How to break into the buyside post-MBA

nickparsenuvia's picture
Rank: Chimp | banana points 14

I think that the established route to the buyside out of undergrad is pretty clear - IB analyst for 2 years and you will be strongly considered by many top firms.

What about for a top tier MBA student without previous banking, ER, or buyside experience? Is investment banking still the best path to the buyside? Specifically, to get into a value oriented hedge fund? If not, what is?

I think that the vast majority of people who successfully land PE and HF jobs directly out of business school have pre-mba finance experience.

Thanks for your opinions.

-Nick

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Comments (58)

Mar 10, 2011

There have been numerous threads on this (search "Post-MBA PE" or something to that effect).

Long/short of it is, it's very difficult to break in, even coming from H/S/W. Some of the guys who have buyside experience are having trouble landing jobs in PE/HF (anecdotal evidence). It's not to say it can't be done (breaking in) but know that it will require 1) a lot of networking, and 2) self-taught finance knowledge.

Mar 10, 2011

Thanks for your reply. I definitely understand that I have an uphill battle, but I think that the first step is to figure out the best path of attack and that is what i need help with. I thought that IB would be the answer, but the more I read, the more i understand that the exit ops for an associate are not as easy as for an analyst. I am aware that for PE its especially hard, but given that I want to go to a value oriented hedge fund, I am wondering if IB is still my best shot to get in. I'm also considering equity research as a way in. Are there any other paths that I am missing? Which path do you think is best?

Mar 10, 2011

I don't quite understand this myth that IB is the way to the buy side. I know very, very few ex-bankers who manage money. You can get a job on the buy side right out of b-school (I did it), it's not as difficult as you might think.

Are you interested the value investing part or the hedge fund part of "value oriented hedge fund?" If it's the value investing part, expand your horizons to the long-only world. As an analyst coming out of b-school you'd be doing the exact same work whether you were long-only or at a hedge fund. I highlight what I see are the key considerations here:

http://www.lifeonthebuyside.com/should-i-go-hedge-...
Is your MBA focused on investing or finance? If not, it's going to be more difficult w/o prior experience. Sell-side research would be the best way to go in that scenario.

Hope this helps.

Mar 10, 2011

John Q, I really appreciate the advice. It is the value investing part that is most important to me. I really like the idea of employing relative value strategies and activist investing strategies, which is why I was focusing more on hedge funds, but long-only seems interesting as well.

I'm getting my MBA from a top school focused on accounting and finance. I am doing a bulge bracket IB summer internship this summer. I would love to hear about how you broke into the buy side and any other advice you have for me.

Thanks,
Nick

Mar 10, 2011

If you want to work on the buyside you should recruit for the buyside. It's not easy, but out of a top 5 MBA program it is definitely doable. I had the same doubts coming back to b-school, and for a while was convinced that I needed to do a few years of indentured servitude in banking. Within a few weeks at school I realized that was a horrible idea, and I would hate myself for life if I wasted this chance to transition to the buyside, and I decided to commit 100% to recruiting for buyside/sellside ER. Worked well so far (got a couple internship offers), although I'm just a 1st yr so we'll see how FT recruiting goes. Truth be told, it seems like the ppl with the most success have been either former consultants, or obviously former ER people. The IBers are having more trouble.

In short, banking recruiting and buyside recruiting are mutually exclusive (due to time constraints), so I would not recommend recruiting for IB unless you really see yourself enjoying it as a potential long-term career.

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Mar 10, 2011

Interesting points Jankynoname. If you end up in sell-side ER, do you feel you could transition to either buy-side ER, Investment Management, or hedge fund? How difficult is it to make those kinds of transitions? Is it easier than if you are coming from an IB associate role?

I'm surprised that banking analysts are heavily recruited for these hedge fund jobs, while banking associates are not, especially given that you learn much of the same stuff whether you are an analyst or an associate.

Mar 10, 2011

Well, let's be clear about "buyside". Most people on this board would consider buyside as PE/HF and probably not investment management. That said, I think that recruiting for investment management is pretty robust at the top schools.

If you look at schools like H/S/W and some of the other finance-y ones, I believe that they usually assemble a resume book (PE/VC) and ship it out to all the major funds (or any reputable fund that is looking to hire post-MBAs). The hiring people at those firms will go through the resumes and pick people they want to interview. I don't think there's a formal process like banking/consulting (someone can correct me if Im wrong?).

I've seen HFs pick up some associates from IBD before (couple of guys I knew went to DE Shaw). Part of the reason why HFs don't recruit associates is 1) associates are probably on the older side, and 2) When you're an associate at a bank, most assume that you are on "the track" (associate --> VP --> SVP --> MD). While I acknowledge that many people will move around to different jobs in his/her lifetime, I think many people in banking still view post-MBA roles as the career.

