Does an MBA really provide value for the buy side?

I am in my relatively young career on the buy side as an analyst for an institutional AM. The expectation is of course to obtain a CFA during your first years. Then, to be considered for senior analyst or PM, you need to attend business school at a top 10 school. Right now the MBA just seems like the final hurdle and not something that really provides value (at least law school gives you the chance to take the BAR). Can someone hit me with a dose of reality that it really does aid your transition from a research gatherer to a decision maker? I don't think I could give up a few years of my weekends that could be spent with my family for something that's just a formality (unless the paycheck dangled in front of me could buy me a home in the Hamptons).

And as a follow up question: Is an MBA common across all buy side firms?

 

I'm in a similar position as you with similar expectations. The MBA path has been changing a lot. Before it was very much expected in AM whereas now more people are resisting especially with how poorly certain businesses in AM are doing and an increasing struggle to keep talent in those roles. In my situation the CFA path is expected but the MBA path is very much optional. Fewer people are getting the MBA since it doesn't always add a lot of value to the AM path if you've previously completed the CFA. I could not possibly do a part-time MBA after doing the CFA. If I did do an MBA it would definitely be full-time.

You are right that most Senior Analysts/PM's still seem to have an MBA despite the little value add it provides. Hopefully this changes as more younger people in AM move into PM roles.

 

It always depends on the firm and the country you are in...but... For HF/AM, I would go with the MSF/CFA path...MSF is more scientific and specialized in finance then the MBA. Obv it all depends on the school you're considering.. Hope this helps, DC

DC
 

This. Absolutely.

MBA degrees from marquee institutions are synonymous with prestige. Last time I've checked finance (especially buy-side) is still prestige-heavy no matter how much spillover into the industry comes in as a result of the overhype and circle jerk of tech as the new sexy counter-culture that is "above" prestige. Reality check for all those software developers of the world who drank the kool aid - tech skills only get you so far. You might have the greatest idea on the planet, but it's statistically likelier that they'd rather hear it from the mouth of a GSB grad. That's the harsh reality, and for every million of Facebook/tumblr/Instagram bullshit a la "Dare to dream" there is just a handful of achievers.

The higher you go, the more prestige (read: semi-objective street cred) matters. If your family/parents is/are well known in your industry/city/country, then you are blessed to have prestige handed to you for free. Most people don't have access to this luxury, and therefore have to make up for it by increasing their street cred through other means such as an MBA or prestigious education in general. There are cheaper way to go around this, but only 0.01% of rags to riches occur in reality. It takes massive character AND luck. Unfortunately, often times the latter needs to be significantly more than the former.

 

Here's the breakdown of whether you need an MBA for the buy side:

First, hedge fund vs. traditional asset manager. For hedge funds, an MBA is not necessary and sometimes can hinder your ability to get into the industry. Hedge fund portfolio managers are focused on generating alpha and love to hire analysts who have the same drive. Hedge funds want young, hungry folks who are driven to make money. Getting the MBA/CFA achieve the opposite: they take time and money. As a result, some hedge funds look down on analysts with an MBA or CFA. They think that you should've spent the time to making money through investing rather than doing coursework.

Traditional asset managers, on the other hand, love CFAs and MBAs. Folks with a CFA/MBA come with solid finance foundation and bring prestige. The reason asset managers care is that their clients care. Their clients are either institutional pension funds, endowments, or individual wealth advisers, who are focused on the credentials of their asset managers in addition to the track record.

So having an MBA and CFA helps with marketing. Comparing the 2, I'd say CFA is more important because it's more desired by institutional clients and wealth advisers.

Second, analyst vs. portfolio manager. If you are an analyst, having an MBA matters less. You are not as involved in marketing as the portfolio manager. This is why having an MBA is more important to become the portfolio manager because it gives you credentials to help market the fund and the firm. The MBA also give you soft skills besides the analytics. Having experience presenting and communicating help you build client relationships.

Third, part-time vs. full-time MBA. You learn the same materials, and the difference is in the network you develop. Full-time MBA gives you a broad network and help you transition from one industry to another. Part-time MBA is more focused on getting through the coursework and getting the degree. Since you are already in Asset Management, part-time makes more sense for you. For those who are thinking about jumping to the buy side from outside the industry, you might want to consider the full-time MBA.

Kelvin

 
Here's the breakdown of whether you need an MBA for the buy side:

First, hedge fund vs. traditional asset manager. For hedge funds, an MBA is not necessary and sometimes can hinder your ability to get into the industry. Hedge fund portfolio managers are focused on generating alpha and love to hire analysts who have the same drive. Hedge funds want young, hungry folks who are driven to make money. Getting the MBA/CFA achieve the opposite: they take time and money. As a result, some hedge funds look down on analysts with an MBA or CFA. They think that you should've spent the time to making money through investing rather than doing coursework.

Traditional asset managers, on the other hand, love CFAs and MBAs. Folks with a CFA/MBA come with solid finance foundation and bring prestige. The reason asset managers care is that their clients care. Their clients are either institutional pension funds, endowments, or individual wealth advisers, who are focused on the credentials of their asset managers in addition to the track record.

Totally agree with this. The hedge funds I interviewed with for a post MBA position were all extremely arrogant about it and had the attitude "why did you need a MBA? Good analysts don't need one."

