How would you pull it off?

Let's take it for granted that transitioning from being an IBD associate to a hedge fund is enormously difficult. The odds are way against it, and I think we can all agree on that point.

The question is, if you're willing to put in the work necessary, how do you actually pull it off? Step 1 would seem to be (as it usually is) networking, but in IBD you don't really interact with HF clients at all, so is this just back to the drawing board of semi-cold reach outs like the undergrads do to get into IBD?

Step 2 would theoretically be building your knowledge base, but what does that entail? Everyone and their mother has probably read Buffett, Marks, etc..., so what else can you do to differentiate? BB banks prohibit trading individual stocks these days, so you can't exactly build a personal trading record.

And what do interviews at HFs typically look like anyway? Obviously it is way less standardized, but is the gist of it three pillars of fit, stock pitch, and prove your investment philosophy fits the fund?

Really curious to hear perspectives here, especially from anyone that has actually pulled this off.

Comments (17)

Mar 25, 2016

I think you're right in saying that it will be incredibly difficult. HFs hire IBD 2nd/3rd year analysts (a number of my friends made this jump), as a second year associate you're too expensive for them to hire while having no experience in their industry. I would say reach out to headhunters and see what they can find.
In regards to your last point, search WSO for "hedge fund interview Guide".

Good luck!

Mar 27, 2016

be willing to take a (base) pay cut?

Mar 28, 2016

if you can't make the transition straight to HF, maybe parlay your deal experience into a PE job. Tons of PE guys will transition to HF later and at least you have a story. For what it's worth, I know 2-3 associates that transitioned straight to HF, although this was generally within their first year.

Mar 28, 2016
JackandDaniels:

if you can't make the transition straight to HF, maybe parlay your deal experience into a PE job. Tons of PE guys will transition to HF later and at least you have a story. For what it's worth, I know 2-3 associates that transitioned straight to HF, although this was generally within their first year.

Interesting, I suppose going to PE first does make sense in some ways. For the associates you know that went straight to HF, do you happen to know if they did it through headhunters or via their own networking? Also, did they have any relevant pre-associate experience?

SearedSalmon:

I think you're right in saying that it will be incredibly difficult. HFs hire IBD 2nd/3rd year analysts (a number of my friends made this jump), as a second year associate you're too expensive for them to hire while having no experience in their industry. I would say reach out to headhunters and see what they can find.
In regards to your last point, search WSO for "hedge fund interview Guide".

Good luck!

Thanks! I think I'm pretty comfortable with the idea that I'd have to take a base pay cut, this is more of a long-term play. I'm pretty young for an associate anyway so it's less of an issue than it might be for someone that had already done a substantial amount of time in the workforce pre-MBA.

Mar 29, 2016

Both headhunters. One did Associate IBD --> PE --> HF. The other was IBD Analyst --> IBD Associate --> HF

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Mar 29, 2016

I'm curious why people seem to think the pay cut is so dramatic - using some high level numbers, let's assume as a first-year IBD associate you make $150k base and $100k bonus for $250k all in. Maybe second year you approach $300k all in.

Conversely, wouldn't a job with a HF likely pay a signing bonus plus a salary, plus a bonus? Even if you assume $125k bsae (discount to IBD), a $50k signing bonus (in line with what IBD pays MBA associates), then you only need a bonus of 1x base to get to roughly flat in terms of total comp, which feels like a pretty reasonable bonus expectation in a "normal" year where the fund does alright. Am I missing something (i.e., just wrong on my assumption of a signing bonus), or are my numbers somehow off?

Mar 29, 2016

^ You're wrong on the signing bonus assumption, but of course I can't speak for every HF.

Also, you won't be picky as an associate IBD. Even those who have made the move, most are going to small shops because they can't compete for the tier 1 funds. Usually means you take a slight pay cut but shouldn't be a meaningful one unless the HF really blows.

Mar 29, 2016

Go to business school and make the career move. At HSW, many students successfully switch careers to IM after graduation without IM work experience before business school.

Mar 29, 2016

Never heard of a signing bonus at a HF from banking. Also take into account that depending on when you leave, you may be leaving a pretty solid bonus on the table from IBD BC at best you'll get a pro-rated bonus for year-end. It won't be until the second year where you can lap and get on equal footing.

Also $125k base is not conservative @ a HF for entry level. Closer to $100k and generally base is non-negotiable. The rationale is that nobody works at a HF for a base salary... you do it to make 2-3x on your bonus, which again is dependent on your performance / fund's performance.

Definitely not out of the realm of possibilities to make $150k in year 1 depending on when you leave, which would be a big cut to $250-300k... especially when you consider upside to $300k is largely performance related. Obviously, every situation is different but my point is that it's almost always going to be a pay cut in year 1. Magnitude depends on timing / fund structure.

