Q&A: Non-finance major --> BB IB --> Director at $5B+ Multi-strat HF (in 6 years)

It's been a slow week and I'm not going away for Christmas so Q&A time. Some background: Engineering major at an engineering-focused school in the Midwest during the crisis (graduated 2011) IBs only recruited for back and middle office positions Got a gig in capital markets at BB bank in NY (2 years) Moved internally to IB (2 years) Recruited to portfolio team in an industry-focused HF as Analyst Promoted to Senior Analyst and then Director At this point I am responsible for coverage on a couple sub-sectors, help an MD with a few positions where we have significant exposure, and keep abreast of credit markets (where opportunities are currently limited)

 

Thanks for doing this. Did you come from a target/semi-target or non-target undergrad? Knowing this would make a whole lot of difference. If you came from a non-target, what did you do to differentiate yourself to break into a Hedge Fund. In other words, what made you stand out from the crowd?

 

I get in between 7:30am and 8:15am. We have a daily AM meeting at 8:15am where the whole portfolio team (analysts, senior analysts, directors, MDs, PMs) sits down and figures out whats interesting etc.

The day after that is a mix of: Reading the news, Updating models, Talking to external research analysts/traders, Pitches/sit-downs with team members on specific ideas, Investor calls

I'm out of the office office 20-25 days a year for work: a mix of conferences, management team meetings, due diligence trips, investor meetings

Slow market days are boring because we need an active market to inspire us. During earnings season you stay till 6-6:30pm, but out at 5pm otherwise.

I currently make between $400-$500 (but obviously super dependent on fund performance). The base is just $150

 

What factors do you attribute to your success as an investor and how do you recommend an aspiring HF analyst prepare for a career in this industry? Thanks for the response.

"Truth is like poetry. And most people fucking hate poetry."
 
Best Response

Ha to call it a success would be a stretch. I would need to do well consistently (in terms of coming up with ideas) for at least 5 years before I start thinking in those terms.

We have hired kids directly from college (parents know senior mgmt or PM hired them from his alma mater), but I would advise working on the sellside in a front office role. Gives you a wider view of the world and you make boatloads of connections (my prior colleagues are now spread across the industry).

Another thing is to remember that NOTHING you learn in the industry is unimportant. Yes, IG loans is boring but you probably understand large company funding better than anyone. Yes, operations at WF in Charlotte or wherever sucks, but maybe you will be a bank investor one day. You really hate doing that telecom industry update because there are no deals, but 5 years later its a super hot field for whatever reason.

Don't be that a-hole who is so desperate to move up that she forgets that EVERY role has something of great value. My greatest value add on many days is tidbits of info I picked up doing something I didn't enjoy 5 years ago.

 

Hey, thank you so much for doing this! I am in a similar position (non target West Coast govenment major with some experience but now NY middle office- client facing (it's a weird role and I can definitely PM you for anonymity)) but I was wondering what steps did you take to go from back to front office in your IB role internally?

 

I was never back office. Got hired directly into capital markets (which is different at different banks). I was in a great team for learning but bad for recruiting so moved to traditional IB to get that buyside gig.

Lots of people from middle office did get hired into capital markets and banking though: 1) Be willing to lose 1-2 years 2) Be willing to work in a "shitty" group 3) Harass people constantly... banks rarely fire people for that

 

I also have a non-finance background - BSc- and was wondering if you could talk a little bit more about how you got into your first job in Capital Markets. What was your strategy to "sell" your engineering degree? Thanks in advance for answering my question.

"Drill, Baby, Drill" - Sarah Palin
 

So, unclear if this helpful.

Basically I got a risk super day interview from the on-campus process. When I went up to NY, there was all sorts of commotion and they didn't have any slots so I ended up having lunch with an alum in the capital markets side of IB. At that point, I had literally 0 idea what that was.

I think he did ECM and he got me into a capital markets super day. I mainly remember saying I don't mind working long hours and love modeling.

 

It was a pretty traditional process from banking. I had 3-4 recruiters that I kept in touch with and they had my profile. Told them I was looking for roles with 3-5 years experience and was willing to do credit/equity or both.

I focused on bringing in a mix of credit (both corporate and asset-backed), and the more M&A/equity focused experience in banking. I was lucky to work at a large BB where I got a lot of breadth and worked across many groups.

