11/6/17

Edit: Wow, did not expect this thread to get so popular. Apologies if you PM'd me and I have not responded - there are dozens of messages I would respond to if I wasn't getting crushed on a deal. My firm must monitor my WSO activity and figured I needed more work to do...

Two quick updates:

  1. My first post on office politics is now here: Guide to Office Politics (Part I)
  2. Many of your PM questions had some common themes around breaking into the industry from various types of backgrounds, compensation, bonuses, carry, etc... one thing I have noticed is that 90%+ of the questions I've received are discussed in WSO's private equity guide. It contains all of the typical basic info you would find in a Vault guide, but also has a ton of intel compiled from WSO's access to practicing industry professionals. If you are serious about breaking in, consider making this small investment.

My original post:

Hello monkeys, I used to be quite active on WSO under a different name (before and up to the Eddie / MMM days), until the IB grind turned me into a lurker. I can honestly say that WSO played a big part in helping me land the IB gig in the first place, so when I coach young bankers / college students on "the path", one of my first questions to them is whether they've joined this community.

I then tell them my story, including observations on the "softer" side of the industry - i.e. the politics, career moves, and fuck ups I've witnessed/committed. It dawned on me, however, that all the experience I've gained in ~5 years in finance (mostly through making mistakes, and occasionally by having great mentors to look up to) might be valuable to some of you internet strangers as well.

So as a thank you to the WSO family that helped me get here, I'd like to open this thread up for general questions on investment banking, private equity, and general survival in high finance.

My background:

  • Semi-target / economics major
  • Analyst at a BB for ~3 years
  • Now in my 3rd year as an associate for a large PE ($10bn+ AUM) with multiple funds
  • Areas of focus include MBO/LBOs, growth equity, mezz, and distressed debt

Regards,
NuckFuts

Comments (133)

10/11/16

Thanks for the AMA.

What are your future plans, will you work into a VP role or go to B-school?
Also describe the worst boss you've ever worked under.

26 Broadway
where's your sense of humor?

Private Equity Interview Course

Best Response
10/12/16
TippyTop11:

Thanks for the AMA.

What are your future plans, will you work into a VP role or go to B-school?

I am very happy in my job and the feedback / indications from higher ups have been positive so far, so my current plan for the next 1 - 2 years is to transition into less of a modeling role and more of a documentation / deal process role to prove myself as a VP candidate. If for some reason that does not work out (we have no policy on associates out, it's case by case), I could always fall back into banking (like a boutique advisory or restructuring shop) - I've been surprised at the number of recruiters that have reached out looking to place PE guys into these type of roles. I want to avoid B-school at all costs since (a) I think I am learning more in my current role than I would at B-school, (b) massive opportunity cost, and (c) in terms of professional development I would rather consider a CFA or something more technical like programming / stats with a big data spin to it. My ultimate dream is to make enough $ in finance to be able to invest in passive income / real estate. Also, I should mention I have been given carry in a few of our funds, and one or two might see big payouts in a few years so I am strongly incentivized to stay put for now...

TippyTop11:

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Also describe the worst boss you've ever worked under

One of my MDs back in banking... it comes down to lack of character, extreme selfishness, and a massive ego. Basically your stereotypical shithead banker who worked his way up and in the process lost every decent part of himself, but got very good at playing the game. When headcount was under pressure, he would lead people to believe they were doing a great job only to berate them in the private year-end review calls, giving them a low rating strictly based on whether or not you were someone's "boy". For example if you went to the same Ivy as him or one of the other MD's, you were good to go even if you sucked ass at banking. There was a ridiculous amount of nepotism. The "outsiders" (immigrants, people from non-targets or in satellite offices) got handed down lower reviews because that would justify a shit bonus and made it easier to let them go / convince them to quit later on. If your uncle was CFO of one of our clients (yes, this happened!) you would get a guaranteed good rating even if you left at 7pm every night. It was all about making the numbers look good for the higher ups in the bank, and preserving the MD bonus pool and relationships. We had a lot of military guys in our group, and I saw them all quit. It wasn't the stress, hours, or pressure - office work was a cakewalk for those guys compared to getting shot at in Fallujah. They quit because they were sick of the non-meritocratic environment this MD created. He would also throw his underlings under the bus to save his own skin, every time. Even senior VPs who had worked under him for 5+ years - if an IPO went sideways due to a miscalculation this MD made, it was suddenly his Sr. VP's fault for fucking it up and he made sure to tell the head of IB as much. I strongly believe in a meritocracy and that you should take responsibility when someone under you screws up - this guy was the polar opposite of that and it rubbed me the wrong way in every possible sense.

10/17/16

Thank you so much for these write ups, much appreciated.
This MD seems terrible, what is he doing in this BB then? How come they still keep this person on their team. I am very surprised.

10/18/16
MikaSF:

Thank you so much for these write ups, much appreciated.This MD seems terrible, what is he doing in this BB then? How come they still keep this person on their team. I am very surprised.

Has a couple of big name relationships with F500 clients as well as personal relationships with top brass names at the BB... also very good at playing politics. Real question is, why would the bank fire him? Junior people may hate him, but he brings in fees and junior people in banking are easily replaceable...

10/11/16

Thanks for doing this.

Why did you choose to stay a third year as opposed to recruiting for PE during your first year?
How did you figure out what path to take in terms of staying on banking, PE or HF, and corporate development? Did you know going into banking?

10/12/16
jamthemansam:

Thanks for doing this.

Why did you choose to stay a third year as opposed to recruiting for PE during your first year?How did you figure out what path to take in terms of staying on banking, PE or HF, and corporate development? Did you know going into banking?

I was fortunate to have a couple of mentors who taught me early on that the beginning stages of a career in high finance are fraught with uncertainty and luck. So instead of targeting a specific sector (PE vs. VC vs. HF and the many sub-types of firms in each of these sectors), I came up with criteria and applied to a pretty broad set of opportunities. This is partly why I stayed a third year - I just hadn't found the right gig yet, but I lucked out with my current position (off-cycle recruiting, turned out to be a fantastic fit for me).

The only thing I knew going into banking was that it would open up doors, and there was this mystical unicorn out there of "greatness" that was somehow achieved after banking -> PE / HF (i.e. the "Break in the Tracks" Leveraged Sell-Out post). So I generally tried to copycat what the older analysts were doing, and eventually found my way once I built up enough confidence in my skillset and interviewing abilities. It took a lot of failed interviews to get there though, and I said no to a couple of "ok" offers that were technically PE but didn't really make sense for me. Saying no was a calculated risk as much as saying yes, and I'm glad I trusted my gut.

My criteria for post-banking job hunting:

  • I had to "stay on track", i.e. no moving to equity research or corp dev or any role deemed to be "less prestigious" in finance. This is because I was not ready to "settle down" and wanted to keep my options open for the future, and it's always easier to get off the track than to get back on the track. I'm saving that card for when I have kids someday.
  • Compensation as a minimum threshold; as long as I am making decent money, I think my future earning potential (which I believe is largely driven by learning experiences in the first several years of one's career) was more important than next year's bonus. Last year my firm's bonus was average compared to street, and I'm happy with that because I'm learning a lot and developing skills / relationships. I could make $50k more at our competitor across the street, but I'd lose out on a lot of intangibles (see below).
  • Culture / skills fit: I had to find a place where I would not be miserable due to culture, hours, nature of the work, etc. In addition to learning, I wanted to go somewhere where I could succeed and build a strong reputation. Can't do that if you hate your job... also, it was especially nice that I had some previous experience and skills that were relevant to my current firm, so I started out with a tiny "niche" already carved out for me. I think this "niche" aspect is extremely important in the long-term as you move up in your firm / industry and the pyramid gets smaller. You need to be able to differentiate yourself - become the M&A guy, the restructuring guy, the [insert industry] guy, the reverse morris trust guy, whatever... if you are good at something that is useful for your firm and hard to replicate by your peers, you have a moat around you that makes you hard to replace down the road. If you can sell a niche in an interview, that goes a long way. If not, you sell yourself as a fast learner, and you look for opportunities where you'll be thrown in the fire. I think that's how you build autonomy as a finance professional, and that's how you make VP... I haven't made it yet, but this line of thinking has worked well so far and was passed down to me by older / wiser monkeys (including here on WSO).
10/12/16

Was it difficult recruiting off-cycle?

It seems like you are in a hybrid distressed / plain vanilla LBO fund. Did you cover a specific industry or product in banking and how did you get interested in the distressed space?

10/12/16
jamthemansam:

Was it difficult recruiting off-cycle?

It seems like you are in a hybrid distressed / plain vanilla LBO fund. Did you cover a specific industry or product in banking and how did you get interested in the distressed space.

Depends what you mean by "difficult". Difficult to find and land opportunities? Yes. But I actually liked it better - I would have one or two phone conversations per week, maybe a couple of interviews a month, and I was always in "recruiting mode". Doing it that way gave me a chance to go back and learn from my mistakes / work on my deficiencies / think about the type of firm I really wanted to end up at, rather than being part of a recruiting frenzy that is very physically and emotionally taxing. When the traditional recruiting window is open for a short period of time, you have to somehow manage your banking responsibilities (I was on 2 live M&A deals at the time) while showing up to 7am interviews that can last all morning, sometimes even flying up to a different city, for a maybe 1 in 12 shot of making it through. I did not do well in the traditional recruiting cycle, but going through it did prepare me for the off cycle interviews where I performed much better.

I covered a couple of specific industries in banking that are currently a particular focus for my firm. I was in a coverage group in banking, not product specific but it did help that I had some acquisition financing and LevFin experience, as these are critical PE skills. We have a lot of different groups in my firm - distressed, lending, LBOs, mezz... because of my industry experience I was able to work with MDs in all of these groups, and I really like the distressed space for some reason. I find it more challenging than traditional M&A, and deal certainty can be a lot higher since once a company is in distress, some sort of transaction will take place... because "walking away" just isn't an option. Also, sometimes you work with bankruptcy lawyers, go to court, bid on 363 sales... the distressed space has a ridiculous culture and it's always different sides fighting against each other, so I find it to be a lot of fun.

10/14/16

Could you talk a bit more about the "ridiculous culture" in the distressed space?

I've been in a corporate lending role for a few years with good exposure to leveraged loans (only two distressed) and have an interest in the distressed debt space, but I'm a pretty easy going guy, and not sure how I would jive with the culture and personalities. Thanks!

10/14/16
watdo:

Could you talk a bit more about the "ridiculous culture" in the distressed space?

I've been in a corporate lending role for a few years with good exposure to leveraged loans (only two distressed) and have an interest in the distressed debt space, but I'm a pretty easy going guy, and not sure how I would jive with the culture and personalities. Thanks!

Maybe someone with more direct distressed experience can chime in as I've had limited (but growing) exposure to the space. My personal experience has actually been that the distressed guys are in some ways more laid back than your typical banker. Yes they work hard and grind like any other IB type of gig, but the backdrop of your transactions is that some company has failed, employee morale is low, and the company is in bankruptcy (or may be trying to avoid it, or is preparing for one down the road). I think this makes restructuring / distressed bankers more cynical and more willing to crack jokes behind closed doors, especially once they've "seen it all".

