CFA and PE: The Ultimate answer based on performance not prestige

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I have searched through the forum for a while on this topic and everybody says the same thing
"The CFA is worthless for trying to get into PE"
That's perfectly fine and I understand the reasoning behind it, but for us that actually undertook the rigorous(emphasized) CFA journey for motives of personal growth and development and really just wanted to grow our acumen and become better investors, what is the take on the CFA and PE dilemma?

I just took the CFA level II exam in June and have noticed that my post exam investment and financing ideas have improved significantly as well as my job performance. Even so, that now my boss wants me to spear head a project which I came up with (which I attribute the development of the Idea to the CFA curriculum).

Now, I do not work in PE, but would like to some day. Yet for those that actually are in PE and have gone through the CFA program how have your on the job skills and performance improved, have you had an edge over your co-workers due to the implementation body of knowledge that you now posses? Or was it just a waste of your time.

In the end I am talking about performance the true career driving factor, not prestige.

Comments (23)

 
Jun 30, 2010 - 10:31am

NO matter what part of the finance industry one works, the CFA will make a significant difference (other than investment banking, you just need to bull shit) You can built a certain kind of trust with your employer because one cannot bull shit into a passing score on the CFA. Also no matter what part of an investment bank or industry, the CFA teaches you about every aspect of finance. For instance if you are someone with great quant skills but have no understanding of accounting or corporate finance, you could learn a lot. Or an investment banker who wants to jump into Investment management (no pitch books there buddy)

At the end of the day if you look at performance factors, the materials learned on the CFA can teach one to think from many points of view and there are many qualitative material covered, which is usually of concern to partners and VP's at PE firms. So overall it could make a significant difference in your performance, but at the end of the day its up to you to apply the materials. If you ask any successful person in the finance industry or in business, they will tell you yo always be up to date on the latest trends and research. And from my point of view if you don't do such things and only know PE, one can become insignificant or possibly a victim of the Obama administration.

 
Jun 30, 2010 - 10:40am

people shit on cfa cos its not worth the time and money if you want to do pe, compared to other things you could be doing, and not because its "worthless" per se. for one, the stuff you learn is completely different

im happy for you that you found that your prof skills have improved. however, keep in mind that investing and financing knowledge would be helpful in jobs that ARE related to the cfa.

you won't find many pe professionals on this site able to answer your question, simply because there are not many out there at all who have done the cfa, especially not at the more reputable and better performing ones. those who do probably had a somewhat wonkier career path

 
Jun 30, 2010 - 10:54am

Thanks for your posts

zbb could you elaborate on "keep in mind that investing and financing knowledge would be helpful in jobs that ARE related to the cfa"

From what Ive previously understood the industry analysis, company valuation, corporate finance as well as financial statement analysis and the investment decision making taught in the CFA was relevant to PE, could you give me an example of what you mean?

 
Jun 30, 2010 - 11:52am

i almost took the cfa myself, here is my opion after talking to a shit-ton of guys with charter holders:

*no doubt you learn a lot of finance on your way to becoming a charter holder.

*however, the curriculum is obviously skewed towards asset/investment mgmt and securities analysis. only a portion of what you learn is applicable to pe.

*to get an idea of how many charter holders work in pe vs am/im, talk to your local cfa society.

*bottom line, TALK TO THE LOCAL CFA SOCIETY. no random dude on the net can give you knowledge about the program like those guys can.

other than that, i think it is a worthwhile endeavor to take the test for personal development and to increase your financial acumen, and its pretty much necessary if you want a successful career in am/im. but its not a tool to break into pe.

--- man made the money, money never made the man
 
Jun 30, 2010 - 12:32pm

Thanks for the post,

I agree that it is not a tool applicable for breaking into PE, the reality is that when I was in undergrad business I found that after concentrating in finance and reading countless books I barely knew a thing about investing, so I began the program to learn more.

In the end I am hoping to apply to an MBA program in a about 1.5 years of years ( which I think is what will really help me get into PE), hope fully I will have finished the exams by then

In other words my question is how useful would the knowledge I obtained be once I break into PE?

 
Jun 30, 2010 - 12:35pm

The argument isn't that it has absolutely no benefit as much as that you could make better use of the resources you spend acquiring a CFA. The CFA takes a huge amount of time to study for and much of what you learn is not particularly relevant for PE. A charter is certainly a boost to your resume but the time could be better spent networking, kicking butt at your current position, or polishing more relevant skills. 750+ hours is a long time to spend on 1 bullet point of questionable benefit.

 
Jun 30, 2010 - 4:15pm

I guess it makes sense that if there aren't a lot of PE professionals who have the charter, that it won't be as beneficial as it is when you sit down with a firm with a lot of charterholders. They just simply aren't as familiar with the program. I think the material must be highly relevant to PE. I just finished Level III this June, and I cannot imagine a scenario where the material would not be useful. PE is an asset management job, no matter how you look at it. Sure, there's more deal based knowledge than your typical mutual fund, but the bottom line is investors are still making decisions based on informed forecasts about the direction of markets and the prospects for profitability of a company under various capital structures. That's really what the CFA is all about.