I interviewed at a lot of shops (everything from traditional PE to long/short equity), including some that been my clients in capital markets. After a couple PE interviews, I decided I didn't want to deal with the focus it required. Overall, I lost a lot of time by not focusing early

I narrowed in on two kinds of roles: 1. Distressed Credit shops that are willing to be more hands-on (actually deal with the company in case their investment goes sideways and it becomes equity) 2. Multi-strat funds that were more industry focused but worked across the capital stack

I wish I had prepared for the distressed interviews a little bit more because I only made it past one of the phone screens. And even that interview didn't go well for whatever reason. I think this kind of fund was more focused on legal docs etc and I wanted something more market facing. Luckily I do work on a couple distressed situations now, and they're a lot of work (especially reading credit agreements, amendments, follow legal proceedings, etc.)

Did much better talking to multi-strat funds. I got interviews in funds that focused in the following industries: industrials, infrastructure, financials, tech. In hindsight, I think I enjoyed these processes more because there was a much greater variety in the kinds of people who worked in multi-strat (CLO traders, equity research analysts, bankers, etc).

 

What general advice do you have for a freshmen (at a public school target Mich/Berkeley/UVA) who wants to work in the industry not only in a FO role but eventually work at a HF. Are there any things I could be doing now to improve my chances for an eventual exit to a HF without B-school (trying to limit my already sizable loan amount). I’m assuming landing such a gig right out of school would be very unlikely even from a target? Thanks!

 

I mean I’m sure it’s possible to land such a gig, but the kids we hire from college are at a distinct disadvantage because their viewpoint is shaped solely by this one experience. So for your long term career, I would advise against it.

As to what you can do, of course everyone say networking and what not but I didn’t even know I wanted to do finance until late in my junior year. I never interned in finance. What I did do was maintain a good GPA and that gets me interviews to this date

 

I mean this is too broad a question for me to provide any valuable insight. So many different kinds of people can succeed at a HF. I don't know why people are so desperate to get in right out of college.

I just met an analyst recently, at a competing fund. I think he was like 40... SUPER SMART. He basically owned me during the conversation, but was nice about it. That was his first HF gig, he was in AM before that.

So like maybe just learn about whatever you're into and things will work out

 

What is your view of the value in hiring quants into the fundamental space? With the rise of alternative data sources, it seems like more and more fundamental funds are at least looking at hiring quants to help with non-traditional data sets. Is that something that your team has considered?

I've heard that funds have been doing this but haven't seen too many job postings or anything on this.

 

Good question!

We have actually considered that... in fact given I'm the most CS-savvy person on the team, I have worked with a very good guy in our IT team to allow us to work with alternative data in the RE space (think beacon data or satellites)

Some industries (like retail, leisure, tech) have lots of alt data flowing and its literally impossible to trade those stocks without that data. My friends at other funds just get from third party providers and don't really do a lot of stuff on top of it.

I think that will change very soon... more alt data means less dependence on excel (UI-driven analysis) and more work on all sorts of regressions (and other analysis) running on top of this data. Of course lots of the old school fundamental guys are not big fans of this and so expect pushback

On job postings, think about it. If we decided to hire someone, more likely someone in-house steps up (me or the IT guy for example). Imagine some external quant hotshot comes in and then says "Oh my all your processes are so antiquated"... that's gonna result in her being fired in 6 months.

But should see more of these roles definitely. I know lots of friends (from when I was on the sellside) who did quant stuff and now they all have jobs on the buyside so clearly there are roles

 

Makes sense, thanks! It honestly surprises me a bit that there's more willingness that there isn't more of an inclination for outside hiring. While some quants might be assholes about antiquated processes, I think it should be easy to find someone who has an understanding that technology isn't first and foremost at a fundamental shop. Interesting to hear this perspective though.

 

1) Huge impact. Every interview I went to I had some guy from GS/MS there. Even people who I knew sucked got great interviews. I was at a very solid BB and always felt left behind. You can make it up by playing the recruiter game though - they are usually stupid recent grads from fluff schools that only read your resume to make sure you check the boxes. I literally could not tell you how stupid they are because it would take a whole day

2) Probably better to be aware of the news etc. I did go through the vault guide but never really helped. Doing like a case study a month on your own time can’t hurt

 

Not OP but I'll bite on this one. I think what he means is that sell side equity research generally have somewhat standardized processes and ways of evaluating companies. Buyside, especially hedge funds, will generally try to take a more differentiated approach, which requires a willingness to look at both alternative data and alternative ways of interpreting data.

