modeling than others (example - oil & gas exploration/production vs. oil & gas pipelines, the former requiring more detailed models, the latter more so requiring an understanding of production trends, infrastructure trends, etc).
What types of trends is the company levered to and how do you feel about those trends? I don't care if said trend will make EBITDA go up by 5% or 6.75%, it's going up, and I want to be directionally correct on that. A simple model with a very good understanding of the underlying business, industry and macro allows you to know this.
Market psychology I - knowing what the crowd cares about - "it's not what you believe, it's not what the crowd believes, it's what the crowd believes the crowd believes... the power of a crowd seeing a crowd is one of the most awesome forces in human society." What does the crowd think? That is your starting point.
Market psychology II - knowing the macro, are we in a risk on or risk off environment (which right now seemingly changes daily), and many other things like that.
That is quite dependent on the HF from what I hear + if you are thinking about MMs, to ramp up your coverage you'll have to churn through models at the beginning and it sounds like OP would quite such a job even before being done with that.
Isn’t modeling part of due diligence? How do you quantify or project anything if you don’t model?
im a long short guy so I’m biased
Yes but I think there are different levels of modeling (could be wrong). My buddy told me his models were very large - built monthly for 5 years with monthly assumptions for NWC, SG&A and COGS with further granularity within those buckets (e.g., sales census build with monthly quota, quota growth, ramp up period that needs to be right by individual and roll up to a nice number). He felt like all the granularity wasn't needed as most MDs would say "just make it be ~3% growth" but it nonetheless is hard to model and execute that level of a model within a ~1 week. Combo that with a culture where sequential all-nighters are fine, you're left with a pretty abysmal week.
Everyone in my life says I like to sit more big picture, which I get bars me from many LBO shops but wanted to explore if there is a good fit for me outside of large LBO shops. Understand I would have to take a pay cut but, hey, life is more about money and making deals right?
Small-cap focused equity hedge funds
Growth Equity? Interested to know the differences in modeling and due diligence across Analyst, Associate, VP, and MD/Partner levels.
It’s different. Instead of modeling ebitda adjustments and NOLs and taxes and whatever you might be trying to look at DAU:MAU or LTV:CAC or whatever (focus on first, do you have PMF, second, do you have a business model that works)
There are a ton of things you could do - private credit as mentioned by others, co-investment funds where you still need to know modeling but where you are mainly building cases over a model that a sponsor built, secondaries - LP secondaries if you like understanding and working in PE at a higher level, GP-led secondaries where company modeling is again more higher level but with detailed cash flow forecasting at the vehicle. That's even before getting into roles in primary fund investing, investment research, asset allocation etc.
Modeling as a skilll, while important, is vastly overstated and oversold on this forum, especially as you move up.
God this battling over tiny little streams of cash here and there makes me want to blow my brains out
Yea it's the latter. When I worked in Seed / A it was not enough of a focus on the financials. Now my whole job (large fund) is assessing every bit of cash flow.
I think the right job lies somewhere on the scale from General Catalyst to General Atlantic...
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