I think another reason for this humorous cynicism is that restructuring professionals often end up having to play the role of baby sitter. Whereas M&A advisers try advise parties on a back and forth negotiation where there is always the option to walk away and the goal is to create value, restructuring people deal with situations involving multiple parties, many of whom are frustrated and pointing fingers at each other (and management). You have vulture hedge funds buying bonds at pennies on the dollar to try to influence the negotiation process, equity committees with shareholders crying foul and arguing for a higher valuation of the company, banks who hate being involved in restructurings and (despite having first lien on assets) don't want to go through a long process only to end up taking over the keys... someone is bitching and moaning at every step of the way, so the restructuring guys are constantly putting out fires and spend a great deal of time advising clients on posturing and strategic negotiation. You also have to be able to set aside all emotions and show up in front of a judge every once in a while, sometimes to take a few punches from the other side in deposition, sometimes to throw punches yourself. At the end of the day though, allowed adviser / administrative fees have super priority in bankruptcy, so you know that all you have to do is play the game as well as you can and collect your check at the end of the process (including success fees if you can get the parties to come to an agreement and emerge with an approved plan). The restructuring community is very small and everyone seems to know each other, so despite all the crying children in the room these advisers are very good at eventually getting their clients to come around to a reasonable position. I'm sure these guys are all drinking together after work and laughing at the ridiculous things you see / hear in court, the clever arguments people come up with...

Anyways, this has been my experience / observations. Would love to hear someone else chime in.

11/1/16

SB'd. Work in restructuring on the consulting side. This has been my experience. The community is small and you run into the same players a bunch.

"I'm sure these guys are all drinking together after work and laughing at the ridiculous things you see / hear in court" - SO TRUE

10/14/16

LOL the RMT guy...nobody wants to be that guy.

10/12/16

SBed, thanks for doing this. A couple of public question to start and I might send you a PM after.

How much interaction do you have with the portfolio companies? Do you have any opportunity/desire to do so?

What was the biggest skill gap you had to make up between banking to PE?

How has your comp changed from year to year? Traditional minor increases to base/bonus? Or do you get co-invest/carry?

10/12/16
mrharveyspecter:

SBed, thanks for doing this. A couple of public question to start and I might send you a PM after.

Happy to talk over PM, but keep in mind that questions in the public forum helps future monkeys who may gloss over this post.

mrharveyspecter:

How much interaction do you have with the portfolio companies? Do you have any opportunity/desire to do so?

Quite a bit, actually. portfolio management is not sexy - there is a lot of administrative work, updating quarterly financials, making slight tweaks to models, looking at tiny bolt-ons, etc... and it takes time away from the sexy deal-making side of PE. I have found that my VPs / MDs have been more than happy to throw portfolio responsibilities at associates once they prove they can handle the tasks. By now there are a couple of companies where I'm pretty much the only one who knows the nuts and bolts of what's going on, and I just report up to the MDs every month or so or when something material happens. I used to hate it at first, but I've actually gained a ton of useful experience with portcos... not exactly shiny gold nuggets for my resume, but I have a good grasp on how things like working capital can affect a business in the short and long term, the games management teams play, etc. I consider myself a better investor and better businessperson because of the portfolio work I've had to do, even if it's not that much fun, so it's actually been very valuable. You also make senior people happy when you take this type of work off their hands, which goes a long way towards solidifying your position within the firm, I think.

mrharveyspecter:

How has your comp changed from year to year? Traditional minor increases to base/bonus? Or do you get co-invest/carry?

I got a salary bump when I came over from banking, from ~$85k to ~$100k (using round numbers for confidentiality). My first annualized stub bonus in PE was in line with my last bonus in banking. Since then the salary has increased modestly (~5%/yr) and bonus has increased somewhat slower than it would at a bank. Cash bonus in PE for me has varied from ~80% to 150% of base. It's hard to compare across firms / industries, so the best I can tell you is that my PE bonus as a 2rd year associate was equivalent to the cash portion of what I would have received as a 2rd year banking associate, assuming I was somewhere in between middle and top buckets. You miss out on non-cash comp a bank offers, essentially. We do not allow employees to co-invest - instead you can invest in our new funds when we raise them, but then you get capital calls any time there is a deal in that fund. I have gotten carry and maybe if I stick around for another 3 to 5 years I'll see a huge payout, maybe not. I usually don't count carry as actual comp and more as "option value". Honestly, I'll take carry over the golden handcuffs at a bank (where your restricted stock vests over 3 years and there is an ever growing pile of money just out of reach, forcing you to stay put). I am much happier in PE and to me that is priceless.

10/12/16

Thanks for the AMA, NuckFuts.

As a student finishing my 5th year at a B-school my options are pretty limited. I own a small painting business that I manage and market and we're making solid revenue. I'm planning on going into a masters of accounting program at a target B-school either next year or the year after that (depending on if I get any positions anywhere) so that I can write my CPA. I'm also writing my CFA Level 1 next December (I know it's a stretch from now). I'm also going to be applying for a strategy consulting position at Deloitte in NYC through a contact that I know there.

My question is does this make sense? Will taking the time to pursue both a CPA and a CFA, all the while having a MAcc under me, even worth it? Is this my only option? Or can I squeeze in somewhere, prove my self, and work my way up? I've also been thinking about applying to small boutiques involved in restructuring, mezz, M&A, and build my credentials from there.

All the best

10/12/16
IwannabethebestMonkeyevar:

Thanks for the AMA, NuckFuts.

As a student finishing my 5th year at a B-school my options are pretty limited. I own a small painting business that I manage and market and we're making solid revenue. I'm planning on going into a masters of accounting program at a target B-school either next year or the year after that (depending on if I get any positions anywhere) so that I can write my CPA. I'm also writing my CFA Level 1 next December (I know it's a stretch from now). I'm also going to be applying for a strategy consulting position at Deloitte in NYC through a contact that I know there.

My question is does this make sense? Will taking the time to pursue both a CPA and a CFA all the while having a MAcc under me, even worth it? Is this my only option? Or can I squeeze in somewhere, prove my self, and work my way up? I've also been thinking about applying to small boutiques involved in restructuring, mezz, M&A, and build my credentials from there.

All the best

This is a tough one as I am not a professional career coach and have not been in your situation, but I'll take a stab at it.

My initial reaction is that you need some more focus. Are you making enough out of your painting business that you could support yourself? Can you focus on growing the business? How much of a time sink is it? Can you sell your equity or hire someone else to manage it for you? I think the first step is figuring out whether you're serious about the side biz or not - when you want to build a career in finance, you can't half ass it by spending a bunch of time on a side project, as you'll be setting yourself up for failure IMO. If the project is viable and has good potential, however, you may be better off focusing on the business instead. You just have to be honest with yourself and carefully weigh the pros and cons of your alternatives, but I don't think you will get away with not making this decision soon.

Assuming you can sell/close or otherwise turn your side business into passive income to the point where it's not a time sink, and that you want to go down the finance route, then here are my other thoughts:

  1. Forget the CFA for now - it seems too early for you, remember you can't put "CFA Level 1" on your resume, so it would be 3 years and a lot of energy spent before this gave you any benefits. I also see the CFA as something to help you get to the "next level" in finance, not necessarily as something you need to break in day 1. Others may disagree (I don't have a CFA so perhaps others have had positive experiences getting a CFA early on) but I see it as opportunity cost - if you spent all the CFA study time networking instead, you may land a gig somewhere and go from there.
  2. It's always possible to squeeze in somewhere and work your way up. How hard that is depends on your background, school, network, interviewing skills, and a lot of luck / chance. However there are things you can do to maximize your chances of being ready for that rare opportunity when it does come - so to the extent you have deficiencies in your resume or profile, you should spend time on things that will cure those deficiencies. Also, network your ass off, send cold emails and cold LinkedIn messages (I don't always respond to these but if there is a shared connection I usually devote quite a bit of time and will spend an hour with the person on the phone).
  3. I don't have a MAcc but my friends who do have not found that it was especially helpful to them outside the context of working for an accounting firm. Why do you want to do the MAcc instead of focusing time and energy into either your business or breaking into finance? Unless you want to be an accountant, in which case go for it.
  4. Same comment for the CPA - I see it as another "nice to have", but if your end goal is to break into finance, there is probably a more direct route to getting there than a CPA. In my opinion, working in a banking / advisory role does more for your resume than a CPA, CFA, and MAcc ever would. Again, this is null and void if you want to go down the accounting route - these types of credentials are pretty helpful if you ever want to be a CFO, but you gotta break in first.

More generally, I will say this: I would pick the candidate with relevant job experience over the candidate with a resume stacked with credentials any day of the week and I think you'll find that this is generally true in the U.S. I think immigrants (especially Asians and Indians in the U.S.) and to some extent Europeans are a bit more obsessed with educational credentials, where in the U.S. I think most people want to see that you had a good GPA at a good school with a relevant major. If you check that box and make it to the interview, from that point on your credentials matter a lot less and the question becomes "is this person a better hire than the other 3 or 4 candidates we've singled out of the resume pool?" That question comes down to your interview performance and people's gut feeling about you, not letters after your name.

As for applying to boutique M&A / restructuring - if that is an option for you, I highly recommend it over anything else. There is not an educational program in the world that compares to 2 years in investment banking advisory in terms of learning skills that are immediately applicable to how corporate finance works in the real world. You can pick up all the textbook skills by googling around once you land a gig and find yourself stuck on a topic or concept. That's the beauty of finance - intellectually it is not that difficult, and does not require years of training like an engineer or scientist would, therefore you can "fake it til you make it" and learn on the job.

10/12/16
NuckFuts:

Are you making enough out of your painting business that you could support yourself? Can you focus on growing the business? How much of a time sink is it? Can you sell your equity or hire someone else to manage it for you?

I've thought about this before and the answer is in two parts. To answer you bluntly the business is a big time sink and I have to spend a lot of time on it (for now) so if the opportunity comes for me (internship, etc) I would have to drop it almost completely. The second thing is that if I don't immediately get a job offer out of graduation I have the opportunity to build my business and hire a manager to look after it. At this point I will still be able to retain equity, get paid out in dividends, and not have to spend 100% of my time on it. At most I'd have to spend 5 - 10% of my time once it's set up like this. This state will take about 1.5 - 2 years to achieve.

NuckFuts:

1. Forget the CFA for now

I feel like I've been needing to hear this for a while now, but haven't come across an honest enough person to tell me this.

NuckFuts:

4. Same comment for the CPA - I see it as another "nice to have"

Duly noted. I haven't made any big decisions about the CPA yet so I'm going to think hard about this one. I've heard that having a CPA also helps having a grasp on how a business truly operates and thus it would give me an edge over my competition. Would you say this edge is exaggerated?

I've been needing some solid advice like this for a long time because there's a lot of noise where I'm from (Toronto). A lot of my colleagues are getting the CFA and are telling me to do the same. Others are telling me to switch schools. Then some tell me I have to get an MBA before I want to consider gunning for an IB/PE position. I KNOW that once I get an interview I'll rock it (of course this is accounting for several failures, but I'm definitely a good contender for a position). The hurdle that I have to jump over is the school that I went to and the grades that I received for my first 3 years at school.

Thanks for the solid advice. If you have the time (and the will), can I send you a PM for a few more Q's?

Really appreciate the time you took to reply to me.

All the best

10/13/16

I'm glad you found my comments helpful. I hadn't realized you were in Canada - I hear that's a tough space right now due to the beating the Canadian banks have taken from the energy crisis... but things seem to be improving, so hang in there.

As far as your CPA question, I can't say if the advantage is exaggerated or not. Having a full understanding of accounting concepts is definitely a key skill for any finance professional, but I'm not sure if you need a CPA in order to build the level of skill required of a banking analyst.

I would summarize your current conundrum as whether (a) you can land an interview with your current credentials/experience, or (b) if your initially poor grades and non-target school status are too much of an obstacle at this point, in which case a transfer/CPA/MBA may be the right move. That's a difficult question to answer. I'm inclined to say you should put your best efforts into recruiting for now, and maybe find someone closer to the Canadian recruiting scene who would be able to look at your resume and give honest feedback on your chances of making it through. I think you should network your ass off for now, and keep the CPA in your back pocket as a Plan B.