OK - so not 100% of the curriculum will be applicable. You probably aren't going to be writing IPS for people or applying Porter's 5. But there is no job out there which employs 100% of the curriculum. Most jobs in finance are specialized, to a point where maybe you encounter 25% of the curriculum on a regular basis. That's still a shitload of knowledge that you will have as a charterholder, that the next guy will be struggling to learn. But if it's not recognized, it's not recognized, I guess. Nothing we can do about that except try to get more charterholders into PE.

 
Jun 30, 2010 - 4:41pm

jankynoname:
I guess it makes sense that if there aren't a lot of PE professionals who have the charter, that it won't be as beneficial as it is when you sit down with a firm with a lot of charterholders. They just simply aren't as familiar with the program. I think the material must be highly relevant to PE. I just finished Level III this June, and I cannot imagine a scenario where the material would not be useful. PE is an asset management job, no matter how you look at it. Sure, there's more deal based knowledge than your typical mutual fund, but the bottom line is investors are still making decisions based on informed forecasts about the direction of markets and the prospects for profitability of a company under various capital structures. That's really what the CFA is all about.

OK - so not 100% of the curriculum will be applicable. You probably aren't going to be writing IPS for people or applying Porter's 5. But there is no job out there which employs 100% of the curriculum. Most jobs in finance are specialized, to a point where maybe you encounter 25% of the curriculum on a regular basis. That's still a shitload of knowledge that you will have as a charterholder, that the next guy will be struggling to learn. But if it's not recognized, it's not recognized, I guess. Nothing we can do about that except try to get more charterholders into PE.

To me it seems like a very valid point, but I guess I'm biased

 
Jun 30, 2010 - 5:52pm

My father is a long-time MD in PE and has his CFA designation and has told me how beneficial he has found it to be. He took it when he started his career in investments at a large insurance company, perhaps the aforementioned "wonkier" path, but bear in mind, conventions change in 25 years; 2 years IB-->2 years PE-->MBA was not always the norm. While I cannot disagree that the significant time commitment may be better spent if you are already on the IB-->PE path, the CFA is a quality designation that proves one's ability to be analytical, a serious plus for a PE job where you are doing significant due diligence.

 
Jun 30, 2010 - 7:07pm

AM/IM/HF are all public equity managers vs. private equity (the name says it all) There are no significant difference between the two, except certain strategies, but everyone uses financial statements, corporate finance, derivatives, equity and fixed income. The economics part covers a lot that one learns in an MBA program, such as game theory and porters 5 forces.

We all agree the CFA is a good thing and its better to have it than not to, but why waste all the time studying while you could be networking especially from a PE perspective? Well I am surprised no one brought this up yet, but once you become chartered you are part of one of the biggest networks in the financial arena worldwide, especially in emerging markets and middle east (i.e. sovereign wealth funds) You get exclusive access to events, conferences and local societies (i.e. NYSSA) I got invitations to the most recent Investment management conferences in Seattle(on high frequency) and Boston(MIT). CFA institute has an exclusive jobs site, which is pretty sick. I was looking through it once and saw hedge fund jobs in Bermuda and the Cayman Islands ($100K + and $300K+)

Now tell me, which network or university can give you all of this? And don't forget CFA is becoming much more intertwined with schools such as Harvard and MIT. And to the poster, the CFA will help you in PE if you apply the material and if you are worried about wasting time studying instead of networking, don't worry, because you will have a worldwide network once you get chartered.

 
Jun 30, 2010 - 7:35pm

non-target:
AM/IM/HF are all public equity managers vs. private equity (the name says it all) There are no significant difference between the two, except certain strategies, but everyone uses financial statements, corporate finance, derivatives, equity and fixed income. The economics part covers a lot that one learns in an MBA program, such as game theory and porters 5 forces.

We all agree the CFA is a good thing and its better to have it than not to, but why waste all the time studying while you could be networking especially from a PE perspective? Well I am surprised no one brought this up yet, but once you become chartered you are part of one of the biggest networks in the financial arena worldwide, especially in emerging markets and middle east (i.e. sovereign wealth funds) You get exclusive access to events, conferences and local societies (i.e. NYSSA) I got invitations to the most recent Investment management conferences in Seattle(on high frequency) and Boston(MIT). CFA institute has an exclusive jobs site, which is pretty sick. I was looking through it once and saw hedge fund jobs in Bermuda and the Cayman Islands ($100K + and $300K+)

