Moving from HF to PE

Hi all,

I went to a hedge fund out of ug, trading special sits and events (usually the equity side) for 1-2 yrs now. Had no IB SA gigs, and have mostly done transactional modeling for risk arb strats and fundamental modeling for a l/s sidebook. Would any PE funds give me a second look, or does my lack of a conventional path hurt me?

 

Have you talked to headhunters to get an idea? Take 30 minutes and reach out to a few. They might try to push you to other HFs, but you'll have an idea...

I think it also will depend on the shop. You have done some of the core skills and may think like an investor (rather than a process oriented banker). Lots of PE shops may want the process type in which case they may go banker, some may not and want an investor (in which case, advantage you).

I hope others with some actual direct PE/HF experience can jump in here and opine on this since they will be more informed about the process than I will (I only really see high level stuff).

Good Luck

PS - why the switch?

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

I'm really looking to have a more involved investment process and a longer term investment outlook, I don't like looking at 10-15 deals a week, and I'd rather gain an intimate knowledge of the companies I invest in. I'm also looking at L/S and activist shops, but they tend to want me more for execution and trading desk jobs.

 

but are you currently doing equity analysis or credit work for the convert book? PE shops will want to hire mainly former ibd analysts who can do fundamental work and kick-ass models.

 

it is possible but extremely rare for a number of reasons. if you work at a hedge fund, you will tend to become a less polished person, because people skills really don't matter as much as in private equity. moreover, you will not develop deal-making or deal process skills at a hedge fund. you can probably do it, but I think the inertia is strongly against you.

 

The best reason I could think of was because you wanted to be more involved in improving and operating companies rather than just investing in them. With the exception of activists, HFs usually don't get very involved with the companies they invest in, and the value of activist involvement is debatable.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 

because in PE all you do is putting in numbers that get you the best IRR based on what your "model" came out to be. And majority of your work is doing due diligence and looking at trending analysis and also get involved with lawyers and accountants about useless shit. How you truely "value" a company does not matter because chances are your senior guys are going to lowball it to get the "best price" anyways (or have the banks to lowball it for you)

 

A big issue is the concept of working on "transactions"-most hedge funds won't give you exposure to how to structure an acquisition and all of the attendent documentation and details.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 

so basically PE firms never look for people to help with evaluating businesses/industries; they leave that to senior management and only hire people to plug models and as ricqles said... "get involved with lawyers and accountants and useless shit"? that is very transaction oriented work, i don't see how thats much more fulfilling than IBD. other than better hours.

 

pe is more fulfilling because

1) better hours (deal dependent, sometimes you might work 100 hr/ week if your deal is closing) 2) less bs work - this is HUGE because the worst part about an analyst program is having to format the ppt and change the font on something at 2 am AFTER you printed all the books. Also shit like WGL, due diligence data dump/formatting, call log, creating graphs or getting logos while presentation help isnt help are going to occupy 70% of your time. 3) responsibility - as a junior banker you probably dont get the chance to speak up, but at the pe associate position, this is where you can really shine if you do well (assuming in a MM, not megas where they see you as just another excel monkey doing 90 hr / week again). But of course, if you suck...

Essentially, at the associate level, you do the same thing as a banker would do but with less mindless BS that will make you want to quit right away

 

PE funds look for people with IBD experience because the type of work you do in banking and in PE is very similar - researching the industry, building operational and LBO models, due diligence, executing of transactions, power point slides for internal committee meetings. Essentially you are working on the same M&A transaction but just from another side. The key for them is strong modelling skills and M&A/Debt/Equity deal experience that illustrates what you learned. I am not sure you get that in HF if you give recommendations but don't execute transactions for majority or significant minority stakes.

cubiclecrowd.com blog.cubiclecrowd.com
 
monkeyc:
what about activist funds? seems like that reduces the transaction knowledge gap

this makes no sense

making a "deal" in a hedge fund sense means clicking buy on a computer screen. buying 6% of a public company or whatever the threshold is to make a filing and yell at the management is an entirely different consideration and process than buying 100% of a company

 

People on this board talk about activist funds a lot. In my experience there are very few pure activist funds, and many of those that do exist are basically small-cap greenmailers. Much more common are value-oriented or distressed funds that are sometimes activist. In either case, there's a big difference between buying a big stake in a company and saying "put yourself up for sale >$x/share" and structuring and executing a deal to actually make that acquisition happen.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 

I did small PE pre-mba and now l/s equity. Depending on your HF experience, if you love the market then I think PE is going to be more boring, more project management type activities, and more political/less meritocratic. If you do concentrated LT investing, maybe less different. I think the PE skill-set definitely has more career/mgt/entrepreneurial optionality to it. I personally prefer HF...just feels like playing with money, and PE is one step closer to a real job.

 

HF work is definitely not the beaten path into PE, but if you perform well at a top HF, you will be viewed as more than intellectually capable of doing PE associate work. At that point, it's a matter of finding a firm that is a good cultural fit that will have a good associate training program to get you up to speed on the details of actual deal work.

