HF to PE post-MBA - my story and seeking advice (long-time poster)!

Hello all! As you can see from my King Kong status and my post history, but I've been on WSO for a long time and was a regular columnist a few years ago. I've benefited tremendously from my interactions on WSO, and now am asking again for some general advice (and will be sure to keep giving out advice as well) as I transition from a credit hedge fund role to private equity investing.


Started in high yield credit at a big bank, and moved to a "top" distressed/long/short credit fund (loans, bonds, mezzanine, equities) concentrating on a few sectors - the fund I was at is considered one of the best, and I had an amazing team. Loved it but always had wanted to go to business school (mostly to party but also to work on ideas and meet cool people). I applied and got into the top ones.

While in Cali, I interned at a prominent startup in the valley (still pre-IPO, not Theranos LOLZ), somehow ended up getting a role at a large (+$3B but MBA experience made me really passionate about this path.

Skills to focus on for PE?

I am curious what skills I should focus on the most as I prepare to start full-time next week. I went through the LBO modeling tests, investment pitches, and case studies, and have a "blue chip" investing background. I understand cash flow dynamics, restructuring, relative value, and so on. However, what are some areas I need to work on as I shift from securities investing to company investing? Some areas I was thinking:

  • Stock purchase agreements and related documentation (I mostly worked with credit indentures and loan docs)
  • Interactions with bankers (I mostly worked with traders in my HF role)
  • Work flow - I'll be a VP, but I come from a very flat organizational background
  • Modeling skills - very strong at forecasting and LBO, but should I double-down on DCF?
  • What should I be reading? Initiations for IPOs in the sectors I'm going into?

I've read all of the topics on WSO, the Macabacus site, and have downloaded quite a bit of research - I've also asked classmates and friends, but to be honest very few people move from HF to PE so hard to get targeted advice! In general, would love any advice as I move from HF to PE/growth.

Also more than happy to answer any questions about my thought process and background. I obviously want to give as much as I take from WSO!

Comments (9)

Jun 26, 2018 - 3:33pm
equitiesinda11as, what's your opinion? Comment below:

I'm an undergrad student trying to figure out if I'd be interested in working at a HF or a PE firm in the future. Can you talk about the motivation behind transitioning from HF to PE? What factors went into your decision?

Also, what was your background prior to your HF stint?

Jun 26, 2018 - 5:04pm
big unit, what's your opinion? Comment below:

Given you are in undergrad, I would focus more on getting a solid post-undergrad entry role and succeeding in that role. Far too premature for you to be thinking about PE versus HF at this point (though maybe times are different now than when I graduated 7 years ago). Its unhealthy to think too many steps down the road, but I would say focus on getting into the most active groups you can get into. All else equal, a team like M&A and LevFin probably gives you best access to HF recruiting alongside PE, whereas industry groups most likely give you an easier path into industry-specific PE roles.

That will open up options and give you the opportunity to meet people across the spectrum of PE and HF and that will give you the best vantage point. You'll have to decide for yourself whether you like deals versus the markets.

I worked in a very transaction-oriented part of the hedge fund market, so the day-to-day is much more process oriented than a liquid equity fund. I'm making the switch because I wanted to work more with technology and growth industries rather than distressed industries. My perspective is far from unique. I also like working with people, and I already have HF experience on my resume so have that option down the road if I want it.

I worked in leveraged finance out of undergrad and had PE/HF offers then - initially had wanted to do PE but had the HF opportunity at a brand name fund, and really liked the PM I was working for. Was a great decision, because the people I worked with have been exceptionally supportive with all of my moves. At the end of the day, brand names and the skills you learn are important, but having people vouch for you is the most important.

Jun 26, 2018 - 9:54pm
white collar, what's your opinion? Comment below:

I can't really say I'm an expert on either PE/HFs but having spent time on both sides (public / private), I might be able to offer some perspective. Based on your post, I'd guess we have similar years of experience under our belts (i.e. I am NOT speaking as someone with gray hair - full disclosure), but PM me if you're interested in speaking in greater depth.

Jun 26, 2018 - 10:03pm
monkey_brah, what's your opinion? Comment below:

Can you do it here in a redacted manner such that we can all benefit from your wisdom? Very interested.

Jun 26, 2018 - 10:57pm
white collar, what's your opinion? Comment below:

Lets give it a shot. All the commentary below is based on personal experience and should be taken with a grain of salt. It's not gospel and others' experiences will vary.