 

Equity research is restricted by public/easy-to-source information. Often this means they switch off their brains and revert to whatever management has told them. This is the number one weakness of sellside analysts: too much trust in what the company says (via press releases, earnings calls, etc.)

Sometimes they are also too caught up in "modeling inputs" instead of just looking at the bigger picture.

I start every conversation assuming management is a lying POS (4 years in banking will do that to you) and go from there.

 

Since I was at one of the larger BBs, the capital markets side of the business had about 20 distinct teams. DCM was particularly hyper-specialized so there were lots of 10-15 person groups.

I was in one of these groups focusing on esoteric structured product origination. We worked with the power, financials and industrials IBD groups.

I thought capital markets was super cool (obviously biased) because we all sat on a large trading floor and I could learn from all the other groups. Since structured land is a little unique we had our own intense 100+ page decks and spent a lot of time with the CFO’s team. Less so CEO.

The main downside was the recruiters only connected with people in IBD and basically thought everyone in capital markets was a DCM dimwit (which many were, but definitely not all). Not sure if I can blame them, they have so little time.

 

Where did people end up?

Many like me made the move to traditional IBD. No one I know lost a year so they moved as third year analysts. Couple of the guys are still there and just made VP.

Lots of them ended at credit focused shops ranging from boring LO to true HFs.

Non-buyside, one or two moved to markets to like CLO trading. At least 4-5 people went to business school and now work in tech or generic corporate roles. Everyone seems to be employed and making decent $

 

Hi roversam, There's something about DCM that pick my interest but don't know why, I haven't started learning on the industry yet (also I am a non-finance degree), maybe because you my country is full in debt.

1, You as an engineer background, did you use some study material to get the basics at first or did you just learn by doing the job?

2, About keeping with the news, I was wondering where do you get it from (I mean do you watch mainstream media news like CNN, BBC, etc or is it better more professional journals like WSJ, The economist, FT) and what do you keep an eye for as relevant to the DCM industry.

 

Appreciate you offering this AMA...my question for you is did you pivot from cap markets to traditional banking to get better buyside looks or just because you wanted to? Did you think it would have been possible to get to the buyside straight from cap markets? Currently on a BB cap markets team myself looking to get into a HF and contemplating whether it's realistic to shoot for the buyside straight from my current role. Thanks in advance!

 

Well I had to move because learning in capital markets stop very soon. I'm not kidding, the VP and I were doing basically the same work (only he got to travel a lot more). But I could have stayed on (as many people did) and just continued making $$. The main reason I moved to banking was so that I could jump to the buyside, and didn't want to take the jobs that were being offered to me by the recruiters.

It is definitely possible to move directly from Capital Markets to the buyside... depends on whether the recruiter considers you banking or DCM, because that makes a big difference.

Very hard to get traditional long/short from capital markets... basically have to move to banking. Lev Fin (and structured finance) people got into credit funds fairly easily. Some PE hiring as well ( project finance, infrastructure, distressed) from more esoteric groups

 

Firstly, thank you for taking the time to do an AMA.

1) Resources you found helpful in developing your knowledge in finance/investing I.e Books, documentaries, website's (WSO ofc.)

2) What's your process of coming up with a trade idea/developing a thesis?

3) If you had your time again, would you consider going straight to a HF after college or doing your time in IB again?

Thanks again!

Remember, the grass is always greener on the otherside because it's fertilized with bullshit.
 

1) I actually read a lot of the popular finance books when I was in college. Just pulled up my Amazon: Liar's Poker, A Random Walk Down Wall Street, Fooled by Randomness, When Genius Failed (a personal fav. since back then I thought I was super smart), Smartest Guys in the Room, Barbarians at the Gate, The New Paradigm (by Soros), A bunch of books on the financial crisis, etc.