Traditional investment managers all tend to value it or, at worst, have a neutral view of it. At my firm almost all the senior guys have a MBA or JD, though a few of the oldest guys don't since MBAs weren't as prevalent / prestigious prior to the 1970s.

 

If you want to get into AM/ HF / fund management. Don't waste coin or money or time doing an MBA. Spend it on a trading portfolio, and you will get further. I don't really know how to describe my role, but I'd say I'm more on sell side equity analyst. I also do my own trading, which I have been doing for 10 years. Anyway, I am currently doing my CFA for brand recognition. If it wasn't for that purpose, I wouldn't waste the time.

 

Out of curiosity, I just pulled up around 200 Long only PM bios and it seems as though around 3/4 have an MBA. And most who don't have a CFA. To my surprise, there are only a few shops that are dominated by M7 MBA's. An assortment of top 25 seems to be more common.

This would support the notion that MBA is needed at the PM level solely for marketability. Most allocation consultants probably can't differentiate Chicago from UCLA from Emory. So the guy with a top 25 MBA and top quartile track record will often get a mandate over a similar manager with no MBA.

So to the OP, the best advice is probably just to suck it up and get the MBA, either part or full time. That is, if your goal is to make PM. I think too many people on this forum are too focused on getting the next promotion and don't think about 20-30 year career progression.

 

Interesting stuff. Very surprising.

Just keep in mind, most of these PMs would have done an MBA when the cost wasn't 100k+ and when few people were doing MBA. CFA is far cheaper and has similar, if not the same, level of prestige as an MBA these days. When you look at the risk for reward of an MBA, it's just not worth it - especially when CFA can give you the same brand recognition.

 

True, the cost of the MBA is higher than before but the idea that more people are getting the degree is misguided. Around 4K people graduate from M7 schools every year and double that at top 20 schools. For all intents and purposes, MBA programs outside of the top 20-25 don't compete for investing roles and therefore are irrelevant for this topic. So the growth of MBAs at ABC State colleges is moot.

Comparatively, 15k people just became CFA charterholders which is nearly 2x the amount of top 20 MBA graduates. That number will only grow over time and further water down the CFA's prestige.

Note: I have my CFA but am strongly considering going back to school despite clearing 200k/year. Why I'm buzzed/researching this topic at 3 am on a Saturday.

 

I have a CFA and I am doing an MBA at a school that's on the podium (top 3) The two things are strikingly different and should not be compared.

The MBA allows you to reach out to people to change career, something I wouldn't have been able to do. I am learning bugger all in the program and a lot of the students are outright stupid. The only real reason I see for an MBA if you are not a vet or in consulting is to get the MBA alumni network. The money spent is nothing, it's the 2 years of your life you spend on it that's mad. Everyone who did an MBA will value it, and people who did not will question the value of it.

Some hedge funds value the MBA, some don't. It's a mix bag. A lot of the large AM require an MBA.

I have the CFA and it's pretty fucking useless in my industry and in the industry I am trying to get into fyi.

That was a lot of random sentences packed in this post - but you should not buy in the MBA marketing bull shit. You need to really consider whether it makes sense for you or not. For a lot of people it does not. For me it did.

 
Best Response

These threads are always a little misguided. The answer is that the importance and value of an MBA or CFA completely depends on the situation of the individual. An MBA generally isn't going to be worth it for someone already on a good track in HF/AM where it is not required. Alternatively, a CFA is not going to be worth it if you have no other relevant experience in the field and/or work at a shop that doesn't care about it. Having said that, the thing people haven't mentioned about the MBA is the network you develop at a top school that can really help a lot through a career. This again is dependent on what you make of it - some guys get their dream jobs through an alum, others get little use out of it. Is that worth $200k + lost income for 2 years? Who knows, it depends

 

I'm not sure who is lateraling into long-only AM shops without an MBA or previous buyside experience. I personally have never seen it happen. My firm ($500B-$1T aum) hires : 1) MBAs, 2) undergrads who go through a rotational program, 3) experienced hires who are typically senior research analysts on the sellside or at other buyside shops. There is no banking >> AM path without the MBA. Similarly there is no PE/CorpDev/consulting >> AM path without the MBA. It's pretty much that simple. People can debate the expected return of b-school all day long, but there is no denying that it is effectively the only way for people to career switch into this industry. Even then it's hard, but it's at least possible.

Now if you started in AM/HF out of undergrad, that's a different story. That's an extremely cush position because now you can effectively get promoted straight into an analyst role after 4-6 years without ever having to go back to b-school. Those direct promotes are all driving Porche's by the time they're 30, while i'm stuck paying off b-school loans... :(

 
I'm not sure who is lateraling into long-only AM shops without an MBA or previous buyside experience.

My previous firm hired IB analysts with 1-2 years of experience. However, the laterals were viewed similar to new undergrad hires except they received better comp packages to reflect their experience. Generally agree with your post though.

 

jankynoname models_and_bottles

I get that this comment is super old, but I'm curious about this. This is something that my current firm does in terms of hiring people out of IB with slightly better comp packages for the most junior investment research roles.

How many people your firms hired directly out of undergrad into a similar role?

 

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