Process - On the private side, investing is as much about the thesis as it is project management. At different points in time you wear different hats. Sometimes you're thinking like an investor (e.g. analyzing the business, assessing industry dynamics, understanding competitive dynamics, building projections, forming a view on valuation), while other times, you're playing traffic cop for the various parties involved in the transaction, which there are inevitably many (lawyers, bankers, TS groups). All these pieces have to work in concert and particularly at the VP level, you're the conductor, trying to get everyone pulling in the same direction. The public side require less cat herding. Often times you start with the thesis, identify the due diligence required to validate the thesis, make some forecasts, form a view on valuation, and try to come to an answer I the most efficient way possible. I'm simplifying a little, but hopefully it illustrates that public TENDS to be much more linear than the private side. All this to say, developing a method/style for project management on the private side is an important skill. Different people have different styles, so there isn't necessarily a prescriptive way to manage projects, but thinking about personality, how you like the interact with people and how you want to manage a variety of parties is important.

Due Diligence - in my experience due diligence is much more detailed on the private side versus the public side. Part of this is simply of function of having ACCESS to more information. On the public side you are limited to what you can glean from public documents or tease out through non-convention due diligence. On the private side, due diligence is much more granular. Depending on the type of company you might be going as deep as assessing revenue on a contract-level basis.

Fund Dynamics - This probably isn't anything profound, but understanding how private equity funds work from an operational perspective is helpful backdrop. They are structurally different to how hedge funds are structured from an economic perspective. This is neither good nor bad but helpful to keep in the back of your mind as you're considering where in the fund lifecycle you are and where portfolio companies are in their lifecycle. Hedge funds typically don't have these considerations.

Valuation - part and parcel with the process / due diligence, valuation on the private side tends to be much more detailed than the public side. Now that does not necessarily mean its more CORRECT (the moment you make forecasts for a business and put a point estimate on the value of that business know that you will be wrong), but models and outputs will be much more granular. There is also significantly more sensitizing around a wide variety of variables on the private side than I have found on the public side. Most of the modeling for PE is LBO modeling and running 10 different cases flexing different assumptions and sensitizing around a variety of key variables (leverage, growth and profitability are probably the main ones)

Emotional Intelligence / Interpersonal Skills - this is one area that is very different on the private side versus the public side. On the public side, you typically don't know the person on the other side of your trade. Its you against the market and the market will dictate whether you are right or wrong over time. yes you deal with management, IR, sell side and what not, but at the end of the day, none of them are required for you to make an investment decision. On the private side, you are investing in the people as much as you are the business, and your relationship with all stakeholders is critical. You will be dealing with management, the board, financing partners, employees, vendors, etc. regularly so understanding their motivations/incentives and what is important to THEM is important to the long term success of the business.

I had a mentor once tell me that at the end of the day a business is just a bunch of interconnected contracts - ones written on papers and ones implied - and if you are an owner of that business, it's your job to ensure those contracts interact with each other harmoniously. Taking his advice on-step further, behind all those contracts are people, so I can stress enough the importance of making sure you understand the interpersonal dynamics that belie the web of contracts.

This is by no means an exhaustive list but some initial thoughts that I can add to as a think of other considerations.

Jun 27, 2018 - 10:14am
big unit, what's your opinion? Comment below:

White collar,

Thank you for this great breakdown!

The 'process' aspects that you discuss are clearly the biggest things I need to work on, and your description of 'linear' progression in terms of analyzing investments on the securities side makes a great deal of sense and is spot-on in my experience - when you have less access to information and less advisers to work with, it certainly does limit the scope of how you are able to differentiate your research in the due diligence process. I find this particularly true on the distressed credit side, where many of the reasons for the capital structure stress are cyclical (and non-differentiated) in nature and are more a result of balance sheet issues than any strategic issues with how capital was deployed.

In terms of due diligence, I did have some private/MNPI level deals that I worked on (for rescue financings and debt exchanges primarily) but this certainly makes a great deal of sense - I need to become more proficient in understanding SLAs/contract language for sure.

The emotional intelligence aspect that you point out is one that I really think will be a major transition - I really like working with people directly (as opposed to in a Bloomberg chat) which is something I realized as I progressed in my career. That isn't to say my HF experience cut me off from great interpersonal relationships, but rather my interpersonal relationships didn't necessarily improve the outcomes of the investing process. Certainly I'm excited to be in an environment where relationships with managers/financing partners/board members will be iterative and multi-stage in nature.

Thanks again for taking the time on your response, really appreciate it!

Most Helpful
Jun 27, 2018 - 5:59am
APAE, what's your opinion? Comment below:

Congrats on all your success so far, you have an impressive professional biography and it speaks loudly in support of the strong work ethic, self-awareness, and intellect that comes across from your posts here.

