Disillusioned with Recruiting and the Expectations of Employers
I'm a 3rd year at a semi-target (think UMich, Northwestern, Berkeley, UCLA) studying Math and the past few summers I've worked at several different T1 hedgefunds. Honestly, I loved the experiences and there is really nothing more interesting than a job that pays for you to learn every single day. The industry is attractive just based on the sheer distillation of massive amounts of information with accomplished and driven colleagues.
I have also started recruiting recently for more entry-level positions, and what really stuck out to me in my interview prep etc. etc. was just the ridiculous expectations for formulaic answers. I constantly hear, "A CV can only hurt", "A story can impress, but don't dwell on any experience too long", etc. and its genuinely destroying my interest in the field entirely.
Whether we like it or not, the IB -> PE -> HF route is very real and I can tell you from experience if your goal is to work at the best firms in L/S equity (like my goal is), a plurality of your colleagues are coming from either GS or BX if not another T1 fund (where prior they worked at GS/MS/BX). This isn't even getting into the fact that at T1 HF's and PE firms, it seems like 50-70% partners and senior people either went to H/W/Y/P for undergrad or grad school.
I guess it's a self perpetuating cycle that churns out essentially the same types of characters, but on some level the lack of interest by interviewers in us, the candidates, is disheartening. Where are the brainteasers? Where are the questions that really make us explain our views on life and our own personal philosophy? Why not put even a bit more effort into selecting based on some kind of intellectual promise rather than just asking me the same six questions, just to look half bored because you are looking for the same answers. The interviews where I respond what I'm actually thinking, where I am providing the most honest and realistically true responses are the ones that go the worst. The ones where I just reply to questions with the exact same replies that I've read everywhere else are the ones that go the best. Do we ever worry the destruction of individuality will limit potential for development?
I guess I'm coming here to ask, if my goal is to get into top tier EM Private Equity, is the only way through the generic route? And if you are a staunch believer in the generic route, what do you think it really provides employees and why does it continue(other than network effects)? And If I wanted to get into PE after getting an MBA, what could I do before business school that would make me as attractive as a candidate that had been at GS/MS?
A few notes:
(1) DE Shaw had a fantastic interview process
(2) Finance didn't used to be like this in the 70s or 80s, when the tycoons that we all strive to be actually got into the field. Hell, Schwarzman majored in something interdisciplinary and wrote his thesis on the architecture of financial firms, only to walk into DLJ (admittedly with 0 knowledge of the field or econ) and after being given a job offer, demanded to be paid better.
I should probably add that my family works in the industry on all sides (LP's, GP's, and as bankers), and that was part of my impetus for entering the field. I know that makes this overall experience less relatable, but we really can't choose what we're born into. I'm just trying to find a career that is intellectually stimulating, pays extremely well, and has me making work my life. Finance is good at all of those things, and thus it has become my vision for my own future. I haven't necessarily ruled out starting my own company or getting a masters or PhD, but I have tentatively ruled out quant finance as a career. I think quant finance is fascinating to research and read about, but I can't code nor do I think that manipulation of capital would leave me feeling extremely gratified in my life choices. PE is great because it allows operational control of a business.
I'm sure other people will be able to comment on the fact that the finance world has become too bureaucratic and institutionalized, so I'll just ask you about EM PE. Which emerging market are you interested in, and which industry? Do you have local ties to the emerging market you are interested in?
I'm based on the west coast of the United States. I'm super interested in India, Africa, Brazil, and Central Asia, but all for different reasons. To preface, I have no ties to anywhere other than LatAm.
Africa is going to have a demographic explosion over the next few decades and the digitization of finance should hopefully clean up the corruption issues that have plagued the continent since decolonialization. The investment by China into Africa for geopolitical reasons will spur US involvement and investment in the region as well. We already see this playing out with Rwanda's emphasis on ease of doing business and the East African monetary union.
India is really just a crucial country in geopolitics and the West's only shot at balancing Chinese hegemony in the fastest growing region on earth other than Africa, ASEAN. Luckily, Vietnam, South Korea, and Japan are allied with the Phillipenes and Indonesia more unsure, but if India can remain politically stable, we will see a transition from China to India for manufacturing and other industry. This doesn't even include the fact they speak english or that for a poor country, they have excellent educational infrastructure.
