Long Term HF recruiting
I'm sure this question has been asked countless of times and my research skills are once again failing me so apologies in advance. Current analyst in a top TMT group (GS, MS, JPM, EVR, PJT) that'll be moving onto a MF PE role next year. Given how early on-cycle was this year, I didn't really have the chance to think through the decision to the degree I would've liked to and now I'm leaning towards going into hedge funds. I'm losing interest in the deal process and would simply prefer to focus on companies.
PE recruiting was very structured - the questions were on countless websites, those above me were successful and had tips and, as a result, I 100% knew what to expect. Hedge fund recruiting is more of a black box (to me at least). Given that I'm 3 years out from when I would (hopefully) join a HF (either L/S or activist most likely), is there a roadmap of what I can do to best position myself? What I was going to do is below, and while I know there's no magic bullet or easy checklist, any advice or critiques would be greatly appreciated.
- Start making an investment portfolio - learn by doing. Will have to be paper money I guess since I'm restricted from anything tech/software related
- Study for the GMAT - imagine a 780+ score would look good (but not sure how helpful this is like it would be for PE... way I see it is I can look smart on a standardized basis and have MBA optionality in case it doesn't pan out, I like PE and want to move up, etc. etc.)
- Just grind out as much company analysis as possible / read as many books / just absorb knowledge
Obviously very far out and definitley recognize the false confidence, but definitley appreciate anyone with any insights
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Learn to code.
Inaccurate. The amount of coding you'd need to do if you stay in fundamental investing is minimal, and if you've made it that far, you would have no difficulty picking up whatever is necessary on the spot.
If there's really any difficult coding needs, the HF will just hire a coder to do that, not waste the investor's time.
Well it depends on the type of fund and how the ideas are sourced and implemented. There are some funds, even fundamental, that want you to prove out concepts to trade on them. Many times that means searching through a ton of information and building your case. At places like this, coding isn’t the most important thing, but being able to do analysis is. We are at a point where a lot of the analysis can no longer be done in excel, it is just too much information. And “just hire a coder” both isn’t cheap or practical.
I’m not saying I agree that this is the way into a fund, but for certain funds it is definitely a plus. It is one thing to have ideas, but it is another to be able to analyze them and prove them out. At some places that doesn’t require a lot of data and coding, at others it will. It does get you optionality and people who have that flexibility will have more opportunities. But the one caveat is that at the end of the day ideas are the most important part and without that it doesn’t matter what you do.
Why not call the PE fund, respectfully decline the offer, and recruit for a HF?
The PE firm knows that on cycle is ridiculously early, and they have an entire year to replace your seat.
The reasons to do the PE associate years are if you want to preserve optionality, strengthen your resume, and have formal training with regards to investment diligence.
If you are OK foregoing that, I’d consider going straight to a HF. 3 more years is a ton to sacrifice for pedigree and optionality.
The exit opps after MF PE only improve marginally, in my view. There are way more candidates from MF PE as everyone realizes that PE is banking 2.0, so it’s actually quite competitive. I know people who went to Melvin, Silver Point, and Tiger Cubs directly out of banking.
I've previously thought about the pros and cons you mentioned above. Where I currently stand, I cannot say with 100% certainty that HFs are where I want to spend the rest of my life. As a result, the optionality and pedigree outweighs the lost 3 years, for now. I'd rather lose some time than lock myself into a path that isn't perfect - I do recognize it's possible to go from HF -> PE, especially if a MBA is in-between (which I'm opposed to), but I'm risk averse and think that PE -> HF is a more beaten path. I've spent 0 days of my life in PE and HFs and don't want to make any firm decisions yet, but do want to position myself so that I can pull the trigger when ready and think that MF PE gives me the best of both worlds on that front.
All of that said - is there anything to start doing now to position myself to win one of those competitive roles post PE?
That seems reasonable. If that’s where your head is at, I’d encourage you to be open minded about PE. You might actually like it, but probably not if day 1 you are already planning to leave for the next thing.
I’m operating under the assumptions that you’re in TMT, interested in L/S and activism, and have limited public markets experience to date.
Don’t waste your time on GMAT to bolster your resume.
If I were you, I’d select a handful of companies in a given sector or “theme” and follow them. Build quarterly models, read research, do analysis, read 10-Ks, learn the multiples and jargon, etc. You won’t be able to keep up with this all the time with your busy job, but presumably you’ll have some down time eventually to stay up to date.
By “theme” I mean something like cloud transition. You could pick 5-8 companies from cloud providers, SaaS, and legacy networking.
By sector I mean something like Internet. Pick a handful of internet or social media companies.
You’ll develop a level of expertise and will really learn how the market trades these companies. Any of the companies really high quality but the market still hasn’t valued it? That’s a great long. Have any of the companies in your universe missed guidance repeatedly and underperformed on margins? They’re a good activist candidate.
I think it’s important to pick a handful of companies and focus on and track them. Maintaining a PA with some random companies you own is great, but it’s hard to keep up with 10+ companies across different sectors while working your full time job. It’s much more compelling, in my view, to go to an interview and say I followed these companies for a couple years, and here’s why these are the [best/worst/most prime for change].
There are great investing blogs and resources. Sohn conference, valueinvestorsclub, 10x ebitda to name a few. Read those too.
Good luck doing those three items while in a MF PE role...
If I were you, I'd immediately try re-recruiting for HF. If it doesn't pan out now, continue re-recruiting while you are in your PE role and jump ship whenever possible
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I would disagree actually - if you want to go to a top tiger cub shop or like an Elliott, the best way is to do at least a year of MFPE beforehand. They love taking 2+2 candidates from MFPE and it’s almost impossible to get into those straight after banking. Not impossible - but exceedingly rare. I had a friend join Maverick after 7 months of banking at GS. But he’s a BSD and one of those guys that will start his own fund soon.
If you want MM l/s then yes don’t bother with PE, but for the SM l/s funds who look at 3-5 year buy horizons, I think you’ll find through a LinkedIn screen that Most tiger cub analysts are MFPE guys first. Half the guys I knew who worked at Viking used to be at Apollo. Just some food for thought.
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