One of our associates recently came from a top HF and he is one of the top performers--extremely sharp and well-respected by people senior to him. At the associate level, it is less important (not to say it's NOT important) to have a ton of deal experience than it is to be viewed as a highly analytically capable candidate. That's why McKinsey and Bain consultants with no deal experience get hired into PE.

to change gear slightly -- how about top IB -> top HF -> MBA -> PE. would you be at a serious disadvantage applying for post mba PE if you'd gone to a maverick, och ziff, lone pine, perry, etc instead of to a pe firm pre MBA? which strategies / types of funds would make you a more or less competitive candidate for top PE spots down the road?

 

To the first question, HF out of college to PE I think is very doable. Probably doesn't happen that much because you don't see people wanting to go that direction, its usually the opposite of ex-PE analysts wanting to go to hedge funds. I think the hedge fun to MBA would be at a disadvantage compared to someone who went PE to MBA back to PE. By that point, actual skills PE skills would trump the hedge fund skills. If they went to Lone Pine (which as far as I know never hires analysts after 2 year programs) maybe it would be different.

 

Look at people currently employed in the position you want - do any of their backgrounds resemble yours?

MBA would help, but I question your modeling skills. Maybe you need to do banking first?

Getting into megacap PE fund is hard for anyone, unless they're Wharton + top tier banking. You're not getting into one of the best funds in the world from a FoF role. You need to find comparable roles and transition slowly, but even then the KKRs and Blackstones of the world are a stretch.

You need to tone down your expectations. At this point, PE in general appears to be a stretch for you.

 

BAAM is very different to PE. I guess if you were younger maybe, but FT? I'm gonna say it would be a very tough move. I'd go with MBA, your background is very different. DontMakeMeShortYou made a good point on the modeling...

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
 

Hello DontMakeMeShortYou and SonnyZH,

Thanks for your inputs. Yup, I suspected I was setting my expectations a little too high. You are right in saying that I don't have IB financial modelling skills and that I don't have a background similar to those going to PE via the standard track.

Which is why I thought of the MBA transition method or through FoF within the company itself.

Oh well, back to dealing with reality. Perhaps I'll move around the FoF side of trading. More client facing roles that way.

 

Nijikon,

Unfortunately I think this would be a very difficult transition for you. I've never met another PE guy that had worked at a hedge fund, though they may be out there. It may simply be a function that people at hedge funds rarely even consider switching to PE. However, the world of PE is entirely transaction oriented. Quant skills and market understanding mean almost nothing in PE. Based on your post, it seems that what you really bring to the table is that you're really smart. The problem is that there are tons of really smart people gunning for these positions that also have relevant experience. You'd be at a huge disadvantage right from the start. I recommend you look into alternative career paths that enable you to leverage your experience and success to-date.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 
CompBanker:

Nijikon,

Unfortunately I think this would be a very difficult transition for you. I've never met another PE guy that had worked at a hedge fund, though they may be out there. It may simply be a function that people at hedge funds rarely even consider switching to PE. However, the world of PE is entirely transaction oriented. Quant skills and market understanding mean almost nothing in PE. Based on your post, it seems that what you really bring to the table is that you're really smart. The problem is that there are tons of really smart people gunning for these positions that also have relevant experience. You'd be at a huge disadvantage right from the start. I recommend you look into alternative career paths that enable you to leverage your experience and success to-date.

I have seen some former fundamental / value HF analysts make the move over to PE, but certainly no one that worked in quant roles. Agree that the expectations are set a bit too high here, it will take some time to make this transition.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

Nihil magnam id dignissimos est. Aut voluptatibus ipsa et sunt officiis sapiente.

Voluptatum autem dicta et in voluptates doloremque quia. Qui labore velit saepe natus sunt. Praesentium quidem et necessitatibus animi et et eum.

Cum qui qui sequi eum rerum. Quidem fugiat voluptatem est sed architecto.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 

Officiis et quaerat et esse suscipit dolorem est. Ut et rerum inventore nostrum et rerum nesciunt.

Quis blanditiis impedit aperiam unde neque officiis possimus. Commodi debitis optio facere sint. Et eius et ad cupiditate. Fuga aut temporibus architecto est laudantium. Quibusdam recusandae quis voluptatem velit sit quisquam.

Illo eos voluptatem reprehenderit ut et eveniet sunt omnis. Hic ea molestias delectus. Aspernatur veritatis ut aut fuga tenetur consequuntur molestias.

 

Dolore consequatur labore suscipit necessitatibus. Ex velit ratione nostrum asperiores velit totam. Odio ut velit cumque. Rerum dolor quaerat nobis animi mollitia eos reiciendis et.

Voluptate veritatis deserunt ullam officia amet cum fuga sint. Ipsa voluptas et hic totam tempora provident. Vel autem hic quasi.

Repellendus nihil id quaerat animi ut architecto. Eum sed voluptas ex veniam. Recusandae sit itaque dignissimos. Voluptatem porro in provident voluptate expedita consequatur et consectetur. Non laudantium vero enim. Eum et sunt quas cum aliquam impedit.

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]

Career Advancement Opportunities

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Warburg Pincus 99.0%
  • Blackstone Group 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

March 2024 Private Equity

  • Principal (9) $653
  • Director/MD (21) $586
  • Vice President (92) $362
  • 3rd+ Year Associate (89) $280
  • 2nd Year Associate (204) $268
  • 1st Year Associate (386) $229
  • 3rd+ Year Analyst (28) $157
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (313) $59
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
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
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...”