Hey everybody - just started as an associate at one of the legacy US Megafunds.
Since our program is a strictly 2 and out program, have to think about preparing for future opportunities. Feel like I've gone through this incredibly difficult path of getting into a top college > BB / EB > MF PE, but there isn't as clear of a next step.
So I have a couple of questions:
1. Are the opportunities from some of the top MFs (APO / BX / KKR / TPG / H&F / Silver Lake) any different than the other newly established MFs (CD&R / Apax / Permira / EQT / Thoma / Vista) when it comes to interviewing for L/S equity hedge funds or applying to business school?
2. To what extent does the sector you're investing out of matter at a MF? Are the opportunities after your associate program any different whether you were in a technology, industrials, consumer, healthcare, or FIG team?
3. What was your decision-making process when assessing options around staying in PE via lateral, going to business school, recruiting for SM, LO, or MM hedge funds, versus moving out of high finance entirely?
Would love any insight from anyone who's been in a similar situation.
+1 in the same boat
Every option you mentioned above is open to you regardless of group.
Stepping back, why are you asking these questions? You have pursued the path of maximum optionality where every business/finance career door is open. At some point, you are going to have to choose what you want to do with the rest of your life. If you float along to whatever is the most prestigious or easiest to recruit for, it's very likely you will soon find yourself trapped in a role that doesn't make you happy.
No one can tell you what career to pick, but it could help to imagine your ideal life when you are 50. How do you spend your time? What type of problems do you solve? What type of people do you interact with? How much do you work/travel?
Good luck, this is a very good problem to have!
The age old question that every MF associate eventually faces - what do I do now?
I'm a few (okay... maybe more than a few) years senior to you, and was also in this same position not too long ago. I had joined one of the aforementioned legacy megafunds above, and felt like I was on top of the world... until the inevitable existential crisis hits (as it often does for the Type-A, high achievers who land these coveted positions).
To start off, kudos to you. These roles are insanely competitive. I thought I knew this when I was recruiting as a banking analyst, but it was only once I joined a MF and saw the process from the other side where I recognized the true difficulty / odds of landing one of these positions.
Our firm usually filled most if not all positions during on-cycle recruiting, while sometimes leaving a spot or two for an off-cycle process. During on-cycle, we would bring in dozens of analysts, all perfectly pedigreed. We'd fill the room with bright-eyed ivy-league + BB/EB prospects, run them through a model test, case studies, and make them continue interviewing late into the night, only for 1 to 3 people to walk away with an offer, depending on the group and year. Brutal stuff, I know. And if you participated in one of these processes and didn't land an offer, keep your head up. Its a numbers game that favors the firm, not the candidates.
Off-cycle can be even worse. Interviews stretched out over weeks at a time, making candidates come to our office for hours in the middle of the workday. There was nothing worse than telling an analyst we weren't going to move forward with their candidacy after they had spent the week interviewing at our office, taking time away from their job. Not fun.
But you made it. And given the MFs obsession with pedigree, I'd bet I have a pretty good idea of your background. You were a superstar in high school, and landed at a prestigious university. You joined the right clubs, made sure you had top marks, and anxiously prepared to interview for IB and landed at a top bank. Then, you took the time from 11 PM - 1 AM after work and on the weekends to prepare for PE interviews (or during your senior year of college at this point), found excuses to sneak out of the office for coffee chats with PE firms and headhunters, and constantly stressed about when the recruiting process would kick off. Through sheer grit, determination, and let's face it, a good amount of luck, you land the offer of your dreams.
Then, you finish up your banking years... woah two years went by like it was nothing. You start at your new firm. You think it's going to be amazing, now you can finally be an investor. You think you're going to be a high-flying associate interacting with CEOs in the board room, convincing partners in IC, and blazing your path toward one day having your own fund.
Then, reality hits. This job is tough. Way tougher than banking. You feel totally lost. The pace is much faster, the stakes are much higher, and your deal teams are far more demanding. Senior members of the team are expecting you to have a complete understanding of all the numbers, and you're forced to defend your views against people who have spent decades on the job. Your firm is writing billion dollar equity checks, so there's no more joking around in the bullpen like you had in banking. You used to be sure you would make partner one day with all its glamorous perks, until you realize how the people you look up to spent decades cutting their teeth to make it, and still face tremendous stress every day.
Couple that with knowing your firm is going to give you the boot once your two years is up, and then the existential crisis hits. New PE firm? Business school? Hedge funds? Leaving for a corporate gig? There's no longer a guaranteed, most prestigious path. All of this is to say that regardless of your choice, just know that you made it into a select pool of individuals with a set of opportunities as broad and attractive as anyone could hope for in their early to mid 20s. So don't stress. However, knowing myself at your age, that's not what I would've wanted to hear, so now I'll answer your questions.