Mar 10, 2011

I think Nick was clear about what he meant by "buy side" - http://www.investopedia.com/terms/b/buyside.asp. HF and AM are much more alike than PE/HF.

I'm glad to hear you are interested in value investing, because it will serve you well in your career. You don't need to confine your search to just hedge funds for value and activism, though ... check out Bruce Berkowitz and his recent dealings with JOE. It will make you think again about limiting your search to hedge funds.

Mar 10, 2011

Herserendipty, I know that at my school, you are absolutely right...there is a resume book that goes out, and many top firms come to do a presentation on campus. The issue that most candidates face is that the vast majority of the buyside and long-only investment management jobs go to people who did banking, research, or were on the buyside before school.

Do you guys think that post-MBA, sell-side equity research is a better way to transition into a hedge fund than IB?

Mar 10, 2011

jqbuyside, fair point about fairholme's involvement in JOE. The core skill set that I want to learn can be picked up in investment management or at a hedge fund. Given the recruiting relationships that my school has on the IM side (and lack thereof on the hedge fund side IMO) I will probably focus my efforts 110% on equity research (buy-side preferred, and sell side as a backup (which can hopefully eventually lead to a buy-side opportunity). I will keep looking at your blog. Great idea to create that given the lack of good information on the space.

Mar 10, 2011
nickparsenuvia:

Given the recruiting relationships that my school has on the IM side (and lack thereof on the hedge fund side IMO) I will probably focus my efforts 110% on equity research (buy-side preferred, and sell side as a backup (which can hopefully eventually lead to a buy-side opportunity).

Yes and Yes on your focus. Try for buy side with sell side as a backup. As I've noted before, sell side exit is to the buy side. I can count the handful of ex-bankers I know in the business, but I long ago lost track of all the sell-siders now on the buy side.

I'm surprised your school has a lack of alumni in the space ... if you want to send me a message offline with your school info I might be able to point you in the right direction.

Mar 10, 2011

nickp - I think you're thinking about it the right way. My understanding is that the transition from sellside ER to the buyside (long-only or HF) is much more common then from IB associate to buyside. PE is obviously a different story, but who cares about PE? I think especially if you stick with a sellside ER role long enough to become a ranked analyst, you have a lot of leverage and ability to jump to the buyside and start managing a sector portfolio right away. That said, the conventional wisdom seems to be that if you want to be on the buyside post-MBA it's easiest to start on the buyside.

As for the IB analysts v. associates, I don't know. My guess is that IB analysts are viewed basically as just a talented group of people with good fundamentals in finance who don't necessarily know what they want to do for a long-term career, so buyside shops don't hesitate to consider them if they appear dedicated to doing IM post-MBA. On the other hand, someone who has done an associate stint is probably viewed as less focused. And their skillset would be more transactions-based and less research focused. What they're really looking for is people who can do meaningful research, and come up with insights that are different from consensus.

Mar 10, 2011

Thanks for all of the advice guys. One follow up questions on sellside equity research...how long does it take if you come in post-MBA before you are an analyst? How long before you start being ranked?

much appreciated,
Nick

Mar 10, 2011

Lead analysts on the sell side are roughly equivalent to PMs on the buy side. Expect a good 5-10 years experience minimum.

Once you are a lead analyst, that's when you make it into the II ranking vote. You get ranked when PMs and analysts on the buy side vote for you b/c your research is good ... most ranked analysts have been in the business 10+ years.

Mar 11, 2011

Ross @ UMich?

The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.

Mar 11, 2011

Do your grades not stack up for the top 5 schools? Just wondering why you're ruling them out as too hard already. And if that's the case, I don't think Sloan would be that much easier to get into for you either.

Is your employer making you get a MBA or are you trying to use it as a springboard for switching?

I'm still not entirely sure what your question is here. If you're asking what other choices would give you an opportunity to land in a mutual fund, outside the top 5, then I'd personally cut it off at Marshall (around top 20) in order to stay competitive for the type of jobs you're looking for.

Might want to take a look at the school profiles and see which schools tend to place better into the type of firm you're looking to join upon graduation.

Mar 11, 2011

for Asset Management (I understand that is your target industry), MIT is not a non-top 5. Actually, i would say that MIT is a top 5 for asset management.

(should be wharton, MIT, chicago, HBS and columbia in no particular order).

Other strong schools are Tuck and Stern. I would stay away from Haas for anything finance related.

Mar 11, 2011

Thanks for all of your advice! I did not write about my intention clearly. Two of my main reasons for MBA are to move to big cities (or nearby areas) and land a decent job there. The company does not intend to push me into MBA program.