Back to the painting business - if you intend on keeping that option open for a while, make sure you tell anyone you interview with that you already have a transition plan in place and are essentially ready to hand over the keys to a new manager if you get the offer. You have to make this clear to them or they will worry that you will be unavailable on weekends supervising a paint job somewhere. Also, this sounds like a great experience to leverage - i.e. "I know my grades were initially low, that's because I had to pay for school so I started a painting business which is now producing cash flows. Although I struggled at first, that experience taught me to manage multiple responsibilities at once, and I got comfortable working long hours. I was able to turn my grades around and the business is now ready to be transitioned to a new manager." or something along those lines.

Feel free to PM me, I just can't promise a speedy reply as my inbox has been flooded...

Best of luck to you.

10/17/16

As far as the CPA is concerned, I would not recommend it unless you plan to work for an accounting firm to start your career, which can be a great place to begin if that is what you are interested in. Additionally, if you could see yourself in an accounting based function later down the line (accounting/controller/finance division/CFO), then definitely go with the CPA.

Otherwise, I do not think it would be much of an advantage, especially in your case when it seems you would like to go the banking route. Having a CPA may be advantageous if you plan to continue to run your own business and would like to take care of it yourself from a financial standpoint.

While I have not taken it myself, so I can't say for sure, I have friends and colleagues that have. From what I gather, the exam tests your knowledge of law, materiality, auditing, and tax concepts, as opposed to overall business, valuation, and corporate finance topics. That said, I do not know that your statement how a CPA enables one "to grasp how a business truly operates" is accurate. Especially for banking, I could be wrong, but I do not think the CPA, although an impressive distinction, would provide you with an "edge over your competition" for the reasons explained before.

Also, unless you would like to get into Asset Management, research, or wealth management, I would defer the CFA until further notice.

With more free time on your hands, now it is time to network.

Feel free to PM me for more details.

10/14/16

I would just chime in to correct that you can put CFA on your resume before being a charterholder. There are strict guidelines. If you are registered for an exam (paid for already) you can say "CFA Level 1 Candidate" once you pass lvl 1 and have registered for lvl 2 you are a "CFA Level 2 Candidate"

Obviously his situation you couldn't put it on the resume yet, but once you register you can.

10/17/16

I've read that putting "CFA Level 1 Candidate" on a resume irks many people as a CFA Level 1 Candidate has merely bought the textbooks and has not yet accomplished anything as far as passing the exam is concerned. Maybe it would be better to just mention that you plan to sit for the exam in the interview.

This is just something that I have read on this forum regarding resume pet peeves - I am not trying to be incendiary.

10/17/16

Yeah that sounds like something people would say, but i would disagree. Laying out $1,500 (the cost of registering and exam price) shows you're serious about the commitment and going through the program shows a level of dedication to bettering yourself. I've been told in interviews it was part of the reason my resume was looked at.

10/17/16

Touche

10/21/16
IwannabethebestMonkeyevar:

Thanks for the AMA, NuckFuts.

As a student finishing my 5th year at a B-school my options are pretty limited. I own a small painting business that I manage and market and we're making solid revenue. I'm planning on going into a masters of accounting program at a target B-school either next year or the year after that (depending on if I get any positions anywhere) so that I can write my CPA. I'm also writing my CFA Level 1 next December (I know it's a stretch from now). I'm also going to be applying for a strategy consulting position at Deloitte in NYC through a contact that I know there.

My question is does this make sense? Will taking the time to pursue both a CPA and a CFA, all the while having a MAcc under me, even worth it? Is this my only option? Or can I squeeze in somewhere, prove my self, and work my way up? I've also been thinking about applying to small boutiques involved in restructuring, mezz, M&A, and build my credentials from there.

All the best

Think long-term

A CFA and a CPA with 10 years of B4 audit experience, while not exciting, makes you a strong candidate for CFO and a surefire lock for a CAO position.

More than one way to skin a cat, friend.

12/27/16

I think 10-15 years ago this was the case. Honestly 10 years in B4 audit often leads you to taking a minor pay cut to take an assistant controller position. Part of this whole senior managers becomes the CAO if they can't make partner thing is B4 propaganda. Look at CAOs on Linkedin for a more realistic path like below.

Path (Midcap or larger company) (Pay amounts are what I saw at public companies; add 25% for fortune 500 or high paying company): 10yrs Big4 audit (130 all in comp) -> 3 years director of SEC reporting(150 all in comp) -> 3 years exec. director of SEC reporting(175 all in) -> 4-6 years VP of reporting- Group Controller (180 cash, 30 stock)->4- 6 Years SVP Global Controller(200 Cash, 75 stock) -> Chief Accounting Officer (250 cash 150 stock)

I want to note that this puts you around 50 when you would take the corporate accounting throne. I have audited my share on companies and almost all the CAOs I have met where around this age. I want to note that someone who leaves as a 1st year Manager will probably be be a year or two ahead of someone who stayed in the B4, make about 100k more during that time, and had a significant better work life balance. Leaving at that point would also open up doors for then to move out of a SEC reporting or Accounting group and into a business finance, commercial finance or FP&A role if they so chose giving them a significantly better shot of getting to the SVP level as other options could be possible(Commercial fin, FP&A, Budgeting, Treasury, Group Business Fin, etc)

In terms of CFOs, although valuable, if you look at Fortune 500 CFOs today, you will see significantly fewer people that spent more then 5 years in the B4, maybe around 10% of them have. I am sure that number was around 40% 15 years ago. I am not trying to be a downer here, I just don't want people considering their career and thinking that its a sure way to the role, when you pretty much have everyone from ex bankers in corp dev, ex consultants in corp strat, people of various and occasionally top shelf backgrounds in corp fin groups competing with the ex auditors in reporting, tax, FP&A, and Technical Accounting. Often these people are not as much of a cost center that accounting is and have had more opportunities to demonstrate how they can improve/ grow the business.

I am a CPA and I enjoyed my time in the Big4, but the propaganda that people believe about the experience is based on a world near SOX, and it hasn't shown any sign of going back in the direction it was held before. Its been quite a while since then and that issue has been moved further back on a companies financial priorities list, which can be seen in the way fees have worked out the last 5 years.

10/12/16

Does coming from a non-target (ranked outside top 100) affect one's chances of getting into a large PE group? Or does it not matter once you are already in a top group at GS/MS/etc.?

10/12/16
myr899:

Does coming from a non-target (ranked outside top 100) affect one's chances of getting into a large PE group? Or does it not matter once you are already in a top group at GS/MS/etc.?

This is going to be very specific to who is running recruiting. A lot of PE guys like to hire people that went to their university (even their own fraternity). I've seen my group do that. But I've also seen them say "no" to perfectly groomed Ivy guys from BBs in favor of the guy from a local school and average IB shop, because that guy wow'd everyone during interviews and was just a better fit. I think ranking of your school helps get through the screening process, but once you get the interview it matters a lot less.

I'm from a non-target myself, and the selling point of "coming from [non-target] we did not have as many resources as [Ivy] to prepare for banking, but I was genuinely interested in finance and determined to break in so I got good at self-studying and learning on the job" worked very well for me while interviewing for PE. Nobody wants to hold your hand in PE, so they like people who can figure things out on their own and jump over obstacles to get to a goal.

10/12/16

You mentioned wanting to invest in passive income / real estate eventually. Is there a specific number you're waiting to hit before you start actively pursuing such opportunities? Have you given much thought about locations or businesses etc at this point?

10/12/16
computerized:

You mentioned wanting to invest in passive income / real estate eventually. Is there a specific number you're waiting to hit before you start actively pursuing such opportunities? Have you given much thought about locations or businesses etc at this point?

Honestly, I have been thinking about your questions for years and I do not have an answer. I would love to hear others' thoughts here.

I will have a 2 part test for whatever my next big move is. (1) will the quality of my personal life be at least as good as it is today? and (2) will my earning potential (i.e. combination of compensation and the extent to which the next gig provides me with opportunities to grow as a professional) be at least as good as it is today? I need a "yes" to both of these questions before I make a move somewhere.

If the next gig pays $800k a year but will take time away from my gf / friends and make me miserable, I'm not interested. Similarly, if I got to move to Colorado and leave work at 3pm to go hiking every day but would have to take a pay cut or would be exposed to less learning opportunities, also not interested. The ideal next move for me will slightly improve my quality of life (which isn't bad now, tbh) while providing me with an opportunity to keep learning and growing. If these two criteria are met and my comp is roughly the same, I would be happy.

I will also mention that being in finance has made me paranoid. I've seen so many people lose their shirt over bad investments / shitty market timing that I keep over 50% of my net worth in cash at the moment. I'm not comfortable putting any more than that into the stock market or real estate, as I think everything is grossly overpriced. I would like to see some rate raises from the Fed and some of the indicators of systemic risk easing out of the economy before I start putting my money to work in a more meaningful way. Maybe after the dust settles from the presidential election I will use my next bonus to put a down payment on some real estate... some of the guys at my shop have also talked about co-investing in properties together to spread out the risk, which I may consider as well.

10/13/16

just wanted to say thanks for taking the time to answer questions!

WSO's COO (Chief Operating Orangutan) | My story | My Linkedin

10/13/16
AndyLouis:

just wanted to say thanks for taking the time to answer questions!

Happy to do it! Will PM you next time I am in BA, it's a wonderful city.

10/13/16

Is the MEZZ/distressed debt real estate back or corporate debt?

10/14/16
Macchiavelli11:

Is the MEZZ/distressed debt real estate back or corporate debt?

Some mezz is corporate unsecured (like "debt" structured as pref equity), some may be secured by equity in an unrestricted subsidiary with some assets, some (especially in distressed situations) may be done with a second or third lien on assets of the company... I've seen a lot of creative structures, it is very dependent on the company's specific situation, capital structure, level of distress, etc.

10/13/16

Thanks for doing this! I was curious about how PE recruiting really works once you're on the job. Specifically, if you aren't at GS/MS/JPM/BX/"insert top group here" are you fucked for recruiting, or at least given worse looks? I'm not sure which BB you were at, but was there a material difference in exit opps based on group placement (i.e. CS financial sponsors vs CS industrials) and from thereon out bank prestige?

Also, if I'm working in a specific coverage group does that preclude me from generalist PE opportunities (i.e. doing tech so restricted to tech PE/VC)? For reference, although a MF sounds awesome, I would be more than happy working in Upper MM or MM PE, and I'm curious with what you saw in your BB recruiting cycle/your current fund.

10/14/16
consultbanklive:

Thanks for doing this! I was curious about how PE recruiting really works once you're on the job. Specifically, if you aren't at GS/MS/JPM/BX/"insert top group here" are you fucked for recruiting, or at least given worse looks? I'm not sure which BB you were at, but was there a material difference in exit opps based on group placement (i.e. CS financial sponsors vs CS industrials) and from thereon out bank prestige?

Also, if I'm working in a specific coverage group does that preclude me from generalist PE opportunities (i.e. doing tech so restricted to tech PE/VC)? For reference, although a MF sounds awesome, I would be more than happy working in Upper MM or MM PE, and I'm curious with what you saw in your BB recruiting cycle/your current fund.

In my experience the prestige of your group helps you get noticed by recruiters / HR. Once you get noticed and make it to an interview, the focus switches to your actual experience. It helps to have a higher up at the bank who is well known in the industry (and whom the PE guys trust) who can speak up for you with a good recommendation - this can help more than the brand name of the bank/group, although often goes hand in hand with being in a top group.

