After I-Banking and Consulting...Thinking Outside of the Box.

Many of the investment banking and consulting analysts on WSO will try this path:
IB analyst/Consulting associate --> junior position at private equity/hedge fund --> D'oh. This. Is. Not-quite-what-I-thought-it-would-be. --> something else/Business School --> Ah, now I have a better idea. --> Launch career.

I chose an IB analyst --> Hedge Fund --> Endowment-style investor path. My regrets? I should have reversed the stuff after IB analyst. Why? I had no idea of my choices coming out of a 2-year banking program. Everyone was going to a private equit or real estate fund. Hedge fund seemed like more responsibility sooner--and it was...but I had no mentorship, and I didn't really know if I would enjoy it (or my firm's style) at all. Years later, our office folded, and I joined an endowment-style investment firm. I was exposed to 100s of hedge funds, private equity, and real assets managers, their strategies, and which ones were more or less interesting, and so forth. I was amazed at how much more I learned there even in the first few months. I realized, unless you know a heckuva lot about what kind of investment style, sector, etc fits you best--and I bet you do not--then I have an idea: try an endowment-style investment office for a few years.

Heck, although WSO lists many categories of investment firms, there is not a single one that captures any part of endowment-style or "fund" investor.

What is it?
Any firm--whether a private family office, endowment, foundation, outsourced CIO--that employs an endowment-style, investing-in-managers model a la Yale University. Funds of funds will invest in a subset of the aforementioned, and they're similar in outlook.

Think it's "not real investing?" Wrong. So much of investing is about picking the right people. What does Warren Buffett focus on as long as he understands an industry and a particular company's moat? The management team. And what does it take to understand if a private equity fund manager or hedge fund manager is any good? A good investment mind (this is where your colleagues can mentor you).

The benefits?

  1. Try it on: Test, interview, taste, discard...basically figure out what kind of investment asset class or style might fit you best. Out of i-banking or consulting, you don't know sh!t about investing. At least not from the job itself. At an endowment-style firm, you'll work closely with scores of world-class investors--i.e. the managers in your portfolio. And you'll see hundreds more in various levels of depth. It's similar to going to business school with a focus on investment management, except you get paid to do it. You can even take the time to "stay in the game" by working on direct investments and trying to join services like Value Investors Club or SumZero.
  2. Early responsibility: except in the case of some hedge funds, this is one of the very few places where you can go after 2-3 years of experience and actually have people listen to what you have to say. The other side of that coin is that when you talk to hedge funds, private equity funds, etc...you'll talk to the partner, the managing member, and you can interview her (or him) about investment rationale, strategy, niche expertise, and so forth. This is because you're the client--and it's always good to be the client when seeking to learn.
  3. Support a Mission: endowments support education, foundations a number of causes, and outsourced CIOs ("OCIOs")/FoFs typically are just one layer in front of those same missions. In all cases, your work--when helping your firm scratch out another 1% return--means more scholarships, more medical aid for children, more grants for scientific progress...the list goes on. If you are in it for more than just the money--and some days you'll wonder "what am I contributing to the world"--being close to that mission, understanding it...is a great motivator.

So, joining a hedge fund, private equity firm, or similar investment firm can be and often is a great start to your career. But, it sometimes is not. Sometimes you wake up years later and wonder why you didn't think about what you really wanted to do--and you feel stuck. Consider an endowment-style firm first...you can use that experience to make a much more informed decision about your investing career.

Note: my startup "Veil" represents endowment-style firms (often called "LPs") in finding great private equity and real assets managers. As an ancillary service, we help these "LPs" fill job openings too. That is why I posted this message. Until I launch a convenient web-based app, I can be reached at apertures [at] fundveil [dot] com and found on twitter [dot] com [backslash] veilapertures.

WSO Elite Modeling Package

  • 6 courses to mastery: Excel, Financial Statement, LBO, M&A, Valuation and DCF
  • Elite instructors from top BB investment banks and private equity megafunds
  • Includes Company DB + Video Library Access (1 year)

Comments (4)

Jun 20, 2014 - 2:05pm

I may just have one of furthest from traditional backgrounds on this site. My advice is pick whatever sounds the most interesting and fun at the time and go all out on it. Hard to imagine having any regrets taking that approach.

Jun 20, 2014 - 2:19pm

...said everyone who picked the first thing among 2 choices that sounded really interesting and fun because the person pitching it had honed his message well. Sure, SOME won't have regrets. I can imagine all kinds of regrets.

/Veil Apertures/
Jun 20, 2014 - 2:56pm
Start Discussion

Total Avg Compensation

April 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (35) $364
  • Associates (188) $234
  • 2nd Year Analyst (107) $150
  • Intern/Summer Associate (96) $145
  • 3rd+ Year Analyst (26) $145
  • 1st Year Analyst (392) $132
  • Intern/Summer Analyst (324) $82