My GPA was 3.9/4.0 when I was in a state university in the mid-west. I don't have gmat score yet and plan to get one in August this year. My GMAT target is about 720. I passed CFA level 2 last year and hopefully can get my charter this year.

My major weakness are that: 1. I am not U.S citizen so that my English proficiency is inferior to native applicants and I will fall into international student pool; 2. The firm that I work for is neither well known nor an industry leader; 3. The state university that I were in could not even compete with state universities in the coasts rank-wise.

I thought I have some chance to get into top 30 MBA programs if I can effectively pack myself, but I am not sure about how competitive I am if my target school is top 5 finance MBA programs. That is why I am asking about decent programs other than top 5.

I appreciate your help and advice!

Mar 11, 2011

Does anyone have more ideas? Thanks.

Mar 11, 2011

Instead of going to a Top 10 where buyside will be a tough slog for 2 years, spend 2-3 months going really hard after GMAT. If you have a 3.9 (even from a State U), you should be able to crack 750 and target for 770. With a 770 and 3.9 try your lucks in Early Admit and R1 and things might just work out at places like Columbia, Chicago or even Wharton.

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Mar 11, 2011

I saw your interest in Boston's MBA programs and understand your uneasiness in starting the process. I looked at similar programs in NYC and Boston recently and came across Babson College in Boston. It offers a very competitive MBA program and has great potential to land you a great job in the city environment you are looking for! Good luck!

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Mar 11, 2011

Anyone?

Mar 11, 2011

A friend of mine did PE and I believe it was 5 rounds of nterviews , not sure if that included the take home case study.

It sounded like no joke. I would be interested to hear if HF recruiting is similar.

Mar 11, 2011

Are you a first year analyst? shit i didnt know things were already starting

Mar 11, 2011

There's no way he's a 1st year. He wouldn't even have four months of experience yet.

Mar 11, 2011

no...third year analyst

Mar 11, 2011

In terms of how many interview rounds before a final decision was made, one place I interviewed at put me through two phone screens and then two separate on-site superdays. My current shop put me through a phone screen, a dinner, a superday, another phone screen, and another dinner (in that order).

I interviewed with four PE shops total, but didn't make it to final rounds with the other two. You're absolutely right though, when you're in the midst of banking and have to go through ridiculously long (and sometimes challenging) interview processes, it can really wear you down. Keep your head up though, it's so worth it when you do get the offer.

Mar 11, 2011

Yeah I guess the process is quite long in terms of rounds per firm and total interviews. My initial question was how many different firms did you interview with before landing an offer? I've heard friends just interview and one firm and get it, and then others who interviewed at 10+....

Mar 11, 2011

**Disclaimer: I have no idea how accurate any of this is.

Mar 11, 2011
Mar 11, 2011

what type of opportunity in the buy-side are you talking about?

Mar 11, 2011

HF internships into full-time.

Mar 11, 2011

how many time do people on this board have to say the same thing over and over again. if you want to spend a life in ops then yes go straight to a hedge fund from undergrad.

Virtually all positions in HFs from recent graduates are for ops (unless you have a phd in maths/econs etc.)

Mar 11, 2011
tallon123:

how many time do people on this board have to say the same thing over and over again. if you want to spend a life in ops then yes go straight to a hedge fund from undergrad.

Virtually all positions in HFs from recent graduates are for ops (unless you have a phd in maths/econs etc.)

ive actually never seen anybody on this board say that

Mar 11, 2011

you said virtually all; I know two guys from my school who got jobs doing analysis. So I guess I'm ignoring "virtually all" positions in HF from recent grads. I'm shooting for a non-ops HF position straight from undergrad.

My question is, if I can do this, should I? What would be the pros and cons?

Mar 11, 2011

The HF & PE managers that I know usually have backgrounds in banking, but say that it was a necessary evil during their time. More 'experienced' people (their POV, and not necessarily that word) generally go to the buy-side.

That said, I don't know what roles undergrads get. Funds are generally considered to be more accommodating with their staff (less bureaucracy being one reason), but I suspect that it's aberrant to go to a PM type role from, say, back office, even at a fund (unless it's portfolio risk/modeling).

Mar 11, 2011

anyone have any insight?

Mar 11, 2011

1. It really won't change anything.

2. What BBs moved to 3+year programs outside of GS? MS tried it, analysts pushed back, MS got rid of it, and that's the last that I heard of it.

3. "With two years IBD experience before going through recruiting I would imagine you'd be a much stronger candidate but are second years looked down upon vs. first years in the process?"

One thing to note - a second year going through recruiting will have 1+ years of experience, not 2 years of experience. And yes, at some firms, second years are looked down upon because the assumption is that you messed up your first year (mostly megafunds and firms with very structured junior roles). On the other hand, some other firms prefer analysts with more experience. I wouldn't skip recruiting first year; every person that I know who did that has regretted it, though YMMV.

