IB vs PE vs HF vs CO vs TR vs AM vs ER vs CF vs VC

So confused on all these terms and which career outcomes lead to what. What I wanna do ... Im interested in stocks and options and managing money and hopefully getting a percent of gain etc, would also be interested in pre ipo stuff too and investments etc. Able to attend ivy league/top programs etc, what is available after undergrad...Am I looking at analyst etc? What category do you think I would be most interested in? Can you explain each one/differences in each. Thank you!

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  • Prospect in IB - Restr
Sep 2, 2021 - 11:11pm

You could broadly categorize these fields you listed into three categories: buyside, sellside, and industry. 

Industry is pretty much companies in general, and a role in CF (corporate finance) falls into this category. On WSO, this category caters towards roles such as Corporate Development and Corporate Strategy. In general, you'd get into these roles after a stint in banking or consulting. 

Then you have the buyside, which invests in companies. Now, this could be in the form of AM (asset management), which is usually investing other peoples' money into stocks, bonds, etc. The most stereotypical AM firms are places like Blackrock and Vanguard (the guys who run the most popular ETFs). Then you have hedge funds (HF), which are, in the most simplified terms, spicier AM firms. Hedge funds cater to wealthy investors, can make use of options and short selling, and generally allow for some pretty creative plays. Despite hedge funds theoretically being stable (hedged and uncorrelated stream of returns), in practice they tend to be pretty risky places to build careers relative to some of the other careers out here. Oh, and hedge funds usually invest in public markets.

Private equity (PE) firms invest in private companies that aren't listed on any exchanges. They'll usually buyout entire companies and take on debt to do so. PE is one of the careers people in this forum love to idealize, with the large pay being a major reason. VC is venture capital ,which are firms that purchase equity in startups and early stage companies in some of the "sexier" industries like healthcare and tech.

Then you got the sellside, which provides services to the buyside and companies. IB is investment banking, which usually does financing work and advisory work. On the financing side, they'll help companies raise money through debt and equity, so these are the guys usually leading IPOs. On the advisory side, they'll help companies buy one another (M&A), restructure their debt, come up with defence strategies against hostile takeovers, etc. Equity Research (ER) guys publish reports on companies, which are then sold to investors. Traders (TR) help provide liquidity in a variety of asset classes, like stocks, bonds, commodities, structured products, etc. Consulting (CO) is a very wide title, but on WSO most people are talking about strategy consulting at the top firms, where consultants research strategy plans for corporate clients. These strategies could revolve around expanding into new markets, introducing new product lines, etc. 

Out of undergrad, you're generally going to start in something like banking, consulting, trading, or equity research. Consulting opens many doors for you such as Corporate Strategy, Private Equity, and Venture Capital. Equity Research is a pretty known way of getting into hedge funds, as is trading. Banking can get you into pretty much all these categories, because it is the broadest career with so much variety in the kind of work you do.

You'd generally start out in banking as an analyst. 

I know my answer is pretty general, so if you've got any specific questions, the more experienced people on this forum would be better suited to answer them.

Sep 3, 2021 - 7:00am

Solid post but consulting is professional services (like law firms, accounting firms, TAS etc) not sellside finance

  • Intern in AM - Equities
Sep 7, 2021 - 4:11pm

This is great--I'll add that if you're looking at AM, you'll want to try and avoid places like Vanguard that are known for indexing rather than active management

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  • Prospect in IB - Restr
Sep 3, 2021 - 12:11pm

Um... if you're going into hedge funds BECAUSE you like risky stuff, you're not gonna be having a great time, buddy.

And if you're like the vast majority of day traders who say they like "options and stuff", here's a rude awakening - hedge funds don't trade options like day traders do. What day traders do is pretty much gambling, because theyre oftentimes a bunch of dropouts that don't understand any of the math behind options. If you're really into options and are mathematically inclined, you could look into some of the options market makers (i.e. Citadel I believe does a lot of that work).

Sep 3, 2021 - 12:23pm

Colleges need to spend less time teaching partial differential equations and more time on guiding students on what options are out there. 

Instagram: @dickthesellsider | Substack: dicktoad.substack.com

  • 1
Sep 12, 2021 - 10:35am

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