At my current fund, we have turned down average (well ranked, well liked, but did not stand out in any way) guys from top groups in favor of hiring a better fit from a lesser known bank, so don't underestimate the importance of cultural fit and demonstrating market knowledge, strategic/critical thinking about deals, etc... the technicals tend to be a "check the box" test - either you got it or you don't. Once you get past that, intangibles start to matter a lot. PE guys want someone who "gets it" from day 1, can hit the ground running, and can get up the learning curve quickly without hand holding.

As far as group placement, I was never in a FIG / sponsors group but I've heard these groups are not that great for traditional exit opps... they tend to prepare you more for an IR/fundraising role (someone jump in if I'm wrong here).

As far as being in coverage, I don't think that precludes you from being a generalist at all. It depends on your deal experience, I think - if your coverage group ran deals themselves (like mine did) instead of sourcing and passing on to an M&A group (which I've heard is the case at some banks, but never actually saw it myself), you should be good. Obviously though you need to broaden your horizons and do some more self study on metrics / analysis that is not specific to your industry. A lot of guys from my coverage group went into generalist roles.

10/14/16

Do you find the culture (not-firm specific, but the general atmosphere) to be quite similar or different between IB and PE?

10/14/16
seville:

Do you find the culture (not-firm specific, but the general atmosphere) to be quite similar or different between IB and PE?

In my experience (this may not apply to smaller funds):

The similarities:
- The deal owns your life; if you're on a live deal and closing in on a deadline, expect to work weekends and late nights; I had one PE vacation where I worked 2/3 of it (they gave me most of my vacation days back)
- General finance culture, senior guys can be image conscious and political, it takes work to find a good mentor, etc
- You spend a lot of time in Excel/Word/PPT working on stuff that will never go anywhere
- Can't even take a shit these days without compliance sniffing around to see what's going on

The differences:
- People respect you as an individual in PE - in banking you are just another kid out of college who just sold your soul to wall street, so people don't think twice about ruining your weekend over some bullshit (it's a rite of passage, really). In PE this part of the culture is missing - people will still grind you but they will be more reasonable about it, they are not in the business of wasting time, which means...
- ...Less bullshit work / pitching; it still happens, but we recycle the same pitchbook and have an IR group that does a lot of the heavy lifting
- This also means that when you do have to stay late or work weekends in PE, it's actually more enjoyable because you feel like your work matters; on the other hand, the fact that there isn't an army of analysts spreading comps means you have to spread things yourself, you have less templates and resources available to you, and you find yourself calling your old banking buddies begging to send you a research report your firm doesn't have access to
- Professionalism matters a lot more; we used to act like children at 2am in banking, cursed openly, got into really inappropriate arguments, etc... in PE you put a tie on and act like an adult all the time, after all you are managing people's money and you better act like it
- More autonomy means more ownership of your work, which is harder but more rewarding; if you fuck up a model in banking, that rarely has terrible actual consequences (other than your VP throwing a printer at you) as there are multiple layers of people checking your work and anyone who looks at bankers' numbers should be doing so with a lot of skepticism anyway. In PE you sometimes turn an analysis in to your MD, and he will immediately jump on a call with other senior guys who will be making a decision based on your numbers. If you fuck up the consequences can be scary, and you don't have as many layers above you to check your work.

10/14/16

+1. Great and thorough response. Thanks!

10/14/16

Thanks for doing this, really appreciate it.

What is the prevalence of non-IB backgrounds on your team, specifically in the mezz space? Do you see people from corporate banking or other roles that provide experience with cash flow lending at all and if so, any advice on how to make yourself more competitive against candidates coming in with IB credentials?

10/14/16
jcc24:

Thanks for doing this, really appreciate it.

What is the prevalence of non-IB backgrounds on your team, specifically in the mezz space? Do you see people from corporate banking or other roles that provide experience with cash flow lending at all and if so, any advice on how to make yourself more competitive against candidates coming in with IB credentials?

Unfortunately coming from a non-IB background pretty much kills your chances... it does happen, but it is rare for someone from non-IB to break in. I think a smaller fund may be more willing to consider this, but not sure.

10/16/16

If you were from a non-IB background and where trying to get into the Mezz space how would you do it?

How is my grammar? Drop me a note with any errors you see!

10/17/16
Papa Harambe:

If you were from a non-IB background and where trying to get into the Mezz space how would you do it?

I would try to get into an IB group like coverage or LevFin first... hard to break into mezz without IB. However some funds do hire analysts, and it's possible to work your way up from there but this is less common and hard to do. It's also possible to break in after business school, but I think IB is the natural starting point and where most candidates come from.

Private Equity Interview Course

10/14/16

any advice for someone from a PE secondaries background looking to break into direct PE?

What are the major challenges someone from my background would face when at the interview?

Background: I did not do investment banking.

Thanks for doing this.

10/14/16
the_ferry:

any advice for someone from a PE secondaries background looking to break into direct PE?

What are the major challenges someone from my background would face when at the interview?

Background: I did not do investment banking.

Thanks for doing this.

Sorry mate, I have zero experience so don't want to mislead you with too much speculation. Generally PE wants to see that you have deal and modeling experience, so to the extent you have that you may be able to leverage it...

10/14/16

Thanks for doing this!

Just some quick questions:
- What's your opinion about PE recruiting former consultants?
- Does your fund opt strictly to hire IB? If not, how much is the bias towards MBB against other strategic consulting firms?

10/14/16
goldarmor:

Thanks for doing this!

Just some quick questions:- What's your opinion about PE recruiting former consultants?- Does your fund opt strictly to hire IB? If not, how much is the bias towards MBB against other strategic consulting firms?

My fund (and many others) strictly hire IB, but I know certain funds like to hire consultants (e.g. Golden Gate in SF, Charlesbank in Boston, probably others as well). I can't say for sure but would think there is a lot of bias for MBB candidates versus other consultancies.

10/14/16

What are your thoughts on the top three restructuring consulting firms (Alix, A&M, FTI) in terms of recruiting for distressed PE? Do you think more or less valuable then strategy consulting?

In addition, what do you think of associates and VPs in banking looking to make the transition to PE. I would think that it is more difficult because you are combining lack of PE experience with a more expensive person. I know it does happen, but I am curious on what you would think if a Laz/PJT,HLHZ associate's resume came across your desk.

The last act is tragic, however happy all the rest of the play is; at the last a little earth is thrown upon our head, and that is the end for ever.

10/17/16
SFREIT:

What are your thoughts on the top three restructuring consulting firms (Alix, A&M, FTI) in terms of recruiting for distressed PE? Do you think more or less valuable then strategy consulting?

In addition, what do you think of associates and VPs in banking looking to make the transition to PE. I would think that it is more difficult because you are combining lack of PE experience with a more expensive person. I know it does happen, but I am curious on what you would think if a Laz/PJT,HLHZ associate's resume came across your desk.

I don't personally know any distressed shops that recruit consultants, but I would guess that restructuring consulting is more directly applicable here. A distressed shop may want a couple of in-house guys with experience in the nuts and bolts of reorganizing a company, and doing so specifically in a context of distress. However, they can also just hire the consultancy when it's time to do the reorg work... so I would think this is a difficult transition to make due to the limited set of shops looking to hire this expertise in house.

It's harder in general for experienced associates/VPs to transition to another firm as they can be 2x-3x as expensive as analysts coming out of banking. However, it does happen - my shop has hired banking VP's to replace our own guys who leave for other shops. For these guys having relevant deal experience directly applicable to the PE shop's focus area is probably more important than at the analyst>associate level.

10/14/16

Do you see most of the PE associates that you work with coming from BB's? MMs? EB? What's the mix look like?

The fool thinks himself to be a wise man, while the wise man thinks himself to be a fool.

10/14/16
Mark Hanna:

Do you see most of the PE associates that you work with coming from BB's? MMs? EB? What's the mix look like?

Mostly BB's, a few EB's, and a couple of guys from MM's. I think the screening out of some MM guys happens at the recruiter level - by the time a resume gets to us, what bank you were in is not a major consideration anymore. Your deal experience and performance in your group matter more when we decide who to call up for an interview. Although if someone is coming from a lesser known boutique or MM shop, we would want to see solid transaction experience and maybe something to make the candidate stand out.

This is all in the context of screening / initial interviews though. Once we establish you have the technical skills and deal experience to do the job, we check that box and move on to cultural fit / industry knowledge / bigger picture. We use the initial criteria (quality of banking group / resume / technicals / initial interviews) to narrow the pool down to 4 or 5 good candidates, at which point it's all about fit.

3/23/17

Hi NuckFuts,

Sorry I'm jumping on this a bit late, but I just discovered this thread. You mentioned for a good MM shop, you would like to see something to make the candidate stand out. What kind of things make a MM analyst stand out in a resume or something a candidate can do to materially increase their chances of securing an interview?

10/14/16

Can you comment at all on country coverage groups ? (Think Europe)
Thanks

10/14/16
BreakingintoIBD:

Can you comment at all on country coverage groups ? (Think Europe)Thanks

The European space is not one I am familiar with, so can't really comment. We do have a presence in Europe but not enough to have specific country groups.

10/14/16

What are your thoughts on breaking into PE if you are coming from the industry side (instead of IB). Specifically, I'm interested in making the move from Engineer @ E&P company (energy industry) ---> top MBA ---> PE firm w/ Energy companies in portfolio. Do you think this is a long shot? What are some things I could be doing to help out my chances (i.e. self-study on LBO modeling)?

Thanks in advance.

10/17/16
Arbitraging:

What are your thoughts on breaking into PE if you are coming from the industry side (instead of IB). Specifically, I'm interested in making the move from Engineer @ E&P company (energy industry) ---> top MBA ---> PE firm w/ Energy companies in portfolio. Do you think this is a long shot? What are some things I could be doing to help out my chances (i.e. self-study on LBO modeling)?

Thanks in advance.

Energy PE is unique in that a lot of PE firms hire in-house engineers to do asset reviews... I actually know 2 guys who went directly from E&P -> PE. Energy groups at banks also hire engineers into A&D groups, both directly from E&Ps and out of MBAs. I would say this is a more common path: E&P -> A&D / IBD -> PE. Some top banks that come to mind in this field are Jefferies, TPH, Evercore... I also know the BBs have their own A&D groups within the IBD umbrella, although I can't speak to their quality. You may want to network with someone who is familiar with the current status of the Houston A&D scene, as it seems to be a pretty small world.

So to answer your question, no your strategy is not a long shot. It sounds like you are on the right track, but I would also open up the realm of possibilities to a couple of years at an A&D shop within a bank (or even straight up energy IBD). Self study of finance/accounting/modeling will go a long way in preparing you, but I wouldn't focus on LBOs as much as on basic capital structure / financing topics, oil and gas NAV valuations, and financial metrics / accounting concepts specific to energy.

One thing to keep in mind - my two engineer friends who are now in PE often complain that they are "looked down" upon... i.e. they feel like they do the real work while the finance guys get all the credit for putting powerpoints together based on the engineers' numbers. It kind of makes sense - at Google/Apple/Amazon you want to be a programmer, at a PE firm you want to be a finance guy, at an E&P company you want to be an engineer. So the MBA -> Energy IBD route may make more long-term sense than going into an A&D group and being forever labeled an "engineer", depending on how much you like the engineering work versus the finance work and what your long term goals are.

10/14/16

If you had to develop one skill/trait to get where you are now, what skill/trait would it be?

What do you look for in a candidate to see if he or she fits in?

10/17/16
Toys-R-Soros:

If you had to develop one skill/trait to get where you are now, what skill/trait would it be?