Brazil has entrenched oligarchies that will be disrupted through technology.
Central Asia will see so much investment from China and India with their intentions to turn it into an economic corridor. Its development and openness is really a function of its politics and whether the autocracies can be dismantled.
The US is at the end of a long-term debt cycle with few Fed policy levers to pull while even China has so much more room to expand credit. The US has had an incredible past 30 years, but the overfinancialization of the economy has created a brain drain into consulting/finance and away from more technical fields. Not to mention that the US should probably nationalize defense and create a single-payer healthcare system in the next few decades and that certainly can't help GDP growth. MMT is an illusion that while politically effective, creates a disastrous environment for US investing over the next 10-20yrs. Except for semiconductors. The US will need its own semi supply chain.
I also want to add that while MMT will push up asset prices and theoretically make real estate and equities more valuable, it's playing with issues that are more fundamental to the world economy like US dollar dominance. Even the issues with budget funding as of late could lead to a crisis of faith in the treasury market as the backbone.
No shade but although your theses sound good on paper, they're definitely superficial and I invite you to do more research because the reality on the ground is very different. For reference I work at a merchant bank (disregard the intern title) where EMs are our bread and butter. Here are some thoughts:
I doubt the demographic explosion in Sub-Saharan Africa will have a strong positive impact on the economies of the region. Doubling the population of DRC for instance won't change the landscape of the country: its infrastructure is either inexistent or was built during the colonial era and is crumbling, and various warlords are constantly fighting the government to carve their own territory and gain control of mineral assets. The "digitization of finance" is a highly theoretical concept: let's not forget that Nigeria banned Bitcoin recently, and that introducing new digital means of payment is actually likely to simplify both regular payments and bribes. Chinese investment focuses on extractive industries such as metals, which also favors bribery and dis-incentivizes governments to invest: why would they try to invest into infrastructure and stimulate the economy to gain revenue through taxes when they can just get mineral royalties from a Chinese firm and get passive income? I also highly doubt that the US firms will get seriously involved in Africa, because they don't have any support compared to Chinese firms who are backed and financed by the CCP. At best, we can expect the US to get military involved if Boko Haram becomes too serious of a threat after France's departure from the region. No doubt, Rwanda is nice, but it's a very small country whose future solely depends on its neighbors DRC, Uganda and Tanzania.
Again, the "West" doesn't exist. The US can't even agree on a budget. We shouldn't think that "the West" can make plans and act like China does - China is a single country controlled by an authoritarian party, the West is a multitude of different countries who can't agree on anything and will never constitute a united block against China. In terms of industry, India already is the biggest pharmaceutical producer in the emerging world (bar fentanyl, in which China is the leader) and its VC scene is thriving. However, an outsider will never be able to do business without getting ripped off, because the first rule of EMs is that if you're not a local you won't be trusted.
Brazil had potential 20 years ago when the term BRICS was still a thing... Oligarchies are entrenched because they own the land, and therefore own agricultural production, which constitutes the country's only competitive advantage. Technology won't have a say.
Why not honestly. I'm bullish on Uzbekistan because the current government wants to privatize state-owned companies, and Kazakhstan still has some potential to industrialize and become more than an agricultural power. However, PE investment in that country is not new at all, and many funds have been shut down because the investors didn't understand the reality on the ground: due diligence is a nightmare, and if you let the previous owner cash out and retire the employees will just leave and setup a competitor doing the exact same thing.
Don't really know about the US since the situation is relatively complex, but yeah I'm quite bearish on it.
I may be jaded, but most of the catalysts you mentioned are unlikely to happen because of structural issues that time won't solve. There definitely are some promising countries such as Uzbekistan, Vietnam and Colombia, but you'll need to speak the language and either be a local or be backed by the government to have a decent shot at making money, because nobody outside of the West is going to really care about your due diligence process or about your Western laws or about your pedigree or anything.
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