    • 1
Mar 29, 2016
JackandDaniels:

Never heard of a signing bonus at a HF from banking. Also take into account that depending on when you leave, you may be leaving a pretty solid bonus on the table from IBD BC at best you'll get a pro-rated bonus for year-end. It won't be until the second year where you can lap and get on equal footing.

Also $125k base is not conservative @ a HF for entry level. Closer to $100k and generally base is non-negotiable. The rationale is that nobody works at a HF for a base salary... you do it to make 2-3x on your bonus, which again is dependent on your performance / fund's performance.

Definitely not out of the realm of possibilities to make $150k in year 1 depending on when you leave, which would be a big cut to $250-300k... especially when you consider upside to $300k is largely performance related. Obviously, every situation is different but my point is that it's almost always going to be a pay cut in year 1. Magnitude depends on timing / fund structure.

Yeah I think this makes sense. Speaking only for myself, A1 was over 250 total comp, and I'd expect A2 to be solidly in excess of 300 based on numbers I've heard (probably closer to 325 I would think, unless my reputation submarines compared to what it was last year). So again, I am pretty aware that there would be a pay cut, but I think of this as more of a long-term play anyway (by which I mean I think the work sounds more interesting in the long-term - my guess is that on a risk-adjusted basis the pay is probably better in IBD but there is obviously that pot of gold at the end of the rainbow in HF if everything breaks right and active management isn't actually dead).

From the responses, it seems like the highest percentage play is to do three things - network, contact a headhunter, and download an interview guide.

I guess my other question would be what I can be doing to build skills otherwise. I'd assume it would just be researching random stocks and posting ideas to get feedback, since I can't actually trade in a personal account. I know about seekingalpha (although I'm not typically that impressed with the analysis there) - does anyone happen to know any other good places to try and do this sort of thing and get useful feedback?

Mar 29, 2016

On a separate train of thought, how do people feel about making the move from ER compared to IBD?

Mar 30, 2016
IronCondorGorilla:

On a separate train of thought, how do people feel about making the move from ER compared to IBD?

On another train of thought, how do folks feel about the transition from dentist to hedge fund?

Also, exit opps after hedge fund? Can I go back to scrubbing teeth? Looking for 900k comp starting out

Thanks guys

Mar 30, 2016

I heard the exit opps from your own practice are actually pretty endless. I know a value dentist who is pulling 7 figures easy.

Mar 30, 2016

@masterg
Interesting POV, I had heard that the on campus recruiting for HFs is extremely unstructured and requires a similar level of networking / legwork on your own as doing so outside of the school as only a handful of firms post jobs directly with the school (note - specifically at Wharton, anyway).

To those who responded to my comments above trying to back-of-envelope calculate the pay cut you'd be taking, one other bit of anecdotal evidence from talking to my current analysts: the numbers they are throwing around for buyside gigs are $300k to $400k for analysts in their first year at these funds. And clearly analysts have a different skillset (ie. efficient modelers but limited experience). Is the view that an Associate would be on equal footing with an IBD analyst? Or are my analysts just starry eyed over the siren call of the buyside?

Mar 30, 2016
BusinessGreek:

@mastergInteresting POV, I had heard that the on campus recruiting for HFs is extremely unstructured and requires a similar level of networking / legwork on your own as doing so outside of the school as only a handful of firms post jobs directly with the school (note - specifically at Wharton, anyway).

To those who responded to my comments above trying to back-of-envelope calculate the pay cut you'd be taking, one other bit of anecdotal evidence from talking to my current analysts: the numbers they are throwing around for buyside gigs are $300k to $400k for analysts in their first year at these funds. And clearly analysts have a different skillset (ie. efficient modelers but limited experience). Is the view that an Associate would be on equal footing with an IBD analyst? Or are my analysts just starry eyed over the siren call of the buyside?

I'm definitely curious to hear perspectives on this point but I'd be pretty surprised if those estimates are actually right for the first year after their analyst program at a HF. Obviously it's a little different, but the typical numbers I have heard for first year PE comp is roughly 250K all-in on average, sometimes moving up to 300K at a handful of funds (excepting extreme outliers like Apollo which pay a good bit more).

I could see some HFs paying $300K, and maybe even some going as high as $400K, but I'd bet that those are top numbers in a great year and far less guaranteed than the all-in PE (in other words, definitely not the right way to think about first-year comp on average), so I think that you are probably about starry eyed siren calls playing a role here. But maybe I'm wrong and the difference between PE and HF for two people with otherwise the same experience really is that significant.

Apr 4, 2016
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