I discuss why MBA is not a magic bullet to break into institutional public equity investing (at a mutual fund, hedge fund, family office, pension fund, etc.). Before you think, “Oh, maybe I should just get a CFA and a MBA, and getting an investment management job will be easy.” No, it is not. (Please also read my view on the CFA)
Based on my own experience, I strongly agree with many on online forums who highlight the following five MBA programs as the best destinations for investment management: Harvard, Stanford, Wharton, Columbia and Booth (I am making up this term “HSWCC”). For MBA students who went through investment management recruiting at schools other than these five, I believe their experience should resonate with mine to a high extent.
There are always exceptions. You are welcome to hold on your own belief if you strongly disagree with my views.
I studied math/statistics in undergraduate, did not know accounting, valuation, and never read a 10-K before MBA. I did my MBA at a top 15 US program where I was a leader of the investing club, portfolio manager of the student fund and made finalist at one of the major MBA stock pitch competitions and spent my second year interning at a sizeable hedge fund. Despite checking all the boxes for required activities during MBA, I found all my internships and jobs through my own networking. So much for paying for an expensive networking opportunity.
I am not dissuading anyone from pursuing an MBA (though many should not pursue an MBA because of the wrong motives). My goals are: 1) painting you a realistic picture of what it is like to pursue investment management through MBA 2) how to take advantage of all the resources during MBA to achieve your goal (which I will cover in a separate article.)
MBA is not a memoryless program
Investment management firms like to hire from Investment Banking and Equity Research because the firms do not want to train juniors the foundational skills. In MBA, you will be competing with classmates who already have the prerequisite skills.
While you are learning competitive strategy and accounting in the first semester, your classmates with prerequisite skills are already working on compelling stock ideas and networking with funds. Meanwhile, you are scrambling to mash together your first stock pitch without having the frameworks to generate ideas and develop variant views. Even worse, some classmates have pre-MBA public equity investing experience: they are good to go from day 1.
Remember that life isn’t fair? Well, no one starts at the same starting line for MBA. MBA will provide you with a rebranding opportunity, but it is very competitive to get into investment management from MBA. Just be aware of that.
Most programs don’t have dedicated investment teachings
Investment management is a skill-based profession. A generic accounting class, a financial modeling course, and a competitive strategy course are not remotely adequate for basic competency to generate actionable stock ideas or even just analyze a business. Sadly, that is what most business schools can offer in the classroom.
Just be aware that you will be on your own to pick up all the frameworks to be comfortably identifying compelling investment opportunities and crafting convincing stock pitches for competitions, networking and interviews.
Yes, most schools have an investment club and some even have a student fund. You should definitely participate, but the quality of the students dedicates the quality of your experience in those activities. In a Wharton Investment Management Fund or a Cayuga Fund (Cornell Johnson) where the processes are robust and the students are engaged, you could get a valuable experience. Otherwise, there is always the risk of a “blind leading the blind” situation, rendering the learning experience low quality.
Speaking from experience, I was a portfolio manager for the student fund. Each student member is responsible for pitching one stock during the semester. Almost all of them prepared their stock pitch 20-30 minutes before their presenting session. You can imagine the quality of the discussion is very low.
Quality of classmates
Every MBA program has similar resources: an investment club, a student fund (if available) and access to external stock pitch competitions. Aside from these resources and classroom learnings from real investors who teach as adjunct professors, you have to count on learning from your peers.
High-pressure pre-MBA work experience such as investment banking and management consulting still ensure relatively higher probability of landing at a top MBA program. If you are a complete novice to finance, as I was pre-MBA, I believe it is immensely beneficial to learn from peers who already have a baseline understanding of accounting, business strategy and competitive analysis, and so on. This is not a variant view: try to get into the best program you can to rub shoulders with high-quality peers.
To give you an example, for my MBA class, ten people “considered” pursuing investment management (that really means three were laser-focused, the other seven people thought investment management is a “backup” to investment banking or consulting). I could not learn from peers who also lacked the skills that I needed to analyze companies. There was a lot of blind leading the blind and the risk of tunnel vision until you are put against peers from top business schools and realize how competitive investment management recruiting truly is.
That said, school quality is a double-edged sword. At the top investment management schools, you have to stand out within your school to be selected to attend an external stock pitch competition of your choice (at my school, I could have attended all the external competitions if I wanted to because no one wanted to do it)
Buy-side firms hire on-site at these external stock competitions, which is why competition is cutthroat. Tying back to my point of MBAs not being memoryless, I can imagine students with prior finance experience will band together to ensure they beat out internal competitors to gain the highest visibility in front of hiring firms. Meanwhile, someone without the relevant experience will feel like that kid with poor hand-eye coordination in PE class who is always picked last.
