I am interested in working in the HF industry in the medium to long term and seems like for some funds there is a specific preference (traders/bankers for Point72, research guys for Surveyor, etc.) I am curious if sell side research is a good background versus investment banking for fundamental L/S equity and long only shops?
Appreciate the comments
Yes
What I have noticed is that, post Mifid 2, the biggest buyers of research these days are the MMs. As a result of this, a lot of sell side research I see here in Europe is now geared to what the MMs want, which is more short-term focused and drilling down into consensus. My guess is this is good news if you want to go to an MM as you will likely fit into their investing style. If you want to do more longer-term oriented investing it might be an issue.
Thank you - for longer term investing do they prefer candidates with banking background?
It really depends on the fund/strategy/background of the PMs. IB opens the most doors as it gives you a general overview of everything and the skills to go down a lot of different paths (PE/HF/credit/merge arb/etc). ER offers a more narrow skill set which is something you need to consider if you are not 100% certain you want to work in equities. Personally, most funds are more interested in hiring guys who are passionate about markets and have the right combination of aptitude and humility needed to be a good investor. The ability to pitch an idea and your reasoning behind that pitch, plus how you react to cross examination, will determine if a fund will want to hire you.
Very true. The other driving factor being II voting changed from AUM-weighing to commission-weighing.
PE / IB / SS ER -> Fundamental Equity funds
SS CR / IB / Credit S&T Desk Analyst / Private Credit / CorpBanking -> Fundamental Credit funds
Macro S&T / Macro Research / Central Bank / Economics Research / Physical Commods Trading -> Macro funds
IB / PE / PE-style Special Sits -> Event Driven / Merger Arb / Cap Structure Arb / Opportunistic etc funds
Structured Credit S&T desks / RE Debt / RE BS lending / PE-style Speciality Finance / IB Securitisation groups / CRA Structured Credit groups -> Structured Credit funds
Former IB now at HF. Plenty of colleagues are former ER too. My take:
ER background people have a less steep learning curve - the junior ER job is much more similar to the junior HF job. As an ER person you also in theory regularly interact with HFs (def not true for IB) so you have a better sense for how people think / what they want out of you.
Transitioning from IB to HF was tougher for me early on (first 6-12mo). It’s a completely different job. The ER people definitely have a leg up on Day 1. That being said, after 12mo the difference was negligible. It’s becoming more clear over the years that there are a lot of “soft skills” I picked up in IB that my ER colleagues don’t seem to have. The focus on getting stuff “right” and having accurate/tight analyses also seems to be higher in IB.
TLDR; ER people have a head start but that fades and I’m happy I did IB instead of ER.
The latter point has more to do with positive selection in IB talent pool vs ER and less to do with the IB job itself. So with that being said, ER is a very solid background for MM Hfs, but at the end of the day whether you succeed or no depend on your own talent
That’s mostly true I agree, but I can also just tell by the way the ER people carry themselves that they’ve never been reamed out at 3am for fucking up a model/slides :).
Said another way, the intensity of the IB job as a major revenue generator for the firm js very different from the ER job where you are closer to a cost center.
What group were you in IB and what do you cover now?
IB coverage group and cover same industry at HF
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