Hi there,
I'm an analyst in a sector team in an investment bank in London. As everyone, I was looking at private equity exits but I start wondering about hedge funds / tactical opportunities / spécial situations. I guess the ones where the IB skillset would be the most relevant are: long / short, Merger arbitrage and high yield hedge funds. Has anyone gone to HF from IB here? How do you think the skillset is transferable?
Thanks a lot,
Sonper
also interested
Up
I was in IB directly before moving to a HF, but had some markets experience as well.
Just remember that your 2 years or “M&A experience” doesn’t suddenly make you an M&A person or make you a merger arb expert. So I would look broader (including event driven and long/short)
Personally, I’m based in NY but if I was in London I would look to get a job at a fund that invests in continental Europe. So many under-followed companies there relative to the US
Interested as well.
I went from a BB to a $30bn HF - what questions does everyone have?
How did you prepare to showcase your investing passion or whatever you need to get your foot in the door? For private equity it seems that if you have the technical skills you can be ready for most interviews. I feel like every fund has case studies that are very different from each other so its hard to prep for
Every hedge fund is completely different. Everything from interviews, investment decisions and comp.
The "prep" is your time in banking (and PE for some) and knowing how to do different types of analysis well.
Some case studies will be ~1hr long and you'll be expected to have a simple model and maybe one slide - if you're in that situation, I hope you;re comfortable with "back of the envelope" or "cocktail napkin" modeling.
Other's they'll give you a week and expect a full model and book.
How did you prepare the interviews? But also, now that you are there, do you feel your BB hint is of any use?
Absolutely useful. If you don't have technical or modeling skills how are you gonna convince or prove to a PM that you have a good idea? Also where do you think head hunters go first for new HF hires?
Went from BB IBD to value/fundamental-focused L/S HF. The key difference I have found is in IBD you learn how to crunch numbers, but you don’t learn (at least I didn’t) how to “think like an investor” and develop investment theses. In IBD, you are taught to take management/consensus as gospel. The hardest part of the HF job is understanding company/industry fundamentals and thinking about what/how something could happen that is out of line with what consensus or management is saying. The DCF/multiples analyses consume probably 10-15% of my time now at the HF and they are much more “back of the envelope” style than what was expected in IBD. Makes the HF job more interesting, but also a lot harder to do it well - there are a lot of smart people around, and to think otherwise is arrogant.
Another way to think about it is in IBD, other people give you model assumptions (from management, or ER consensus) and you spend 99% of your time plugging that into some DCF/comps templates. On the buyside, your main job is figuring out what the right model assumptions are (i.e. revenue growth, spend, etc) and be able to defend why you are right and why consensus/management is wrong. You spend 90% of your time figuring out what the right revenue growth rate / margins are, and 10% doing a quick DCF/multiples analysis.
This was my experience at least, I’m sure others have had different experiences based on their funds’ particular strategy.
How did you learn/prepare for HF interviews since in IB we don't learn investment thesis creation? Would you say its necessary to go to PE then HF as some funds seem to implicitly require (Tiger Global)? From speaking with older analysts it seems that you learn investing at PE and use that to transfer over to a HF, since our skills are only transferrable to PE as an analyst.
Not necessary at all. While you're working on a deal in IBD, actually use a chunk of your brain and think about the strategic reasons why the deal does or doesn't make sense instead of just plugging and chugging numbers in your model and deck.
When deals get announced, do a mini-case study for yourself and think about the strategic rationale.
Same thing when activist funds announce positions - work and and try to think about it like they did.
If you do all of those things, you'll be a lot further ahead then most, and worse case scenario if you don't get the "almighty buyside job" you'll be a more thoughtful banker than most around.
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