The search channel
Investment management is notorious for its unstructured recruiting process (funds just hire whenever they need.) One of the values of the MBA is the opportunity to market yourself on campus in front of hiring firms without needing to build your own relationships.
Both product and go-to-market are important for the job search. You are in control of the product – work hard to learn the skills, identify actionable ideas, form variant views and differentiate and concisely craft a stock pitch.
The go-to-market is why you are paying six figure tuition and forging two years of salary to gain access to, but sadly most schools cannot provide the following advantages that the top MBA programs for investment management can provide:
- Alum network: Say each year Columbia Business School (CBS) sends 50 people to the buy-side. That extrapolates to 500 CBS alums over the 10 years for you to network with. For my school, I know less than 30 people in total who made it to the investment management in the last 10 years. With investment management known for the lack of shots on goals, going to the right school is very crucial.
- Brand Perception: In a profession where most jobs are unpublicized and filled by referrals and recruiters, only the largest investment firms spend money to recruit on campus. Viking Global’s public investing team is almost entirely from Wharton. Fidelity and Wellington, the top mutual funds in the nation, have a heavy alum base from Harvard and Stanford MBA. Where will these firms spend their recruiting budget? It’s all about winning the perception race. Of course, I know that getting into the HSWCC (Harvard, Stanford, Wharton, Columbia, Chicago Booth) is very hard, but I believe you are not better off by attending a lesser MBA program like the one I attended than networking your way into the buy-side from where you are currently. You are paying similar tuition for any MBA program, but the value is vastly different for the specific purpose of buy-side recruiting.
Conclusion
In conclusion, I want to point out MBA is nowhere near a magic bullet to public equity investing. If you consider MBA for a shot to buy-side, try your very best to get into one of the HSWCCs to maximize your chances. Even then, the following is true in general about life but particularly relevant for a skill-based profession like public equity investing: You get out what you put in. I am a living proof that it’s doable from a lesser school without employer respect (frankly I would not recruit talent from my school if I were looking to hire research analysts.)
I would love to hear your feedback!
Dude, its you... not the program you go to.
Bill hwang went to Carnegie for his MBA. There's plenty of top investment managers who didn't go to the schools you mentioned. I would argue that the investment management industry is more meritocratic compared to other areas within finance as you're judged based concrete performance.
You need to break into the industry and then work your way up from there.
Ultimately, absolutely yes. I am saying if you are paying for the similar tuition, go to the one that gives you best RELATIVE access and class learnings.
How's Bill Hwang's fund doing?
If you have a non-equities background pre-MBA but in fixed income trading or non-equity sell-side research, would you count this as still starting from ground zero in terms of investment management MBA recruiting? In your view, would there be issues for recruiting for non-LO strategies like global macro with this background?
If you are gunning for fundamental buy-side RESEARCH: Research will not be from ground zero (you need to explain why equity from fixed income and demonstrate ability to think about upside of a business from a downside protection background).
I think trading and global macro are both from ground zero because a candidate lacks fundamental analysis skills, but global macro is a risk-taking role so that's more favorable than execution trading (unless you were referring to fixed-income prop trading).
The fundamental skills can be picked up during MBA but you will be competing with pre-MBA I-bankers, private equity and equity research people who already have the fundamental skills.
You’re always extremely helpful with your advice, Dick! Thank you so much. In a fixed income execution desk currently but want to move into global macro one day so this is truly appreciated.
We’re talking about a so-called profession that is zero sum and really only rewards those who think differently from everyone else. Really the complete opposite of a profession when you think about it. It should come as absolutely no surprise whatsoever that there is no standard path that reliably gets a job. If anything, following a standard path should (and probably does) make it harder to succeed in investing.
Agreed. But the mega funds deny your and my point - I don't see the point of strictly limiting talent pool to elite IB + PE 2+2 types, but probably the talent sourcing pipe works for them so why change it? Seems too much of a standard path.
Great post. I've thought about this topic myself as I work with a few MBA programs and in my view, it comes down to the buyside placement ecosystem.
I can't emphasize this enough. The MBA programs OP highlighted have an extremely strong buyside placement ecosystem. It goes beyond getting a few funds to show up on campus to interview students, this is NOT nearly enough.
Schools with strong buyside ecosystems have alums and non-alums in the industry recruited to participate in student stock pitches and mentor students early on. Example - beyond the popular stock pitch contests that get advertised, CBS has its first CSIMA student stock pitch very early in the 1st semester. These nearly monthly events are judged by industry professionals. Doing a stock pitch as a student several times before on-campus recruiting, with a sizable motivated smart cohort before the big popular stock contests happens is a huge leg up. It's also instant networking handed to the student, no cold emailing needed.
Professionals (alums and non-alums) are drawn to these MBA programs not only to give back BUT to expand their networks (esp if they are not alums) as these MBA students get placed at top funds and you get to meet involved alums from across the buyside universe.