I remember you from years back, although I wasn't as active then and definitely didn't contribute in the same manner I do today. It's good to see another old-timer resurface and begin giving back.

Fair warning, this is long, I worked on this for half a flight but I am happy to share.

Your questions are astute and not abnormal for someone in the uncommon position you're in: moving from securities to deal work.

It's a bit of a frustrating situation, actually. All the professional development resources are geared toward interns or analysts, people getting their feet on the ground to begin with. It provokes a natural question: "Where's the help for somebody mid-career like me who's trying to figure out how to actually get sprinting now that I already know how to jog?"

I've never understood the logic in the industry's practice of by and large ignoring human capital investment in the people whose progress creates an impact exponentially larger than that of new graduates to focus on new graduate enrichment programs.

(This is one major factor behind Goldman's edge on other firms in senior talent retention. Many MDs at other banks don't even know about the Pine Street leadership training initiative they've formalized. Check out the HBS case study for more, it's from 2005-ish I believe.)

Let's jump in.

One: Modeling

I can't tell whether you did a banking analyst stint or not. (One comment says "high yield credit", the other says "lev fin".) If you didn't, I recommend you do a lot more of what you said you've already started with Macabacus and the like.

There's a newer resource I wish I'd had back in my college days: Multiple Expansion. If your start date is later in July, I'd email someone and ask if you could get your hands on the models for an exited portfolio company -- the bid one and also the live one when it was in the portfolio.

This is just an 'is'. You acknowledge the infrequency of someone like you getting that seat. Your peers are all coming from pre-MBA roles doing the exact same thing. You don't want to have any gap in the core skill-set.

That being said, don't sweat this too much. It's binary. Once you've ticked the box, don't stay dialed in on this. You'll have junior resources to hand things to. The point is to make sure that if you're ever time-crunched (or perhaps your junior is just being dense or is not accessible for some reason), you're completely able to roll up your sleeves and crank something out yourself.

Two: Sourcing

Here I'm going to pull almost verbatim from a prior comment I made years back.

Sourcing is the lifeblood of every senior investment professional. This is not a two-and-out program, you aren't the pre-MBA associate that 95% of all written material on the industry is tailored toward.

If you can't put high-caliber deals on the table, you won't ever get anything into the portfolio and thus you won't ever get paid.

People on forums like these (rightfully) talk down on associate roles at the shops where the primary component of the job description is sourcing. That makes some sense, because at the junior level you're looking to learn the quantitative elements of the deal process in order to develop the foundational skill-set that will serve you well as your career progresses.

Well, a private equity career progresses toward sourcing roles. In your case, you're in the first title where it starts to matter: Vice President, or depending on the firm, Senior Associate.

This means you need to begin building the muscle memory around identifying interesting investment opportunities, vetting them moderately, and bringing them to the table for discussion.

It's possible to write tomes on this, but for the sake of time, let's be brief.

You need to develop (a) theses and (b) mechanisms.

(a) You know from your prior role how imperative it is to have some research-driven convictions around how the world is unfolding. These evidence-based channels allow you to focus your time efficiently when studying your space.

e.g. "Moore's Law is under duress. The increasing player concentration and rising dollar cost of R&D in semiconductors, plus the key demand factors of automation, IoT, and cybersecurity, mean that the big guys are going to increasingly do inorganic R&D through acquisition."

(b) You need to develop repeatable phenomena that surface deals for you. Find a way to build mousetraps that churn out investment opportunities.

This may be a particular conference you decide you're going to own. You go the first year and meet a whole bunch of people. You stay on top of them well enough over phone and email in the intervening year, then ahead of the next conference, you line up your own private itinerary within the larger event.

Set up private breakfasts, lunches, and dinners off-site. Be the ringleader. Find some industry figures (non-deal professionals) whose voice would be valuable and get your firm to cover their ticket. Use these people as bait to dangle as your hook to get people to your mini-events. You can get existing acquaintances on board easily, and it's also a fantastic way to reach out cold to people you see in the attendee roster who you haven't met yet.

A couple grand on conference costs is a blip and should be easily approved by your firm, and you'd be surprised how many people will cover their own travel costs if they're being comped at a prominent conference plus invited to what looks like exclusive programming.

Maybe you develop a blog. This tends to be way more the domain of venture or growth equity guys, I haven't seen buyout guys do this (maybe that's your opportunity). This can be a way to discuss the developments you're seeing in deal structure, pricing, or traffic in focal sub-verticals.

You could do a podcast.

You could do a monthly professional development breakfast series where you invite more senior speakers to talk through a topic of their choice in soft skills.

Find a way to demonstrate and deliver value to a group of people. Tailor that value based on (i) the reputation you want to have and (ii) what you want to get out of them.