Now tell me, which network or university can give you all of this? And don't forget CFA is becoming much more intertwined with schools such as Harvard and MIT. And to the poster, the CFA will help you in PE if you apply the material and if you are worried about wasting time studying instead of networking, don't worry, because you will have a worldwide network once you get chartered.

network totally passed me by, good call
 
Jun 30, 2010 - 7:50pm

non-target:
We all agree the CFA is a good thing and its better to have it than not to, but why waste all the time studying while you could be networking especially from a PE perspective? Well I am surprised no one brought this up yet, but once you become chartered you are part of one of the biggest networks in the financial arena worldwide, especially in emerging markets and middle east (i.e. sovereign wealth funds)

well thats the thing. IF you have a charter, then it means something. charteholders are typically in their 30s and 40s, with many yrs of relevant exp. not to mention it was easier for them to find employment and get qualifying exp.

but if you are still a cfa level 2 candidate with no exp, no way you're getting a 100k+ base salary.

and again, the cfa generally doesnt help with breaking into pe. pe firms will almost always recruit a top mba over a great cfa candidate. i know that's a pretty sweeping generalization, but i have yet to see otherwise.

--- man made the money, money never made the man
 
Jun 30, 2010 - 7:18pm

If you have the time to study for it and are committed then get it. It cannot hurt. That being said, there are probably more efficient uses of your time. The careers which give you the best opportunity to break into PE also tend to be careers where you have very little free time. Taking that precious free time to hold yourself up in a corner studying probably isn't the best thing to do.

If you are working at an insurance company doing 45 hours a week with dreams of private equity dancing in your head then I think getting a CFA is a good way to legitimize your resume. Most people who have realistic chances of breaking into PE simply do not have the time to put into the test.

To anyone who says it is just a bullet point, I beg to differ. Putting Johnny Appleseed, CFA on the top of your resume is pretty powerful.

 
Jul 13, 2015 - 9:43am

If you are working at an insurance company doing 45 hours a week with dreams of private equity dancing in your head then I think getting a CFA is a good way to legitimize your resume. Most people who have realistic chances of breaking into PE simply do not have the time to put into the test.

That's me!

 
Jul 18, 2015 - 3:46pm

Not sure why you bubbled up an extremely old thread to add no value, but the CFA designation got me into TMT banking. So no complaints here.

More on topic: LP's are really into governance and ethics due to concern of damaging reputation for their shareholders/constituents, so I could see them looking favorably on the designation due to the high code of ethics required to maintain the designation. They are very familiar with the designation since most of the public equity fund managers they are interviewing have it.

 
Jun 30, 2010 - 8:39pm

Yea we all accept that the CFA charter is not that helpful for getting into PE, and we know that a top MBA is a much better bet. But at least in my opinion if you undertake the CFA just to have a bullet on your resume you are pretty much irrational, for me my commitment to the grade is about personal development and achievement.

On that note I am not just looking to break into a job or a career and be average, my goal is to excel once I am there and every edge I can get is worth it even if I have to make large sacrifices, In my opinion most people are driven by more than just money and that's what i'm trying to get at.

Once in PE will the charter make you a better professional? Never mind how one gets there

 
Jul 1, 2010 - 9:01am

It all depends on how you apply the material. Remember the CFA covers almost everything in Finance (other than material from the FRM) and if you don't forget the material then once you get above an Associate or VP level in PE, you could definitely become a better professional. I say this because when I was interning at a PE shop there was an overseas deal going on in which the the higher level guys had to decide on hedging currency risk, country risk and risks of all sorts, as well as doing macro economic analysis. You learn some of these in an MBA program, but it is covered much more in depth on the CFA, across three levels. Once again being a better professional is up to you, because you could just study the material to exploit the charter and forget about it, or actually apply it. As someone once told me, to be successful you always need to be up to date on the latest research, trends and knowing something others don't. I strongly believe with the CFA knowledge this is made a lot easier, especially given you have access to CFA Institute research and financial analysis from some of the well respected practitioners (i.e HF/AM/IM/PE) and academics from top universities (i.e H/W/MIT/S)

 
Sep 30, 2010 - 11:00am

I have new data regarding the CFA in PE.

I am a year out of college and have passed the level 2 examination. I was recommended for a PE interview by my current boss who is CIO of the pension system I currently work at. When I interviewed with the shop they did not pay that much attention to the credential as some did not know exactly what it ment so I explained it to them the knowledge it brought and the dedication and work ethic necessary to achieve it more importantly how it would add value to their organization.

In the end I got an offer, I don't know whether it was due to the CFA, my referral, my drive and extracurricular activities, my young age relative to some of my achievements or my sub par 3.15 GPA. But what I know is that they were impressed by my knowledge and my grasp of finance at such an early age and I would say that the CFA contributed greatly to that.

While I am at it I also want to thank every one in this board for providing knowledge and answering the questions which helped me land this job.

 
Sep 30, 2010 - 12:03pm
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