Not sure how much they helped, but definitely got me excited about finance

I didn't go to a target school so I wasn't familiar with the Vault guide or WSO or any other online resources. But I was just generally aware about the world

2) Too broad of a question. I basically try to follow any name I have looked at in the past and see what's going on with it. Also try to pick up peripheral names every few months or so to keep expanding my universe

3) No. I have great network because of IB. I SHOULD have moved earlier that's for sure given 2013-2015 were generally good years for the buyside (markets UP), but trying to look forward.

Also we pay the college hires way less (not sure if the case everywhere else)

 

How are analysts from top EBs (PJT / EVR / LAZ, etc.) viewed compared to analysts from GS and MS when it comes to getting first rounds for traditional fundamental L/S equity funds?

 

I wouldn't group PJT in with EVR and LAZ given its smaller size and less robust brand name, but based on conversations with friends/alums from my school, I'd guess that analysts from EBs like EVR and LAZ are viewed as being on par with their counterparts from GS and MS.

 

Hey roversam,

Thanks for doing this. I joined a L/S hedgefund out of undergrad. I was wondering what the investment horizon of your fund's positions is.

Furthermore, I wanted to know how your fund measures your contributions when you were an analyst (including financial performance measures and more qualitative measures). What did it take to get promoted to senior analyst and director? How do they assess leadership potential at early stages? Seems super impressive that you managed to reach that position in two years.

 

Nice. Congrats on getting that out of school. How long you been there? Do you feel like you're compensated fairly relative to hires from outside?

Huge range in time horizons. Literally some trades are less than 1 day and some have been traded around for about 5 years. The longer ones are often names we love, or positions we're stuck holding because its way too illiquid.

The way our firm works, there are four levels of analyst that work for the PM: analysts (recent grads / new hires), senior analysts, Directors (manage multiple positions), MD. I did NOT understand this completely when I signed the offer for an analyst role.

An MD is basically someone that has full control of a part of the book. The PM flexes the MD's book who then give Directors some autonomy and so on. Thus, The MD's performance has more specific line item level attribution, and below that it's more qualitative although of course people are watching your ideas.

Anyway a few months after being there, I spoke to a couple of the guys and expressed my displeasure at being only an analyst, since I wasn't a new grad and brought a lot of experience/maturity to the team. They pushed my case and helped me get promoted pretty quick

At that point, I dove in and tried to get as many names in the portfolio. It took a little while, but I listened to the kinds of ideas that the PM was into and then pitched them constantly. As I got more confident, the seniors got more comfortable with me and I gained more responsibility.

I think my breadth of knowledge and general comfort across multiple products made it easier for me

 

Been there for about half a year. Not sure how much better an associate (after 2 years at GS/MS/etc) is at the job compared to me, but I am happy with what I am being paid, since all-in, it is higher than any IB job out of undergrad. Also the job itself is a target destination, with a lot of very qualified applicants, so I don't really have much room to complain, since there are other smart people who want the job.

How many positions are in your book, on average?

 

We are a multi-strat shop so not restricted by asset type or time horizon. We do believe in some high-level themes though, a couple of examples below:

1) There is value in legacy structured product, because nobody wants to do the work eg. a couple months ago a broker hit us up asking for a bid on a pre-crisis Synthetic CDO mezz tranche. The CDO referenced 4 CMBS tranches of differing seniority. And in each CMBS there were 7-8 loans. At this point I pulled together the basic data (CDO remits, CMBS remits, CMBS servicer reports from Trepp, list of all properties) and figured based on some simple math that we would never come close to the price talk that had been indicated. So, I just had an approximate price in mind and moved on... also learned a little bit about those 4 CMBS deals.

Probably have to look at 15-20 of these before you find one you like. But these are smaller $ tickets so not impossible to pull the trigger

2) Complex capital structures lead to opportunities We can use CZR as a generic example (although obviously that was a HUGE deal and all of Wall Street was on top of that) of something that was a complete mess, lots of different seniorities/securities and asset sub-pockets. But essentially something like that (maybe smaller in size so not a lot of people are looking at it), hopefully with a lawsuit in there that scares away most investors. In these cases, if we see value the goal would be to become a major stakeholder in the clean-up process whether that's getting involved in the debt or equity.

