PE vs HF (activist) - which is the best career to be an owner/investor for returns.
Before I knew what finance was, age 11, my local golf club went under. I’d not had much affinity for its waterlogged greens and microwaved food, but it was sad nevertheless.
Later that year, we’d joined a more sophisticated members club. The new club played much better, however, had closed 3 of its 6 courses due to a declining member count and excessive maintenance costs.
On an afternoon, I’d been left in the lounge with a hot chocolate whilst my father was roaming the pro-shop. With the world’s ignorance I asked a portly man to my left who had previously been complaining about the club’s decline. “Why don’t the owners of the club just make more money.” The owner replied back, “I’m sure they’re trying their best.”
A year later, the once prestigious members club was gutted and sold off to various estate companies. At this point I’d become slightly ticked off, another weekend sanctuary had been stripped from me.
Now age 12, I’d attained absaloute confidence, that I could run a business better than any grey-haired countryman, and from then on my goal was to take-over companies and improve them.
Pre-university I’d become familiar with the stories of activist investors and private equity. Today I’m still set on this goal to end up as an asset investor and improve/turn them around.
Some of today’s financial magnates that have adopted this style of solo investing for returns include; the David Blitzers, the Josh Harris’, the Carl Icahns and Bill Ackmans. Some of them admittedly are more buy and hold.
To my question.
Which type of investor/which career path is better suited to buy a company and run/improve it for returns - Private Equity vs the (activist side of HF)?
If you believe it’s RX investing, feel free to say why RX PE is more relevant than RX/Activist investor.
To achieve your goal of becoming an asset investor who takes over companies and improves them for returns, both Private Equity (PE) and Activist Hedge Funds (HF) offer compelling paths, but they differ significantly in approach, skillset, and long-term alignment with your vision. Here's a breakdown based on the most helpful WSO content:
Private Equity (PE)
Core Focus: PE firms specialize in acquiring entire companies (or significant stakes), improving their operations, and selling them for a profit. This aligns directly with your goal of taking over companies and turning them around.
Skillset Development: PE provides hands-on experience in:
Returns: PE returns are often driven by improving an asset's performance and selling it at a higher multiple. However, as noted in WSO threads, PE returns can sometimes be correlated with public small-cap stocks, and the illiquidity of investments can be a drawback.
Relevance to Your Goal: PE is often referred to as "banking 2.0" because it builds on the valuation and deal-making skills learned in investment banking. If your goal is to own and improve companies, PE is a natural fit because it emphasizes control and operational transformation.
Activist Hedge Funds
Core Focus: Activist hedge funds target underperforming public companies, acquire a significant minority stake, and push for changes to unlock value. These changes can include:
Skillset Development: Activist investing hones skills in:
Returns: Activist funds can generate alpha by identifying undervalued companies and acting as catalysts for change. However, as noted in WSO threads, activist funds can be less stable due to their reliance on fundraising cycles and performance.
Relevance to Your Goal: Activist investing is ideal if you prefer working with public companies and influencing change without full ownership. It’s less about running the company day-to-day and more about steering it in the right direction.
Restructuring (RX) PE vs. RX Activist Investing
Which Path is Better for You?
If you’re drawn to distressed investing, RX PE offers the best combination of control and turnaround opportunities, making it a strong contender for your goals.
Final Thought
To emulate the likes of Carl Icahn or Bill Ackman, you might start in PE to build operational expertise and later transition to activist investing or solo asset ownership. Alternatively, you could focus on RX PE to specialize in turnarounds from the start. Both paths can lead to becoming a successful asset investor, but PE offers a more direct route to owning and improving companies.
Sources: Breakdown of Post-IB Exit Opportunities, Hedge Fund or PE Analysts Program, Accounting vs Finance: Part 1 – Career Paths, https://www.wallstreetoasis.com/forum/private-equity/where-is-the-industry-going-for-young-professionals?customgpt=1, Activist Value Investing: Be Your Own "Change" Agent
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