Before I start, any differences is really a matter of splitting hairs here, but hopefully this can act as some concrete guidance and information. To your first question:
I will say that for Bschool placement and some of the top L/S equity funds, there seems to be a higher propensity of individuals from the more legacy platforms of APO / KKR / TPG than the newer names like a Vista / Thoma, but I'd chalk that up to a few things
1. These firms have founders, partners, and principals who attended these schools, leading to more touchpoints with admissions and the admissions team creating a pipeline from these schools
2. Selection Bias: the type of person who lands at one of the "name-brand" MFs will be more likely to pursue the HBS or Tiger Cub roles afterwards as they blaze down the path of prestige. This creates a positive feedback loop where the new L/S Equity seats that come up choose to recruit from the APO / BX / KKR / TPG / Bain / H&F's of the world because they have members up and down the organization who had a stint there.
3. More upward mobility at the newer MFs. Its known when you join a legacy platform that there isn't a spot for you afterwards, so they are forced to actively pursue new opportunities. Whereas the newer firms (less so today than 5 years ago) are more of a "partner-track" model, although this is diminishing over time for these funds as well.
On your sector specific question, after being in the industry, I don't think it matters much. The core diligence process and skillset developed if you're doing Healthcare at Warburg, Industrials at CD&R, Consumer at Advent, or Tech at Apax isn't as different as one might think.
With the firm I'm at today, we know that any of these candidates are legit, so we want to gauge for their investment acumen, make sure they've got great reviews from their previous firm, and have started to think about their own research process and investment framework. So I wouldn't worry about the sector you're in, focus more on the platform and the training you will get in your time there. If it's a firm with upward mobility where you can build a career, then sector starts to matter more. But for the majority of MF associate seats, that's not usually the case.
Now, some quick advice. You just started as an associate. Make sure you're crushing it at work. Recognize it's supposed to be tough, and try to maintain a long term view. I've seen a lot of peers burn out because they either learn they never really had a passion for investing and were merely prestige chasing, or they overthink about how daunting the path forward is instead of focusing on their role today.
There's no right or wrong as to whether you get an MBA, move to public markets, stay in PE, or ditch the high-finance world altogether. You have to realize that it's time to focus on what truly matters to you, not what adds another notch to your belt of prestige.
Good luck and happy to answer a few follow-ups here if needed.
Not OP but thanks for this, needed the perspective.
The latter really struck a chord. It’s felt like a non stop existential crisis about the future since starting and realizing these things about the job.
Thank you for this. Helpful to get some much-needed perspective from someone who was in the same position. One of the best write-ups I've seen on the forum to date.
Very informative post, feels a little too close to home with the way you've described the path to landing a MF seat and my thought process once I figured out I need have a sense for what I really want to do after
How would you describe the differences between MFs from a learning / deal reps / culture perspective? How did you think about ranking the firms when you recruited back in the day? Only asking because of the different dynamics of pre-MBA versus post-MBA roles and considerations around upward mobility of the legacy MFs. I'd like to stay in PE if I can, but it looks like it would most likely be in the MM / UMM space, given how rare post-MBA roles open up at the MFs.
Del
thank you for sharing - i understand that a select number of SM HFs hire out of undergrad, such as abdiel and abrams bison, but those roles seem v hard to get (mostly top ivy summas and magnas, and have to be the cream of the crop among those).
if, hypothetically, you get one of these seats out of undergrad, would you recommend taking one of those or going for eb/bb ibd --> mf pe --> sm hf?
a mentor of mine, who is currently a higher up at a top tiger cub, recommends definitely going bb/eb ibd --> mf pe --> sm hf, but would love your insight on the matter, thanks!
If he is at a top tiger cub then he most likely did IB to PE to HF so he will obviously be biased to it. Maybe ask him to connect you with some people that went SMHF out of undergrad to get a better picture.
I just want to pile on here. I was in one of those top banking groups people salivate over on here. I was at one of those legacy top MF PE firms people salivate over. In both of these positions, I still always found it absurd how a good chunk of the class managed to sleep-walk their way into the role without knowing what they actually wanted to pursue as a career. I was not this way, but a lot of my peers including some very good friends were. To the poster above with the very long post, you give OP way too much fucking credit because way too much people really do just drop into MF PE ASO stints with no clue what the fuck to do with their lives then get their eyes opened by reality.
Del
Lmaoo dude you really think you can coast into H/S MBA just because you got a legacy MF job? Those days are so over.
Is this true? What are the odds of HSW from some of the legacy MF mentioned above (BX, APO, H&F, TPG)? How much different are your MBA chances versus the best UMM / MM funds?
There might just a handful of exceptions to this but MBA candidate pool has very much diversified over the years (they come from a very broad background now), so the admissions team don’t really focus that much on big PE name candidates anymore.
Your best shot is still going to be from the BX / KKR / TPG / Carlyle firms (APO doesn't want you to go to business school so not including them) but its become much harder. There was a time where these firms were sending 75% of their associate classes to HBS or Stanford GSB each year, but those days are long gone.
Outside of that, some of the Boston based UMM and MM funds have great placement into HBS, same with west coast funds for Stanford.
1) For L/S equity - don't think there is a meaningful difference. I was in the second group of MFs, and had inbounds every time a top hedge fund was recruiting (Lone Pine, Viking, D1, etc.). Didn't formally interview for any, but after some soul searching realized that publics was not the path that I wanted to pursue.
