Q&A: 3rd Year PE Associate (entering MBA)

Prospect in :

-What made you realize you weren't a very good public markets investor?

-Why were you initially leaning HF over PE for buyside recruiting?

-Why was growth equity the fallback when you realized that HFs weren't the right route for you?

-Were you in a coverage or product group? How do you feel that that impacted your buyside recruiting experience?

-Did you plan to recruit buyside before you even began IB or was it something that emerged later on?

I feel like these might be some more general and broad, useful questions/answers to the majority of monkeys

1. I was looking at a combination of long only / long short funds. Around the time I was recruiting, a number of the larger shops shut down and there was a sort of decline, which I think has continued in asset allocation towards HF, with fewer and fewer generating alpha over a long period of time. I spoke to a number of people in the industry and my perspective on those roles really changed quite a bit -- I interacted with a lot of people who had hopped around from fund to fund (at some great places) and it offered a lifestyle and frankly stability level that I didn't think I'd be comfortable with. I also received a good amount of advice from alumni that was pretty negative with regard to investing in equities and trying to make a career out of it, so I'm sure that impacted my thinking to an extent. In terms of realizing I wasn't the strongest public markets investor, I had maintained a paper portfolio for about 3 years, was able to see the calls I made over that time. I think to succeed in one of these roles you need to have extreme conviction in your thesis and price target and have the stomach to see the markets ebb and flow (sometimes significantly) in the short term. I had a few 'buys' on stocks that had some underlying linkage to oil (utilities, airline leasing, etc). In the fall of 2015 oil prices fell through the floor (as did the aforementioned industry stock prices) and I think that was probably the final sign for me.

2. I was ultimately deciding between a few HF offers and the role I ended up pursuing, which was outside of the US. I was not at that time looking for the traditional PE experience, and I had been interested since I was in school in working abroad (studied international relations + history), so the role I took gave me the chance to do that.

3. I guess I should clarify, I moved to a non-US role where very little buyout activity took place and almost all the deal activity is primary capital put into the businesses, not a sort of Palo Alto tech focused growth equity shop. So in that sense more similar to a conventional PE role but without much (and often without any) leverage.

4. I was in a coverage group that did its M&A in house, so in that sense it was a fairly well rounded experience. At GS all the groups do in house M&A, and about half of the coverage groups at MS do as well. I looked at it as the best of both worlds, as we not only got a good understanding of an industry but also had the chance to work on different types of transactions, including financings. While the debt issuances aren't particularly exciting, I had the chance to pitch for and work on a few IPOs, which was quite interesting and fulfilling work.

5. Not at all, and I don't think most of my peers did either. I think those coming from an undergrad finance / business background tend to be more aware of these paths compared to others, for better or for worse. My group didn't have anyone from Wharton, Ross, Stern or any of those programs, so we all came in a bit blind. The 2nd years in our group were extremely helpful as far as recruiting, including providing recruiting materials, making us aware of all the HHs and which HH covered each fund, interview prep, etc.