Want to get an early lead on the type of stuff that's widely trafficked? Get bankers and lawyers to think of you well.

Want to get founding CEOs of late-stage middle market technology companies in non-core geographies to call you impromptu to initiate a conversation about 'strategic options'? Well, you have to really differentiate yourself as someone who's cerebral, connected, compelling, and not-just-another-suit.

Your mileage is going to vary widely here based on what you're going after.

Three: Executive presence

This matters so much more than people think. At this point, your voice is expected to be heard. A lot of people struggle here; it's a fairly abrupt transition from a lifelong habit of speaking only when prompted to.

Think about it: the teachers in grade school, professors in college, analysts you summered under, seniors in your analyst group, partners in your first associate role, and professors at business school all held the keys to when you got to open your mouth.

It sounds like you may have an advantage here on the broader crowd of guys returning from pre-MBA private equity roles given that you were at a hedge fund with a PM you say was great. You probably contributed easily in a fairly flat environment.

In your new role you are going to be expected to lead, everywhere. Lead processes with service providers, lead conversations with financing partners, lead strategy and operational discussions with portfolio companies, lead recruiting processes, and on and on.

I will paste portions of another comment I made elsewhere:

I think of executive presence as going dramatically beyond simple public speaking skills. It's a set of traits that inspire other people to follow your lead. That should hold true whether you're talking for two minutes in an informal chat, for ten minutes as part of a formal boardroom conversation, for an hour as a keynote or fireside chat at an event, or just giving someone pointers on a daily task.

1) Know your audience.

This takes two forms.

One, always keep in mind who you're speaking to. The way you talk to your board members is different than the way you talk to your secretaries which is different than the way you talk to guys from your analyst class you're catching up with.

Think of the axes of respect, respectability, and familiarity. Visualize them as slider scales on a DJ board. For whoever you're talking to, do you have those three sliders toggled to the right place?

If you treat someone too deferentially (respect slider is too high), they probably think they have more power over you. If you treat someone not deferentially enough, they think you're arrogant. The trick is figuring out who that person is and the appropriate measure of deference to display.

(Amusingly, this also varies by situation. In the hedge fund space, for instance, you'd get laughed about behind closed doors if in an investment pitch you act with the same level of decorum as is necessary to not get talked down about in private equity.)

Respectability you can basically think of as manners or presentability. Your pledge brothers are going to laugh at a joke that's halfway off-color. Your secretary may feel uncomfortable overhearing it, even though she may never mention it (duh, there's a power imbalance).

Even if your board is full of cool people who you get along with great outside of work, if you're profane in front of them, that's a mistake. They are always evaluating you as an extension of the firm; they want to know you're always going to put the best light on the brand you all share. In this political climate, it's also always safe to assume that your respectability slider needs to be higher in front of women, no matter their seniority relative to you. Don't do something dumb that can bite you in the ass.

Familiarity is how collegial you can be with someone. I remember a story about Hank Paulson being irked at Sarah Palin for going straight to using his given name (he's born Henry but known as Hank) without ever having met him. (Couldn't find the longer article, here's a shorter one.) Some people require that you treat them with a different level of familiarity than you may default to. As an interesting wrinkle, some situations require that you treat someone with a different level of familiarity than you normally treat that very same person in normal circumstances.

In short, always think of these three levers when you're talking to someone and adjust your behavior accordingly.

Two, do the research. There is absolutely no excuse in this day and age for not knowing what's on the first two or three pages of Google about someone. It takes 10 minutes max. Scan their LinkedIn, read whatever things are mentioned about the philanthropies they're involved with, see if you can read anything their alumni magazine may have mentioned about them, look for news articles mentioning deals they did ... the usual.

You do not want to creep someone out by immediately rattling off everything you know about them right when you meet them. You can, however, manipulate people (in a positive way) by mentioning things that you know you have some commonality on without referring to the research you did. Or, you can selectively mention that you did see something about them and then mention whatever you want to about yourself to spark the conversation.

Also, having a body of knowledge on someone in advance can save you both time and pain. Time in that if you read everything about someone's asset allocation strategy, for instance, before your first meeting, you can look smart when they ask "So, what do you know about us" by rattling off a concise recap of what they do. They'll think you're really well-informed, plus you save yourself from listening to some windbag drone on for eight minutes about his firm. Pain in the sense that if you discover something someone cares about a ton, you can avoid unknowingly stepping on a landmine by accident.

2) Master the mechanics.

Speak in shorter sentences; it gives the impression you know your stuff cold.

It's okay to take pauses; it demonstrates mastery and the fact that you're not nervous.