As for business school, there is no correlation between the buckets you defined above and the placement. In fact, I would argue that firms like GTCR / MDP have better placement than firms like BX / KKR given they are by far the best firms in Chicago (typically an area in which H/S do not receive many quality candidates, as opposed to NYC). Whether you work at a UMM firm or MF, this does not matter to the adcom (i.e. KKR vs. AmSec is not a meaningful difference to adcomm). For what it's worth, the #1 predictor of placement is whether or not the firms come to campus. At my MF last cycle, GSB came on campus and we got several people in.
2) Generally agree with points above
3) For staying in PE, definitely thought about it, but my view was that there were marginal benefits after the first 2 years (at least for the subsequent 2-3Y as senior associate / VP - I'm sure the partner experience is very interesting). As for business school, had gotten into one of H/S so was considering that option as it was dream of mine for a few years. However, ultimately decided to pursue something more entrepreneurial as a few extenuating circumstances made it much more interesting / a once-in-a-lifetime opportunity.
Can attest to part one here. Was at TB/Vista for my associate stint, and our whole associate class would get a ton of inbounds, but at the end of the day I think there was such little intent to go for them because most people either wanted to do privates or stay at the firm for the long haul. I also ended up realizing I was in the former category (wanted to do PE long-term), so never touched any HF inbounds. Also fwiw those who did go to HFs from my firm ended up going to pretty, pretty nice shops, so I think you'll be fine. I largely think most of the time these elite buyside roles that hire almost exclusively out of MF PE are largely coming down to the individual and less so the logo next to their name, so I wouldn't stress it.
Can u dm me?
Could you talk more about the HF recruiting process during PE aso years
I think it's misleading to say that your opportunities coming out of UMM is going to be the same as a KKR / TPG / Blackstone / H&F firms. I find it hard to believe that AdCom treats those candidates the same all else equal. Easy to do a quick LinkedIn search and see the massive overrepresentation of former MF associates at HBS / Stanford compared to the UMM firms.
Regarding hedge funds, while I agree that the newer MFs definitely give you the opportunity to land at some of the top single manager seats, at the end of the day these firms have decade-long pipelines from the legacy megafunds. So I still believe there's a significant advantage to being at one of those platforms, even if it is true that the experience doesn't differ much between a Blackstone versus Vista.
Regarding point 1 for UMM vs. MF for MBA placement. Your point is completely incorrect. The metric to focus on is not how these funds have fared from 2010-2020, but how they've fared in the past few 2-3 cycles - it is a different era today. Nobody from KKR PE in NYC got into H/S round 1 last cycle. TPG Capital had less than 40% placement rate into H/S. On the other hand, top Chicago UMM funds place lights out into these schools. It is not meaningfully better to be at a MF PE group vs. top UMM firm. What is a better predictor is the city you are in, the strength of your recommendations, and the relationship your fund has with the MBA program (hint: if H/S visits your PE fund, you are considered a "target firm"). Source: I've gone through the process from a MF (and was admitted to H/S), seen 30+ data points from peers in UMM/MF PE funds in the last 2 cycles
Regarding point 2 for recent vs. historical MFs. Again, completely incorrect. This is like college kids who think GS TMT / PJT RX is meaningfully better than GS Consumer / MS GPUG for PE recruiting (hint: they are not...I was in one of former two banking groups and can tell you there are other coverage groups who have placed better as a whole). The closer analogy between old school vs. new age MFs is like comparing two students from the same school for investment banking recruiting. One has a 3.92 and one has a 3.88 from the same school. Sure, you can say one has a higher GPA, but they round to the same thing, and there are many other things (i.e. major, athletics, general social skills) that are much more important in rounding out what you think about the candidate. If the thing that you are so obsessed about is GPA (once you get to the 3.9 range), you are absolutely focused on the wrong thing.
The main benefit of hiring someone out of MFPE is you know that they’re super well trained and either know what they’re doing or have the common sense to figure it out. You also know they’re not a pussy and can and will work really hard and not cry about it.
That’s sort of it. Industry, strategy, etc less important. As long as the above 2 check out, then it will be more about how you think about the world as an investor and how that aligns with what they do.
del
Very marginal differences but I do think sector matters for future opportunities. After going through the recruiting process, I'd say the way to think about sectors is as follows:
TMT / Consumer / Industrials preserves the most optionality for staying in PE or moving to hedge funds because the business models are applicable to so many other areas.
FIG / Healthcare leads to a more niche, specialized skillset that can potentially pigeonhole you. This has advantages and disadvantages. You can argue that a more specialized skillset is preferred because of the entry barriers to learn the sector, but this comes with less optionality in future roles.
Because of this, during recruiting you typically see Tech, Consumer, and Industrials as the most popular, while FIG and Healthcare are often less preferred.
what about RX? PJT, CVP, EVR, and LAZ RX seem to place v well, but would like to hear your thoughts on the upsides and downsides of it.
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