What do you look for in a candidate to see if he or she fits in?

Very interesting question. I would say it's extremely important to be observant and introspective. For example, in every meeting I take mental notes of how people are acting, what ideas they present and how, how people react to certain things... and I am very self conscious about mentally comparing my own habits/traits against what I am witnessing in others. This is a skill I necessarily picked up as a foreigner trying to fit into the northeast culture in high school / college - watching others and learning from their successes / mistakes was the only way I was able to figure out social norms and get people to like me. It takes constant work, but it becomes a habit after a while. A crucial part of this is spending time by yourself reflecting and questioning every assumption and deeply held belief you hold (it can be hard to even admit to yourself what those beliefs really are). Once you become good at this, noticing and taking in feedback/criticism becomes easier and you become more malleable to change, which is another way of saying you are quicker to improve on your shortcomings. I would say this is the greatest gift of growing up in a diaspora, where conflicting views/norms exist and there is no clear path to follow - introspective critical thinking and constant observation of others become powerful habits that allow you to speed up the rate at which you become a better version of yourself.

As far as candidate fit, I personally look for a lot of the traits I described above... critical thinking, hunger to learn / improve, observation and introspection... as well as being generally likeable, smart, and hard working. We don't need mathematical geniuses, we need friendly smart people who work hard, learn quickly, and adapt easily.

10/15/16

For someone coming from corporate finance trying to break into corp. dev or PE what advice would you give them to mitigate the lack of transactional and/or modeling experience they have?

10/17/16
da chief:

For someone coming from corporate finance trying to break into corp. dev or PE what advice would you give them to mitigate the lack of transactional and/or modeling experience they have?

Your only options are probably self study of financial modeling with some creative networking or an MBA... I can see a move from corp fin to corp dev if you stand out as sharp and motivated at your current firm, but you'd have to play internal politics to make it happen. To be honest I have never heard of someone moving from corp fin to PE without some pre-corp fin banking experience.

10/17/16

Awesome thanks man SB'd!

What about corp dev. to PE? Assuming there would be some quality M&A experience in there.

10/18/16
da chief:

Awesome thanks man SB'd!

What about corp dev. to PE? Assuming there would be some quality M&A experience in there.

I have seen this happen a couple of times, but at a more senior level. In these cases you had an experienced corp dev guy with a fat rolodex of industry contacts, and they were hired into PE as business development people to support portfolio companies... their industry contacts mattered more than analytical capabilities though, and the associates doing the grunt work were still ex-IB at the end of the day.

Not saying it doesn't happen with associates, just that I have not seen it happen and would think it's a tough move to swing.

10/16/16

can you talk about your lifestyle in PE vs. IB, how late are the nights and how often are you doing weekend work? Also, how much vacation are you able to take every year?

10/17/16
winsle.100:

can you talk about your lifestyle in PE vs. IB, how late are the nights and how often are you doing weekend work? Also, how much vacation are you able to take every year?

See my answer to @seville above re: the hours. Short answer is that you still grind in PE, but the grind is more fun because your work matters more. You do less BS work in PE so your hours are better, but the stress factor is higher since you own your work and there aren't as many checks and balances to catch mistakes.

I technically get about 3 weeks of vacation a year, but haven't taken more than 10 days in a year... except I took a full 2.5 weeks when I got married and that wasn't an issue (I did get some friendly jabs about it in the lunch room). However, planning trips over long weekends and adding some vacation days on the back end has allowed me to take several personal trips.

10/16/16

Whats the best part of working on a LBO?

How is my grammar? Drop me a note with any errors you see!

10/17/16
Papa Harambe:

Whats the best part of working on a LBO?

Knowing that the deal has a <5% chance of actually happening...

In all seriousness, I guess LBOs are "sexy", there are more advisors involved, more travel and high profile meetings, lot of steak dinners to expense, a lot of mileage to accumulate... but I have generally found that more of the numbers are made up, the business rationale is not as sound, and the appeal of LBOs is generally overstated. When the market is hot, if you can work on a few LBOs it can be great for your career, but the likelihood of actually doing so is not that great nowadays, and investors rely on a lot of ambitious projections materializing if they are to make any money (there is no science behind guessing an exit multiple 3 to 5 years out - it's glorified gambling, with higher stakes and more legal docs involved).

10/29/16

if that's so, then why do you seem to like your job so much? I haven't read anything yet about what parts of the work make you interested in staying but more so 2 factors;
1. Compensation
2. Quality of life
I understand those two are important, but if you invest so much time into a career, dont you want it to be something you enjoy? Given that you aren't at the senior levels yet, it's quite hard to see how your day to day match exactly to your end goal as well. So what keeps you going and keeps you pushing in this ambiguous direction towards something that isn't even clear??

To be simple, I want to know what is your end goal and what do you think abuot your day to day compared to that.

2/2/17

The answer is simple - I grew up without money, and making lots of money makes me happy provided my basic needs are met.

Basic needs include quality of life, working with people who are nice / have a good culture, and work that is intellectually challenging / stimulating (i.e. constantly learning about how the world of high finance works).

Banking provides some of the learning aspect, but quality of life sucks and people tend to be dick bags. PE provides more learning, better quality of life, and nicer people (at least at my shop), so my needs are being met.

I don't live to work, I work to live. My personal fulfillment does not come from doing meaningful work - I'm not trying to save the fucking manatees at work, I'm trying to make money because money enables me to do whatever I want when I'm not working. This includes things that ACTUALLY bring me personal fulfillment - taking my wife to Argentina on a first class ticket, paying for my family's medical/education expenses, sleeping well at night without worrying about paying the bills, donating to the charities that my college friends now work for, etc.

Most importantly, making money now (in my late 20's / early 30's) will mean I don't have to miss my future kids' basketball games because by that point I will own my time and won't have to slave away at a desk job that I hate for long hours just to make ends meet, like most of the population does.

So if my basic needs are being met and I am making good money knowing that I'm on a path to financial freedom, and if I derive my personal fulfillment from things I do OUTSIDE of work (and that are often enabled by the money I make at work), then why wouldn't I be happy? The whole idea that your work itself should be meaningful and fulfilling is a bullshit idea sold to college students by liberal college professors who hate their jobs! Work should be tolerable and profitable, and happiness happens after you leave the office.

2/3/17

I don't usually post, but I wanted to respond for the benefit of people who may read this thread in the future (I doubt I'll be able to change your mind). I don't agree that you can't find personal fulfillment at work while also being compensated well and having a good quality of life.

I work in PE at an impact investing fund (while being paid similarly to other PE professionals) where we invest in companies in renewable energy, healthcare, education etc to achieve social impact with financial returns. I love my job and I'm much more personally motivated to work than when I was in banking at a top BB. I don't think I'm giving up anything that I would've gotten by working at a traditional PE fund, and it's not like I'm living on minimum wage while working at a nonprofit.

Just something to think about for those who are searching for fulfillment in the finance industry... you referenced saving manatees - one of our investments actually works to benefit ocean wildlife / fishes while having a sustainable and profitable business model.

10/17/16

How important are GPA / school in the process compared to bank, group & fit? My school, group and bank are fine, but my GPA is subpar (3.6). Also, did you find that HHs care about the GMAT? Does it make sense to take it now or does it not matter?

10/17/16
Kazimierz:

How important are GPA / school in the process compared to bank, group & fit? My school, group and bank are fine, but my GPA is subpar (3.6). Also, did you find that HHs care about the GMAT? Does it make sense to take it now or does it not matter?

GPA / school are initial screening tools... if you meet some initial criteria, they become an afterthought in the recruiting process. I had a 3.6 GPA and no GMAT and turned out just fine. If you had a baller gmat score, it will help a bit... if your GMAT was under 700, don't bother including it in your resume or discussions with HHs until you have a higher score. GMAT is not a major consideration and is only a "nice to have".

10/17/16

As a 3rd year IB analyst and with about 8 months left before I start my PE gig, what would you advise I do? Would you suggest just relaxing to the extent possible or should I be focused on something specific headed into the new gig?

10/18/16
ValueBanker14:

As a 3rd year IB analyst and with about 8 months left before I start my PE gig, what would you advise I do? Would you suggest just relaxing to the extent possible or should I be focused on something specific headed into the new gig?

A few things that would have made my transition to PE easier, in hindsight:

  • Practice developing a view on any set of financials or model you develop, and practice succinctly presenting this to others / speaking up more in calls and meetings; one surprise for me in PE was how on my 3rd day I finished my first rudimentary valuation / returns model based on a CIM / dataroom, and in the lunchroom an MD asked me what my thoughts on the deal were; I was not prepared for that, and had to develop a habit of forming an opinion about my work as I did it, rather than just cranking it out like you do in banking
  • Stay sharp on your Excel/PPT skills, specifically without relying on your banking plug-ins like FactSet/etc; when I got to PE I ended up switching to Macabacus (had to fight with IT to get it installed) and had to re-learn a few shortcuts
  • If you aren't already in the habit of building your own models from scratch, start doing so without relying on banking templates
  • Study the types of deals your new firm does, get smart on those companies / industries if you aren't already
  • Speaking of banking templates, not saying you should covertly save these down on a USB drive or compress them into a password protected ZIP file which you then name "Personal_Docs.xyz" so it gets through the filters when you email them to your gmail... this would be irresponsible and you should not do it even though it could make your life easier later on...
  • Think about your banking contacts within your group and remember you may have to call your old buddies to get access to research reports / templates (which is a safer way to play it than saving things down yourself, since your buddies may be allowed to send templates to potential clients, and you will technically be one)

Apart from all this though, don't kill yourself. Try to relax a bit and practice being a normal human being again - getting up early to work out before work, better eating habits... when I was in banking I would drink/smoke all the time, and ate like shit. In PE the successful people all have their shit together, and it all comes down to killing any bad habits you formed during banking.

10/18/16

+SB. That's really helpful. I'll use that as a guide for the remainder of my time here.

10/20/16

For some reason I thought about this again, and would say that forming good habits now should be at the top of your list. When I think about all the successful people I know in PE, they all have good habits in place. It's so much harder to get in the habit of working out, eating right, getting enough sleep, etc while also focusing on learning your new job in PE. If you come into your new gig with these habits already in place, you will be more efficient and will probably have an easier time with the transition.

Also, this may sound cheesy but check out "The Power of Habit" - download it on Audible and listen during your commute or while at the gym. I am a true believer in forming good habits as a path to achieving goals, and this book made me more aware of how and why I had certain habits as well as how I could go about improving myself over time.

Of course, ignore all of this if your habit game is already on point. But I know mine certainly wasn't towards the end of my banking stint :)

10/18/16

Thanks for taking the time to do this--serious props for the amount of effort you're putting in these answers.

I'm in a bit of a weird situation in terms of my career and wanted to ask if I could send you a PM to get your thoughts/advice.

Thanks in advance!

10/18/16
HNNNG:

Thanks for taking the time to do this--serious props for the amount of effort you're putting in these answers.

I'm in a bit of a weird situation in terms of my career and wanted to ask if I could send you a PM to get your thoughts/advice.

Thanks in advance!

My inbox is flooded so it will take me a while to answer it all... so if you don't mind waiting a few days, go for it. You wouldn't know it from my activity in this thread but I do have a day job in PE and review season is around the corner :)

10/18/16

This is easily one of the best and most detailed AMA's i have seen in a while...Thanks for the insight man, SB'ed you.

10/18/16

Of course! Really appreciate it. I'm currently getting bombarded as well but will send you a PM tonight/tomorrow.

Thanks again!