Maybe something that ultimately results in a deal like GSO is doing here with Hovnanian (this has been in the news obviously): http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Njg2MDQ0fENo…

These investments often involve positions in 4-5 different securities simultaneously, eat up a lot of time and resources and require a LOT of reading. But the upside is the ability to invest large sums ($100M+) and generate multi-year double-digit IRRs

 

Viability of multi-strat, sector focused funds?

I haven't been able to wrap my mind around why that isn't more of a thing with HFs. Like let's take the Telecom sector - with the same fundamental analysis, one could decide to invest in ANY security along the capital structure.

Currently at a sector focused equity l/s fund, and practically every time I try and parlay my FI knowledge I get shut down in investment committee.

 

Honestly there should be more, because as you note the fundamental analysis is already done so it's a matter of applying the same knowledge. At a minimum, your equity position can be influenced by following things like CDS spreads, debt covenants etc.

I think the issue is actually unrelated to the investing... it's a fundraising problem. Institutions want to be able to bucket things clearly and not provide PMs with huge leeway. Happy to be corrected, but I don't know if there is a ton of go-anywhere type money lying around. Easier to pitch a beta-neutral l/s or distressed debt or wtv

 

Adipisci non labore consequatur sint sunt veritatis. Aut mollitia rerum cumque quia saepe amet. Quis omnis nostrum sed.

In et nesciunt voluptas et odit sed minus natus. Qui qui quos fugit suscipit recusandae. Totam quibusdam vel numquam possimus alias. Amet nihil quo earum et.

Rerum sit porro doloremque non sequi blanditiis. Tempore quam sit tempore neque temporibus repellat ipsum. Autem nihil quo ab eius expedita est. Maiores eos voluptatibus dolores natus dignissimos molestiae dicta ipsum. Perferendis placeat placeat impedit dolores quisquam et corporis. Nisi corporis excepturi reiciendis quidem.

Rerum facere unde accusantium alias sit voluptatum. Voluptatibus ut eius aut. Quis aut in et quod commodi. Quo quaerat rerum enim rerum est.

 

Ut enim sint mollitia quo enim nisi nostrum. Natus ut cumque eum rem provident omnis enim. Vero maiores eum quia similique qui.

Natus eius veritatis repellendus dolores. In qui maxime quos nobis. Ab soluta error qui reprehenderit.

Odit eos expedita voluptatem dolorem officiis harum. Eos natus est consequatur inventore aliquid illo consectetur.

Repellat dolores est eum harum et qui et molestiae. Iure rem ipsam corporis voluptas. Vero expedita voluptas aliquid eos quasi. Fuga doloremque aut vitae aut repudiandae in odit soluta. Animi neque est qui eligendi velit et. Qui ratione mollitia voluptatum consequatur dolor.

Career Advancement Opportunities

March 2024 Hedge Fund

  • Point72 98.9%
  • D.E. Shaw 97.9%
  • Magnetar Capital 96.8%
  • Citadel Investment Group 95.8%
  • AQR Capital Management 94.7%

Overall Employee Satisfaction

March 2024 Hedge Fund

  • Magnetar Capital 98.9%
  • D.E. Shaw 97.8%
  • Blackstone Group 96.8%
  • Two Sigma Investments 95.7%
  • Citadel Investment Group 94.6%

Professional Growth Opportunities

March 2024 Hedge Fund

  • AQR Capital Management 99.0%
  • Point72 97.9%
  • D.E. Shaw 96.9%
  • Citadel Investment Group 95.8%
  • Magnetar Capital 94.8%

Total Avg Compensation

March 2024 Hedge Fund

  • Portfolio Manager (9) $1,648
  • Vice President (23) $474
  • Director/MD (12) $423
  • NA (6) $322
  • 3rd+ Year Associate (24) $287
  • Manager (4) $282
  • Engineer/Quant (71) $274
  • 2nd Year Associate (30) $251
  • 1st Year Associate (73) $190
  • Analysts (225) $179
  • Intern/Summer Associate (22) $131
  • Junior Trader (5) $102
  • Intern/Summer Analyst (249) $85
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Betsy Massar's picture
Betsy Massar
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
dosk17's picture
dosk17
98.9
5
GameTheory's picture
GameTheory
98.9
6
Secyh62's picture
Secyh62
98.9
7
CompBanker's picture
CompBanker
98.9
8
kanon's picture
kanon
98.9
9
pudding's picture
pudding
98.8
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”