If you're standing in front of a group, don't look like a robot; move around. There's all kinds of cool research that shows if you have a list of points to make, taking a distinctive step to a new spot when you introduce a new point helps people remember all the points better (the visual delineation signals newness to their brain).

All the stuff like this is discoverable online. People are also giving tips in this thread.

3) Make people feel noticed.

Remember people's names and use them when answering their questions or saying goodbye at the end of meetings.

Give gifts.

It costs $20 to get a small pack of gourmet chocolate or something else small. If you give that to the secretary of a guy whose office you're in twice a month for three months while banging out a deal, she is going to absolutely love you, make sure you reach him on the phone whenever you need it, get scheduled in earlier rather than later, and will sing your praises to him without him even asking about you.

When you close a deal, get all the people involved a real bottle of something decent. Your budget will vary based on your seniority, but if you're post-MBA and making over half a buck a year, there is zero reason you can't spend a couple thousand on real wine or whiskey that you package up nicely and send to your counterpart at the fund you bought from or sold to, the lawyer that managed the deal, and anyone else who spent dozens of hours laboring on the deal too.

Be a real person.

Show what matters to you. I'm not saying you need to go all Leonidas and scream what you're thinking at people. I am saying that it's good if people know you care a ton about college football and have gone to your rivalry game for the past eight years running, or that you're a marathoner, or that you like to hunt and have a big game trip in Africa coming up. It lets people relate to you, ask questions that you demonstrate real interest in answering, and helps you look like a human with a personality.


In summary, you need to look like someone worth following. You can do that most easily by being someone worth following, and that's a non-trivial endeavor. It requires a rewiring of your brain. I mean it. There is so much social programming around making people more conforming and more docile. This isn't too say you need to transform into some kind of chest-beating neanderthal, it's to say that you'll notice you start to stand out a bit when you develop a habit of taking initiative, going the extra mile, putting in that extra bit of effort, doing the things fewer people do.

Turns out this brings manifold returns in all arenas of your life. You become more likable, more date-able, more welcome at social gatherings, more a center of attention, and generally better thought of.

Four: Thinking like an owner

This is the major difference between your former world and your new world. Yes, you still need to think like an investor, but there's a large macro context to frame that in.

Success in your old world meant beating a faceless market. You did your work well, congrats, your bonds performed well, or the equity drove in the direction you predicted, or your loan didn't default, or the underlying name you sold CDS on didn't default.

Success in your new world means that after a long, tedious, myopic, and multi-faceted diligence process, a competitive bidding process, and an exhausting closing process ... you own a company.

This is a very different situation to be in. You can't sell the equity with a punch of a button. You can't net out your CDS. You can't dump the direct loan. You are in it for years. Getting out of it is the same excruciating process in reverse.

You need to start weighing all kinds of factors that may not have been on your radar before.

"Am I going to face reputational harm from owning this company?"

You may not think that's a factor in technology, for instance, but look at the headlines we live with today. Do you want to own a business that monetizes user data in an incredibly invasive way? If you encounter a John Carreyrou type who digs in and does a six-month expose on your business, does that company face immediate duress?

"Is this a business I'm going to be able to find willing buyers for?"

You can just about always get out of a security. You may not love the price, but you can find liquidity. If you're left holding the bag on a company though (because the industry fell out of favor, the multiple you expect is not supported by the underlying business, etc.), your deal turns into an albatross that makes the fund extend its lifecycle and eventually prompts a whole world of headaches administratively and with your LPs.

So many deals today are underwritten on the simple premise that someone's going to lift it off of you in 30-60 months at the same or a higher multiple ... I see a lot of guys fail to take the big step back to ask the simple binary question.


These are some initial thoughts. I apologize if the length makes it unwieldy. If I wrote any further, it'd be more on the importance of soft skills.

Best of luck as you commence this transition. I know you probably have a peculiar sense of emotion, nostalgia, eagerness, hesitation, and commitment all rolled into one extended moment. Too many people ignore the unusual opportunity that the inflection point of business school graduation, one's final "Wow, I am stepping back into the real world" moment, and the start of your post-school role affords.

The mental space that that entire phenomenon grants you is uncommon. With all the last trips with friends, goodbye or update emails, time with family, and preparation for your new role, it's admittedly tough to carve out the time for serious reflection.

I encourage you to take that time. Consider your goals, then your dreams; then see what gap exists between the two and what you can do with the former to make actionable steps that give you better odds of making the latter real.

Again, really warm wishes. You're in an awesome spot and I wish you the best.

I am permanently behind on PMs, it's not personal.

  • 21
Jun 27, 2018 - 10:39am
big unit, what's your opinion? Comment below:

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