If you're at a T15 program that has a student fund and an investment club, you have the bare minimum compared to the popular buyside MBA programs. Sure you can land a buy side job from any school but you're at a disadvantage and there's a lower likelihood of success without the ecosystem top programs provide. If you're a T15 student who lands a top HF or MF role, you don't have the alumni network to help as your career progresses. All of this can be mitigated, but it's hard enough as it is to make it from a top school.
Second this as someone who broke into buy side from CBS without pre-MBA experience. The ecosystem that Columbia provides around public markets is fantastic, and I honestly don't know that I could have broken in without it. My classmates in CSIMA and the VI Program were all great as is the network I now have in the IM community through alums and mentors from VI program, adjunct profs, and people I met through pitches and competitions over time.
I can't speak to HSW and Chicago, but if you're considering public markets, Columbia was great.
Thank you. You really just got right to the point: ECOSYSTEM is the key here.
Do you think it is still like this in 2022 across SMIFs at MBA programs?
It's bifurcation: The good SMIFs always get laser-focused people who want to do public equity. Hard to see how a bad SMIF suddenly gets a critical mass of passionate public investors.
To add a more general flare to this post: there's not really a magic bullet for anything or any job, no magic bullet exists for achievement in any space.
I've written at length on other posts before but my belief is that those successful in any path or career tend to be passionate to an extreme and have found what they do to be satisfying and enjoyable, arguably to a fault. Getting your MBA has advantages and also comes with costs, as does doing an undergraduate degree, as does taking a gap year, as does just about every decision ever. All decisions come with some degree of opportunity cost. Measuring that opportunity cost is difficult and that's what this original post is for (to attempt to size it), but it's important to have that context when trying to evaluate pursuing an MBA and what that return may be.
Yes, Columbia's Value Investing program places exceptionally well into top public equities buy-side roles. Is it necessary? Absolutely not. Is it definitely and undeniably helpful if you have a very non-transferable skillset and background and are looking to pivot? Absolutely. The decision around an MBA is so context-dependent it's almost impossible to derive some perfect remedy for the right % probability factor generally speaking. I don't have one, nor do I plan to get one. This can change. I may burn out of 5+ years of public markets and need one if I wake up and want to do private equity.
I think the better reasons for going and getting your MBA is 1) using it as a pivot tool and 2) using it for a network. 1) As a pivot tool is crucial because it allows you to leverage #2 to tell a more conceivable story of why you're attempting to now make a leap into public markets (for example). If your background is in corporate finance/development, and you attempt to try and leap to public markets, most guys aren't going to look at that resume/background and scream "wow, this is exactly who we've been looking for!" Not saying it can't be done, but again we're speaking in likelihoods and probabilities. If there's a guy who did 2-3 years in corporate development at a F500 company, went and got his MBA at Columbia (maybe even ex-Value Investing program), he actually still has both A) a better story to tell of why he got his MBA and is attempting to leverage it into a public mkts seat and B) a better network to leverage for those roles.
I hate to say this and I'm probably subjective but outside of those top 7-8 schools, you're probably going to see diminishing marginal returns if your goal is public markets. Even with Columbia (or better) on the resume from an MBA, the *beauty* of public markets is it's far less prestige-dependent (ex-Tiger) and more prying your thought process and ability to think critically to make money. That's it. The silver bullet for getting a public markets seat as far as I've been able to tell is how likely are you able to think of ideas and generate PnL. The best way to demonstrate this is by pitching it to funds and getting reps. If that comes in the form of an MBA and enhances an otherwise mediocre story as to why you want to do public markets, by all means pursue the MBA. If you scan LinkedIn and see there are tons of Sloan/Tuck guys at funds you'd be interested in, you can most certainly justify attending those programs. I will not criticize someone for doing their homework on MBA programs and finding one that makes sense and puts you on a trajectory to get into a public equity seat.
That ALL said, MBAs are largely there for the network. Public markets is a wide but small universe. I'd say less than ~50% of public equities investors have their MBA, think someone a while back put out the top 20 AUM fund managers in the world and their education, and it's actually shockingly low Ivy League (< 50%) and low MBA (< 50%) across the board. There's no single way to have success in this business, except for proving yourself via returns. Paulson and Dalio have MBAs from Harvard, PTJ went to UVA, Boaz went to Michigan, Simons went to MIT (no MBAs, Simons PhD). Stevie no MBA, but went to Wharton. Och too. There's literally a million different diverse backgrounds (diverse in the school sense, lol) that make up the top managers. All they had in common was a passion for markets and a knack of generating very strong returns.
Yeah, ones with determination and discipline can get there without anything. The ones who don't, even CBS won't change much.
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