10/20/16

Thank you for the feedback! I questioned whether to even post this thread since I wasn't sure there would be any interest, so I'm happy to hear it has been helpful.

10/21/16

I'm in the process of reading through this thread but wanted to get this question out when its fresh in my mind. My career is on the lending side in commercial real estate banking. I'm a new analyst, but I'm planning on building a private real estate portfolio, with the goal of having enough passive income 10-20 years from now to replace a high paying corporate job. I've been speaking with a few potential partners about setting up a company to do this. I imagine if we were successful down the road, we'll look to bring in private money. PM equity returns go for around 7-10%. Obviously, at this point my involvement will need to be greater, unless a partner takes over this.

Would you be interested in being a capital partner for private real estate investment companies such as that? I'm trying to get a better idea of what investors would like to see as I look to this idea in the future. Would you like to be the partner in the deal funding the money, collecting a return, and having no involvement in the rehab process or tenant management? Or would you prefer a debt structure, lending in 6, 12, 24 month terms collecting a 4-6% interest return? Any insight on what your goals with real estate would be great to hear.

10/21/16
Surfing Pirate:

I'm in the process of reading through this thread but wanted to get this question out when its fresh in my mind. My career is on the lending side in commercial real estate banking. I'm a new analyst, but I'm planning on building a private real estate portfolio, with the goal of having enough passive income 10-20 years from now to replace a high paying corporate job. I've been speaking with a few potential partners about setting up a company to do this. I imagine if we were successful down the road, we'll look to bring in private money. PM equity returns go for around 7-10%. Obviously, at this point my involvement will need to be greater, unless a partner takes over this.

Would you be interested in being a capital partner for private real estate investment companies such as that? I'm trying to get a better idea of what investors would like to see as I look to this idea in the future. Would you like to be the partner in the deal funding the money, collecting a return, and having no involvement in the rehab process or tenant management? Or would you prefer a debt structure, lending in 6, 12, 24 month terms collecting a 4-6% interest return? Any insight on what your goals with real estate would be great to hear.

I've flirted with this idea myself. Excuse my bluntness, but...

  1. Why would I trust a new analyst in the field with my money, without any previous track record of generating returns, originating deals, running a shop, etc?
  2. Assuming you had all the necessary skills to source deals, put together all the paperwork, and effectively manage a portfolio, why should I expect you to outperform other real estate investment vehicles such as REITs, especially on a risk-adjusted basis?
  3. Why would I put my hard earned money into a 4-6% debt instrument when I could instead buy a REIT yielding 4-6% and expose myself to equity upside? Unless you are willing to personally guarantee the loan and have substantial assets to pledge as security?
10/21/16
NuckFuts:

Surfing Pirate:I'm in the process of reading through this thread but wanted to get this question out when its fresh in my mind. My career is on the lending side in commercial real estate banking. I'm a new analyst, but I'm planning on building a private real estate portfolio, with the goal of having enough passive income 10-20 years from now to replace a high paying corporate job. I've been speaking with a few potential partners about setting up a company to do this. I imagine if we were successful down the road, we'll look to bring in private money. PM equity returns go for around 7-10%. Obviously, at this point my involvement will need to be greater, unless a partner takes over this.Would you be interested in being a capital partner for private real estate investment companies such as that? I'm trying to get a better idea of what investors would like to see as I look to this idea in the future. Would you like to be the partner in the deal funding the money, collecting a return, and having no involvement in the rehab process or tenant management? Or would you prefer a debt structure, lending in 6, 12, 24 month terms collecting a 4-6% interest return? Any insight on what your goals with real estate would be great to hear.

I've flirted with this idea myself. Excuse my bluntness, but...

1. Why would I trust a new analyst in the field with my money, without any previous track record of generating returns, originating deals, running a shop, etc?2. Assuming you had all the necessary skills to source deals, put together all the paperwork, and effectively manage a portfolio, why should I expect you to outperform other real estate investment vehicles such as REITs, especially on a risk-adjusted basis?3. Why would I put my hard earned money into a 4-6% debt instrument when I could instead buy a REIT yielding 4-6% and expose myself to equity upside? Unless you are willing to personally guarantee the loan and have substantial assets to pledge as security?

Sure, good questions to ask.
1. You wouldn't trust anyone like that, of course. You'd be throwing your money away most likely. When looking at this from an investors standpoint, you'd only want to work with partners who have a successful track record and whereby trust is established.

  1. I think portfolio diversification is something you'd aim for. The benefits of private real estate investment include these things, off the top of my head.
  • As a debt partner, you can hold a 1st lien position on the property. You can negotiate what kind of terms you want. Do you want to set the rate at 5%, then bump the rate up to 8% after 5 years with a total term of 10 years? IO for the first year so the investor can make a larger cash on cash return in Y1, then amortization begins afterwards? If the partner violates the loan agreement, you can foreclose on him or her and take the property back. You have no negotiation ability with investing with a REIT.
  • As an equity partner, you'd normally see profits split 50/50 to 70/30. If you're investing alongside in commercial deals i'm sure you'll see more sophisticated equity structures. Say you're partner purchases and flips as property going in at $70k purchase and $50k rehab. Sale price of $200k and you guys split acquisition costs 80/20 and rehab 50/50. Unlike investing in a REIT, you have the ability to influence the deal. Do you want to fund your partner so he can do a bare minimum flip, aiming to flip the house to the lower end of the market? Or do you want to put more money into the deal so you can do a more middle-class or luxury flip and increase your profit?

You also have the ability to conduct your own due diligence on your partner's legal team, general contractor/subcontractors, marketing etc.

  1. Investing privately vs on the public markets (REIT)
  • Some reasons are listed above. Others include:
  • You're subject to public market risk. Your investment in a REIT has upside, and downside most importantly. What happens when the public markets run into a bull market? Your REIT is likely affected.
  • You have different tax advantages with private real estate investment. I'm not a tax expert, but there's plenty of advantages through pass-through entities, capital gains exclusions, mortgage interest deductions, and estate tax planning.
  • Where I work now, the real estate market remained relatively flat during the GFC in 2008. If you were invested in the public markets at that time, good luck.
  • Investing privately, your supplier is a homeowner (unless you're building on raw land). Homeowners are emotional, irrational, and unsophisticated. A lot of investors made a lot of money buying up foreclosures, buying houses and mulitfamily properties from homeowners selling off extra properties to stay afloat, etc. A lot of distress means higher profits. If you are your partner can successfully market to these people, you could be getting properties at a 50% discount.
  • When you own shares in a REIT, you only own those shares. If your 100 shares worth $10,000 go up in value by 5% for 5 years, you made a gain of $2,762 + your accumulated dividend distributions. If you have ownership, your gain on a property worth $100,000 over a 5 year period at 2% growth is a $10,408 gain. Plus, you're probably getting monthly cash flow from the property as well.
10/21/16

Hi, thanks for doing this and helping out people looking to break into finance. I've a few questions myself.

  1. What is your opinion on the UNC Kenan-Flagler undergraduate business program? Is it a well represented school among BB banks and Wall Street in general?
  2. As a undergraduate looking to eventually move into hedge fund or start my own fund, what would be the "ideal" or normal path? (Ex: 3 years of IB at BB banks, then into hedge fund. Or straight into buy-side HF programs such as Point 72 Academy or Bridgewater)
2/3/17

No idea on question 1 - I've never come across anyone from that program (that I know of).

On question 2, banking is always the surest bet with the most optionality in terms of exit opportunities. Some hedge funds also hire out of equity research given the public-side versus private-side focus, but IB is still by far the easiest entry point into the hedge fund industry. You can start off as an analyst at a HF but I am skeptical that this is the best path. I suspect you would rather come into Bridgewater as an associate (after 2-3 years of IB) with higher pay and some experience. As an analyst, you will still work your ass off for (probably) less pay, and you are more likely to fail as you don't know what you are doing yet. You are prone to making mistakes when starting out - I personally would rather make those mistakes in IB and start my HF career with a clean slate and a bit more maturity.

10/23/16

Thanks for doing this, this is a great thread.

Have you seen / have any experience with moving over from hedge funds into PE? I spent two years in IBD before exiting to a hedge fund and I've realized I'm much more of a "deals" person than a "markets" person. Does it make more sense to try to make the switch now or to try to move over post MBA?

Array
10/28/16
SqualBall:

Thanks for doing this, this is a great thread.

Have you seen / have any experience with moving over from hedge funds into PE? I spent two years in IBD before exiting to a hedge fund and I've realized I'm much more of a "deals" person than a "markets" person. Does it make more sense to try to make the switch now or to try to move over post MBA?

You might as well try it - do some networking, get in touch with recruiters, and see how receptive the PE hiring market is to your background. I don't personally know anyone who has gone from HF to PE, but I have seen people go from trading to PE. For example they moved from a daily sales / trading function at their trading firm to putting together contractual arrangements between power plants and gas suppliers and structuring transactions... which still fell under "trading" but the transaction aspects were directly relevant to PE as well. I guess it depends on how transaction-heavy vs. trading your HF gig is.

10/23/16

Thank you very much for doing this; I'm finding it very helpful.

What are your thoughts on the CFA?

I'm 2 years into an analyst stint in the NYC based lev fin group of a Euro bank (non BB) covering financial sponsors. I have a pretty good list deals for the resume, but hardly any lead-lefts. How big of a disadvantage is only having joint lead arranger / participant deals on the resume?

My rationale behind pursuing the CFA is that it will "make up" for my non BB and state school background and help me get a PE interview. Thoughts on this strategy?

Thanks again for taking the time to do this.

10/31/16
Slick willy:

Thank you very much for doing this; I'm finding it very helpful.

What are your thoughts on the CFA?

I'm 2 years into an analyst stint in the NYC based lev fin group of a Euro bank (non BB) covering financial sponsors. I have a pretty good list deals for the resume, but hardly any lead-lefts. How big of a disadvantage is only having joint lead arranger / participant deals on the resume?

My rationale behind pursuing the CFA is that it will "make up" for my non BB and state school background and help me get a PE interview. Thoughts on this strategy?

Thanks again for taking the time to do this.

I think I beat the CFA horse to death in some of the replies up above... but in summary, I don't think a CFA is a replacement for IB experience. I think you need to invest the full 3+ years into the CFA before it becomes useful, and even then it is more of a tool to groom/legitimize a finance professional looking to step into a management role, not as a tool for analysts/associates looking to land a PE gig.

As for your deal experience, not having any LL's is obviously not great, but it's not a fatal flaw either. If you can talk intelligently about the deals and your views on the market, you may still be able to leverage your experience into a buyside gig. From a LevFin background, consider looking into distressed, mezz, and hedge fund type of opportunities. As with any other situation where one tries to break into the buyside from a somewhat disadvantaged background (in your case, lackluster deal experience), the single best thing you can do is amp up your networking game.

Also, if you aren't getting any interviews or traction with networking, have you considered a lateral move within your bank to an M&A or non-sponsors coverage group, if that's a possibility?

11/3/16

Thanks NuckFuts,

Agreed on the CFA, but as my work life is manageable by banking standards I think it's a good call to go for it at this point.

Also agreed that a credit fund would be the most logical next step. On that note have you seen / heard of people moving from credit / distressed funds into PE?

Unfortunately lateralling to m&a is not likely given the circumstances, but moving to a distressed investing group might be in the cards. As a corollary to the above, would you view distressed sell-side experience as more advantageous for PE recruiting than sell side lev fin?

2/2/17

I think distressed vs. lev fin shouldn't really matter in the context of PE recruiting. Your deal experience and industry knowledge may be more relevant, along with how well you network and sell yourself during the interview process.