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Mar 11, 2011

I know RBC has implemented this strategy. Not sure how it will affect anything.

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Mar 11, 2011

Also JPM

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Mar 11, 2011

Deutsche Bank now has 3 year contract

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Mar 11, 2011

Even if buyside firms know you are on a 3 year contract, they would still assume you struck out during recruiting the first time if you waited until your second year to go through recruiting?

Mar 11, 2011

Since when do these firms have 3 year analyst programs? Can somebody prove this via sources? The only true 3 year program I know of is Centerview

Float like a butterfly, sting like the bee.

Mar 11, 2011

bump

Mar 11, 2011

If you're a top analyst in a decent group, you'll at least get looks from the bigger funds. It's very competitive and most of the slots go to the top GS/MS/BX etc. kids, but you're not locked out if it if you perform well. IMO the most important thing to do is the work hard and get the senior people in your group to bat for you.

As far as being a career banker goes, it's completely up to you. A lot of people are burnt out after their analyst stints and simply want nothing else to do with banking. If you can stomach working in the industry afterward, then there's nothing wrong with trying to climb up the ladder and it seems as though a lot of banks (GS and JPM especially) have tried to encourage that recently. Hours on the buyside (at the associate level) can range from a lot better, to somewhat worse. I would say that the average buyside associate works slightly less than the average banking associate. Certain shops (the megafunds come to mind), tend to have hours that are similar to banking.

Banking will always be a rough job, lifestyle-wise, and while senior people usually aren't in the office as much, they can expect to travel a lot more. It's also pretty tough to get promoted the higher up you go, with major bottlenecks at the analyst-associate level and the VP-director level. I've known people that lateral to other shops when they get passed up for a promotion.

Finally, B-School isn't necessary unless you want to switch careers. All of the MDs I know that started out as analysts skipped it. It's also very difficult to break into PE from b-school if you don't have prior PE experience, so just going from a BB -> HBS won't really help much.

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Mar 11, 2011
Slash-Finance:

If you're a top analyst in a decent group, you'll at least get looks from the bigger funds. It's very competitive and most of the slots go to the top GS/MS/BX etc. kids, but you're not locked out if it if you perform well. IMO the most important thing to do is the work hard and get the senior people in your group to bat for you.

As far as being a career banker goes, it's completely up to you. A lot of people are burnt out after their analyst stints and simply want nothing else to do with banking. If you can stomach working in the industry afterward, then there's nothing wrong with trying to climb up the ladder and it seems as though a lot of banks (GS and JPM especially) have tried to encourage that recently. Hours on the buyside (at the associate level) can range from a lot better, to somewhat worse. I would say that the average buyside associate works slightly less than the average banking associate. Certain shops (the megafunds come to mind), tend to have hours that are similar to banking.

Banking will always be a rough job, lifestyle-wise, and while senior people usually aren't in the office as much, they can expect to travel a lot more. It's also pretty tough to get promoted the higher up you go, with major bottlenecks at the analyst-associate level and the VP-director level. I've known people that lateral to other shops when they get passed up for a promotion.

Finally, B-School isn't necessary unless you want to switch careers. All of the MDs I know that started out as analysts skipped it. It's also very difficult to break into PE from b-school if you don't have prior PE experience, so just going from a BB -> HBS won't really help much.

Thanks I appreciate all of your advice. Now does the same go for HF recruiting? So like you said, I understand that more spots are filled by the guys at top groups in GS/MS etc., but what about if I want to get into a L/S fund or something of the equivalent down the road? To me, it seems that their recruiting is a bit more informal but I am not too sure.

Mar 11, 2011

Top analyst matters way less than top school and GPA, since you're not ranked until after you get your jobs and your associates and VPs usually say positive things if you need a reference as long as you're not terrible. Unfair but true

Mar 11, 2011
wso_user:

Top analyst matters way less than top school and GPA, since you're not ranked until after you get your jobs and your associates and VPs usually say positive things if you need a reference as long as you're not terrible. Unfair but true

Top school matters even if you have already made it to a BB, like in my case? I am a non-target (albeit not a terrible non-target) but that did not stop me from getting superdays and an offer. Why would this matter after the fact? Doesn't really make sense.

Mar 11, 2011

Heavily group dependent as well. There are groups with legacies that break the conventional wisdom of banks. Actually, most buyside shops target groups, not banks. Groups that are known for having great analysts will get at least second wave looks from places that otherwise don't really look at analysts from that bank.

And yeah, GPA in particular matters. Lots of places have hard GPA cutoffs, and while warm introductions from a senior banker with a relationship can get you over that hurdle, that's a lot of political capital to spend on just landing an interview.