And I don't see why you wouldn't be able to move from credit/distressed into traditional PE or vice versa, as long as you can show them that you have the relevant skills. This should not be much harder than a typical lateral move from one shop to another. The real answer is that lateral moves in PE are not easy or common to begin with, so all I'm saying is if you cross the typical hurdles that exist for a lateral move, you should be able to do so coming from credit as well as it will only be marginally harder. I have not lateral'd myself and am just speculating here, so interested in others' views as well.

10/28/16

Noting

10/28/16

Hey NuckFuts,

I want to do finance but I'm not sure what type of Finance I want to do. I'm alright at math, but I'd prefer not to be doing complex math problems all day long alone. What I'd like to know from you guys is. What careers paths are the highest paying and worth looking into? Also, should I be looking for an internship as a College Freshman I have no experience so I'm also not sure what to put on my resume. If I want to look for an internship where should I go?

2/2/17

As a college freshman, take on whatever challenging / prestigious internship you can get your hands on, even if unpaid. At this point your goal should be to learn about what you like / don't like, and learn first hand about what it's like to work in difference finance roles. Wealth management is a good place to start as it's easy enough to get an internship as a freshman and while the work itself has nothing to do with IB / PE, you can get a feel for the culture and "feel" of working in a finance office. What you really want to do right now is pad your resume up so that by the time you are a junior applying to someone more selective, you will have demonstrated a serious interest for the industry on your resume.

10/28/16

How did you handle this seemingly psychopathic MD Did you make sure that your work received exposure to other MDs who recognized the value of merit and general attitude? Please explain as I am reasonably sure most groups tend to have these asshole MDs with a strong disposition towards relationship hires, cute analyst chick he wants to bone, etc.

10/31/16
thekid_24:

How did you handle this seemingly psychopathic MD Did you make sure that your work received exposure to other MDs who recognized the value of merit and general attitude? Please explain as I am reasonably sure most groups tend to have these asshole MDs with a strong disposition towards relationship hires, cute analyst chick he wants to bone, etc.

As an analyst there is little you can do in a situation like this other than keep your head down, crank your work out, and try not to piss anyone off. There is a Japanese saying that goes something like "the nail that sticks out gets hammered back in" - this is very true in banking. The thing about psychopathic MD's is that they are very self-centered - i.e. they don't care enough about most analysts to give a damn what happens to them, so if you play it safe and are just another monkey in their eyes, the judgement / bonus decisions will likely be delegated to the VP's who actually worked with you. You have to take their abuse in the chin and brush it off (unless it really crosses a serious line, e.g. sexual harassment and I don't mean just an off-color remark here and there) - that's just how the industry has always operated, and the people who get screwed the most are those who try to turn any personal slight into a moral crusade... it's just not worth it. Suck it up and keep working, the beauty of the analyst sting is that it's meant to last ~2 years so keeping your head down should almost always be a viable strategy.

10/31/16

Thanks, good advice and in general I think this is the best-prescribed path when encountering psychopaths as a subordinate.

10/29/16

NuckFuts, I always wondered how you pick the fund you work at. There is one fund that has reached out to me and that I've developed a close relationship with over the past year due to the mutual friends with their org that I have. However, they are also a 10bn+ sized fund, and I am not sure the people, given their backgrounds, are going to give me the right learning opportunity, - only 1 bb is there and he is the group md. Nobody else under were from eb,bb etc.

How else would you qualify a firm? I know investments and people are the two biggest factors, but it's not like I can judge exactly the trajectory of the fund without really getting hands on with the people working there. So how did you learn about the firms you recruited for.

10/31/16
QatalystV2:

NuckFuts, I always wondered how you pick the fund you work at. There is one fund that has reached out to me and that I've developed a close relationship with over the past year due to the mutual friends with their org that I have. However, they are also a 10bn+ sized fund, and I am not sure the people, given their backgrounds, are going to give me the right learning opportunity, - only 1 bb is there and he is the group md. Nobody else under were from eb,bb etc.

How else would you qualify a firm? I know investments and people are the two biggest factors, but it's not like I can judge exactly the trajectory of the fund without really getting hands on with the people working there. So how did you learn about the firms you recruited for.

I never really approached the PE recruiting game in this light... my options were limited, so rather than try to pick the absolutely best fund, I set minimum criteria and decided to go for the first good offer I had. The risk of getting stuck in banking because you held out for the perfect fund is very real - it's hard to make it out of banking as an associate. Now if the choice is between two or three viable opportunities, it's probably going to come down to intangibles.

You already mentioned investments and people - if the culture is good and the investment style is something you are genuinely interested in, you have little to lose. Coming over from banking to PE was a big learning opportunity in and of itself, and chances are you won't be spending 5+ years in your first PE gig anyway. So practically speaking, the trajectory of the fund is less important than making sure you end up at a place where you will be treated well and will have the chance to learn / grow as a professional.

With all that said, one factor that was very important to me was whether or not the fund had a policy of kicking associates out after 2-3 years. I wanted a place where I at least had a shot of remaining in the industry, as I never saw myself getting an MBA after PE. This turned out to be a good criteria for me, although it may end up limiting your choices.

The important thing is to figure out what matters most to you, and learn to recognize that in an opportunity when you see it. It's vague advice and tough to put to practice in reality, but I think this type of decision making is inherently difficult and highly personal, and therefore it's hard to generalize a framework for it...

10/30/16

Thanks for doing this. I have two questions.

1- Do you think your fund would consider hiring someone doing a 2year analyst stint at a LMM/MM PE firm for associate positions? Or do you guys only hire ex bankers to come in as associates?

2- What was your comp as a first year associate?

10/31/16
takenotes08:

Thanks for doing this. I have two questions.

1- Do you think your fund would consider hiring someone doing a 2year analyst stint at a LMM/MM PE firm for associate positions? Or do you guys only hire ex bankers to come in as associates?

2- What was your comp as a first year associate?

I haven't seen it happen, but in theory it could happen. Our firm has a culture where we prefer to promote rather than hire laterally, so traditionally we have focused on hiring banking analysts.

My cash comp (annualized) was just over $200k my first year in PE. From what I've seen I would categorize the bonus range as being in the 80% - 150% of salary range, which is quite broad as it depends on whether it was an "up" year or "down" year for the fund.

10/31/16

Thanks for doing this.

I am currently doing MSc Finance, and I am wondering what skills I should be focusing on to be best able to go through BB and then buy-side in the end. What skills contributed the most helping you succeed in your career?

How often do PE firms hire outside of the firm, and especially people without IB/buy-side experience? The reason I ask because one of my classmates, which had no previous IB experience, got hired at a PE firm two years ago as an analyst. She studied bachelor in business from a non-target school and worked in a startup firm before joining a EU900m PE firm after talking with the MD, and they hired her immediately. She said she was lucky to land the job. How often does this happen?

2/2/17

Getting into PE from a non-traditional background is hard and does not happen often, but it does happen and nothing is impossible if you work hard and network your ass off.

Investment banking work is not very academically difficult. It basically comes down to having a really good grasp on corporate finance and accounting. The real challenge is maintaining focus, working long hours, developing high attention to detail, and working with assholes under intense time pressure. A lot of this is about your attitude / mentality - in other words, "grit". Develop an insane amount of grit, and you will pull your own weight in banking.

To truly stand out / succeed, you need to develop a higher level sense of awareness. That means always seeing the forest for the trees, or the "big picture". This applies to everything from your deals / projects to the broader economy.

So what do I mean by awareness? Awareness is a habit you develop where you constantly observe the world around you and think about the higher level significance of small, seemingly insignificant facts. Observe the shitty employees at your firm - what small habits/actions do you notice? Observe the most successful people - how do their habits/actions differ from the shitty ones? Constantly make mental notes of things you notice, and make a conscious effort to emulate the successful patterns while destroying your non-desirable habits. At a higher level, get in the habit of skimming headlines and listening to the Economist/WSJ podcasts on your way to work, to give a few examples. Start developing a macroeconomic framework - how do large organizations behave, what broad factors impact their decisions, and how does that apply to your own industry and deals? Being able to articulate well informed opinions on these matters is ultimately what will set you apart from your peers in buyside interviews, assuming your technicals are rock solid.

2/15/17
NuckFuts:

Getting into PE from a non-traditional background is hard and does not happen often, but it does happen and nothing is impossible if you work hard and network your ass off.

Investment banking work is not very academically difficult. It basically comes down to having a really good grasp on corporate finance and accounting. The real challenge is maintaining focus, working long hours, developing high attention to detail, and working with assholes under intense time pressure. A lot of this is about your attitude / mentality - in other words, "grit". Develop an insane amount of grit, and you will pull your own weight in banking.

To truly stand out / succeed, you need to develop a higher level sense of awareness. That means always seeing the forest for the trees, or the "big picture". This applies to everything from your deals / projects to the broader economy.

So what do I mean by awareness? Awareness is a habit you develop where you constantly observe the world around you and think about the higher level significance of small, seemingly insignificant facts. Observe the shitty employees at your firm - what small habits/actions do you notice? Observe the most successful people - how do their habits/actions differ from the shitty ones? Constantly make mental notes of things you notice, and make a conscious effort to emulate the successful patterns while destroying your non-desirable habits. At a higher level, get in the habit of skimming headlines and listening to the Economist/WSJ podcasts on your way to work, to give a few examples. Start developing a macroeconomic framework - how do large organizations behave, what broad factors impact their decisions, and how does that apply to your own industry and deals? Being able to articulate well informed opinions on these matters is ultimately what will set you apart from your peers in buyside interviews, assuming your technicals are rock solid.

Thanks. That is a great response, much different than what I have seen before.
I do believe I have many of the skills you mentioned, but I do not think that will land me an interview or a job. Possibly, if I ever get an IB job, I know that will help me a lot to become a better banker. But so far, getting a high GPA should probably be my first priority, as I believe you won't land many interview with an average GPA, unless you do a lot of networking.

11/2/16

What would be your advice for a college senior whose goal is PE/ corporate development but couldn't end up getting an IB stint right out of college? What would be the other options that might have chances to lateral into an IB role afterwards and should I go do a MSF program?

2/2/17

I don't know about the MSF, to be honest. I don't know anyone who has one.

If your goal is PE, don't give up on banking yet. I know people who broke into banking 1 - 3 years after graduation, it's hard and takes a lot of networking but it's possible and it's your best shot at ever making it into PE.

For corp dev, I know someone who just got a good role coming out of 3 years in equity research. Consulting is also an option. But realistically, an MBA may be your best bet (but you won't get into a top program unless you have a few years of impressive work experience, so it's a bit of a catch 22).

11/3/16

Thank you very much for highly informative post, NuckFuts. May I ask how you or your fund would view different groups in BB differently vs EB? I have a BB SA offer, but am not sure if I should recruit FT for EB to better position myself for PE, which I know I want to do (personality fit as an investor). Is LevFin always the team that HH loves to go for first, or would particular groups not matter as much over deal experience?

11/4/16
VMC16:

Thank you very much for highly informative post, NuckFuts. May I ask how you or your fund would view different groups in BB differently vs EB? I have a BB SA offer, but am not sure if I should recruit FT for EB to better position myself for PE, which I know I want to do (personality fit as an investor). Is LevFin always the team that HH loves to go for first, or would particular groups not matter as much over deal experience?

LevFin is good but I would say M&A or coverage is better if the group has good deal flow... primarily because those roles tend to touch on all aspects of a company's valuation and you still get capital markets exposure, whereas as a product group LevFin is more specialized so it leaves you better suited to mezz / credit opportunities. Best thing to do here when deciding between two groups (assuming you like the culture of both) is see if you can talk to a couple of current analysts and get a feel for where the previous exits have ended up.

12/26/16

Hi @NuckFuts and merry Christmas! You've mentioned knowing how to play politics a few times -- can you talk about how you got that knowledge and provide some examples of someone doing it right vs. doing it wrong?

2/2/17

Excellent question - I have been thinking about this and intend on making a new post on this topic.

Also, props on the avatar. I'm sure Buckley is turning in his grave right now. The documentary on the series of debates between him and Gore Vidal is the single best introduction to the historical context that explains today's America, in my opinion.

12/26/16

Hi,

Thanks for writing this inspiring post, I have read most of the questions and answers above and found them extremely helpful!

I am a student who is going to graduate in May and have already accepted an offer at a leading EB in their M&A group in nyc. I am thinking of doing P&E after banking and have a few questions to ask:

  1. You mentioned that your fund usually hire BB analysts, I was wondering what's the realistic chance of me going into a MM/UMM fund coming from my background and for EB analysts? I am in a non-target school but did study hard and got high gpa.
  2. I was wondering what's the typical career path like in PE when you work as an associate in the industry? If PE doesn't work out and ppl decide to go back to banking, what tier of banks would they typically fall back on? Assuming coming from a MM or a LMM fund.
  3. I am thinking of doing a PE internship before my full time banking job starts in the summer to test if I prefer PE and want to exit into PE or not, I haven't found one yet. Considering the amount of time and energy involved in finding one and doing it for a few months, do you think it's worth it?
  4. What would you recommend me to do/prepare in order to excel as an IB analyst? I have a few months to prepare. And do you think IB and PE are industries where you are reviewed based on meritocracy or not really?

Thank you!!!!

2/2/17
  1. BB versus EB doesn't really matter - if the group is good and you had good deal experience, you would probably get an interview at my shop. The interview matters more than your pedigree once you pass that initial hurdle.
  2. I'd say going back for an MBA is more common than going back to banking... most people who leave banking for PE do so because banking sucks ass. You might make more money in banking but chances are that once you are a 20-something making more than $200k+ a year, you will happily trade an extra $50k or whatever for better quality of life. If the immediate money was that important to you, you probably wouldn't have left banking for PE in the first place.
  3. I know people who have broken into PE from nontraditional backgrounds, even though many on this forum will tell you that this is very rare (it's somewhat rare and difficult, but not impossible). However I don't know a single person who has ever done a PE internship unless it's at a tiny shop. I would say don't waste your time looking for one, if you find one it probably won't be anything like the real thing.
  4. Read 10-Ks of companies your group will be covering, build your own models (pay attention to the details around the capital structure, put your own multiples together, etc). Make sure you have a really good grasp on corporate finance and accounting
2/2/17

Thanks - I appreciate you taking the time out to answer my question! It's very helpful!

I have one follow up question to ask - I understand it's somewhat difficult to advance in mega funds hence associates usually leave after 2 years, is that true? For those who don't want to go back to school for MBA(I won't have that option for personal reasons), what are some of the other options out there? If I just want to stay in P&E for the long term and assume I am at a mega fund, after 2 years, will they let me stay? How likely is that?

Thank you!!

2/3/17

Generally speaking, yes it's difficult to move up in PE. However, not all firms have a 2 and out policy. My shop is >$10bn AUM and we don't kick associates out. This is a question you should ask during the interview process - my shop's policy was a big reason I was excited about the offer,

However, are you getting your MBA currently? That may change things - from my understanding it's harder to break in from an MBA, but the MBAs that do make it are typically on career track anyway. Not sure about that though.

2/3/17

I am not doing my MBA.

But I have 1 masters degree here so I decided that I will not go back to graduate school anymore in the future, well if possible.

Also I had a very non traditional background coming into IB - I did not do my undergraduate degree here in the states, but came back here for masters, worked my ass off, had good technicals, talked well in the interviews and made my interviewers all really like me to get the offer basically. And oh, also luck and referral to get the first round.

I know I may not have the "credentials" which PE seems to love?

2/3/17

Got it - reason I asked is your profile tag says "Other - Business School"...

Regarding your credentials, I think having pedigree is definitely helpful in PE... but the kind of pedigree I'm talking about is coming from the right family (i.e. your dad is a member of the right country club and you went to the right private high school then Ivy school). I don't have any of that either, and neither do many of my colleagues, we just have to work a little harder to prove ourselves worthy. For that reason I think IB is the great equalizer - Goldman Sachs truly does God's work by giving hundreds of young immigrants and middle class kids the opportunity to work their asses off and out-compete the kids who were born with a golden spoon up their butt.

2/5/17

Yes Goldman really did - gave me an interview when I was recruiting this year despite my very non traditional background, it's my fault that I didn't get the offer in the end but they gave me that opportunity! Very grateful for that.

I wanted to ask - do you think it's helpful to reach out to PE guys in those funds I am interested in? Honestly, it's not all about trying to network in advance to get in and I am currently not completely sold on PE yet, I am more interested in learning more about their responsibilities on the job and the culture of those firms they work for - more about trying to figure out if PE is for me. I know they are all very busy and might not have time for me, but I am not sure if it's worth reaching out and connect anyway? I saw some guys from my EB who are in those funds. Also I am aware that recruiting is more about waiting to be contacted by recruiters assuming you are in the right group first.

Thanks again for doing this and I hope you enjoy the super bowl tonight!

2/7/17

I would not say that recruiting is about waiting to receive calls or email blasts from recruiters. Yes that's how many people break into PE, but I know several people who have broken in through proactive networking. You have nothing to lose in reaching out to associates at PE shops, especially if you have some connection to them (same school, same bank, mutual friends, etc).

I suggest you read up on the theory of "the strength of weak ties", developed at Stanford by Mark Granovetter. His research essentially suggests that it's your weak ties (acquaintances, friends-of-friends) rather than your strong ties (your close friends and family) that provide the greatest potential for social (and by extension career) mobility over time. There is some room for debate but this is a very popular theory in sociology.

Simple explanation here: http://www.analytictech.com/networks/weakties.htm

2/7/17

Thank you so much - you give great answers!

I wonder what kind of background do those kids you mentioned that broke in through proactive networking have, like IB MM? Or even not there?

Thanks again!!

2/8/17

If not IB experience, then their experience was in some way related to what the fund invests in. For example, McKinsey consultants going into operationally-focused shop, someone who worked in corporate banking going into a credit shop, or someone with niche industry experience going into a fund that focuses on a technical investment area.

With a non-traditional background, it's easier to go to smaller / MM funds. The big boys are set in their ways and have too many resumes to screen through, but smaller shops will rely more on direct connections and referrals. The key is to have some connection to somebody in the shop who can raise their hand and vouch for you. For example - if you worked an internship and impressed your old boss back in the day, you could meet them for coffee to catch up and ask for advice on your career path. You can casually ask if they know anyone in the industry (you can do some spying on LinkedIn beforehand), and you might get lucky with a referral or two. Even if you've never met anyone at the shop, the referral from an old boss into someone who currently works at the shop could be enough to get your foot in the door. I've seen this happen before, and it's a perfect example of how powerful weak ties can be.

2/9/17

Thanks! But if I have a leading EB name on my resume, will my background still be considered non-traditional? I mean my previous background as I did my undergraduate overseas and then not a target school for my masters here in the U.S

I do not need sponsorship tho.

1/1/17

Firstly, thank you very much for this great resource and answering everyone's questions - very helpful.

For someone that does not come from a distressed background, how would you suggest one start to prep for distressed funds in the most efficient way possible? There aren't a whole lot of distressed PE prep guides out there. Also, do traditional modeling exercises from WSO make the cut?

Thanks!

2/2/17

I have personally reviewed the WSO prep materials like the PE guide and yes, they are absolutely legit. Especially when you consider the pricing of the WSO stuff compared to other wall street prep guides, the WSO guides/models have the highest ROI in my opinion. I would complement them with models from Macabacus (which are free and very detailed, but less explanatory and less helpful if you are jumping in without prior experience).

I'm not aware of any specific distressed guides out there... perhaps that's a niche Patrick @WallStreetOasis.com can fill in the future...

My advice would be to get really familiar with different types of debt, especially in a bankruptcy / restructuring context. For example, read up on DIP loans and how they work in a bankruptcy context. Learn specific terms like "stalking horse" and "fulcrum security" and start piecing together how it all works, as well as the different strategies in distressed debt such as "loan to own". Read up on transactions executed by restructuring groups like Houlihan Lokey, Centerview, Evercore, Lazard, etc and see how they think about things. The nice thing about restructuring deals is that the information is often public (through bankruptcy sites / court dockets maintained by law firms) so while it's not easy, the info is out there.

I'll come back and update my response if I think of any other specific tips... unfortunately the way I learned distressed (and I am not an expert by any means, mind you) was by being thrown into a couple of transactions unexpectedly and seeing them play out.

P.S. I don't know how good these are but a quick Google search yielded a couple of interesting result:
http://www.thecmlink.com/wordpress/wp-content/uplo...

1/2/17

Thanks for doing this thread! Just a quick question on industry knowledge that you mentioned. What kind of industry questions do PE interviewers ask for? Is it more of a broader picture, as in where I see the industry right now and where I think it's going? Or is it more like recent deals? Thanks again!

2/2/17

It's really both... see my answer to Toys-R-Soros above. Being able to articulate whether certain deals make sense within a macro framework shows that you both (a) have knowledge of specific deals and (b) understand the broader trend that's causing firms to behave the way they do. A private investor needs to understand this in order to evaluate how their own investment thesis fits into the broader picture... and ultimately needs to be able to craft this into a story they tell to LPs so they can raise money for new funds, successfully deploy into the best opportunities, then rinse and repeat.

3/16/17

Not sure if you still check this but this is an area of interest for me, would you mind if I PM'd you a quick question? (has to do with breaking in but not from undergrad, from what I'm doing now).

Edit: read above and you answered my question already!

3/17/17

Thanks for the AMA, NuckFuts.

I am a graduating senior at a top 40 non target (in California), with double major in Financial Mathematics and Quantitative Economics. In my freshman and sophomore years (and actually the start of my junior year I had no idea what I wanted to do. I was awake after half of my junior year has passed). Now I have an internship experience in equity research (a non elite boutique at NY) and I'm currently doing remote training & summer internship later with a small boutique at NY. My parents can probably get me internships at CITIC securities IBD (one of the largest group in China), or some companies whose sizes are a little bit smaller. Yes I am an international student.

I have (had) about 3 leadership positions, besides my internship experiences, and recently I just took a part time contract with a large Japanese Energy Consulting firm, although currently I'm only doing some basic work for them. I have had a few friends who got offers from top tier schools to give me advice on my grad school application (MSF, Financial Mathematics, some management programs like Kellogg) and they all gave me good feedbacks. I've had the WSO grad school application expert TNA to evaluate my profile and he said I was on good track (he also picked some schools from the long list I posted) despite the fact that my GPA is slightly below 3.5. I'm aiming for a 730+ GMAT.

I just started networking, since the idea of IB actually just came to me this January. I spent more than 3 years in college and eventually I figured out that IB (more specifically M&A) is the thing I want to do. My school does not have a lot of people in investment banking (<100 people in history). I recently got cold email responses from three gentlemen at Evercore, GS and BNP Paribas. One of them is an alumnus, the other two are just great and warm people.

With that being said, I feel like I still need to improve. May I ask what other suggestions do you have for you please? (I know that banks usually do not recruit a lot of masters. Hence, what are some ways that are gonna increase my stakes to land a job at a BB/EB in the future once I get into grad school? Sorry for the long post.

Thank you very much.

3/17/17
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3/17/17