Path to HF from MBB: Direct or Move to PE first

Hi all,

I am currently a management consultant working at MBB in the firm's PE practice, in Europe/London. I have previous experience in PE and public equity investing from past internships.

I am looking to move to the buyside at most a couple of months after finishing my first year. Having spoken with a couple PE headhunters I was told this would be feasible, namely if I was targeting the consultant-friendly PE shops, and that I could start at the Associate level.

However, I am very much interested in public markets, being an investor myself (focusing on small cap value, spin offs and other special sits), and over the long term would like to work there. In fact, my ultimate goal would be to launch my own fund or family office. So I am deciding between the following two options and would appreciate your input:

1 - Target PE firms on my recruiting efforts, get into a top large cap fund at end of my first year with a view to move to the public side 2-3 years after that

2 - Target HFs from the start and try to make a direct move from MBB to public equities at end of my first year, potentially longer due to difficulty in doing so

Of course, I could target both, but that would dilute my efforts. So I would appreciate you view on the feasibility of 2. My feeling is that it might be too difficult, and I would be better off going for 1 - I would be honing my investing skills in PE, so I do not think it would be lost time from a career standpoint.

Thanks in advance!

Region: 
All Europe
United Kingdom

Comments (15)

Mar 29, 2020

just fyi, haven't seen anyone breaking into hf from MBB directly. If you are heading to a L/S HF, your training in MBB can hardly be very useful

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Apr 2, 2020

Do you have any thoughts on activist funds possibly being receptive to MBB consultants who have experience working on corporate finance and commercial due diligence projects?

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Apr 17, 2020

that's just blatantly wrong...fundamental L/S funds love MBB

Apr 2, 2020

Haven't seen many MBB go directly to HF.

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Most Helpful
Apr 3, 2020

In Europe the move is quite common esp. on the activist / longer-term side, mostly long-term deep value investments, often with operational spin i.e. the whole private equity to public markets idea. Take a look at Cevian for example and their spin-offs - all ex case team leaders. I can think of various funds and various candidates.

The issue we had with directly hiring MBB into public market positions is that whilst the skillset is great, they lack investment understanding. So you need to go one of two routes: do the PE track and get the private market investing skillset under your belt or - longer shot - start really investing yourself and develop the value mindset and an understanding of the names etc. out there and become able to proof you can "invest". The latter obviously takes you out of the HH sphere because they only go by name not skill, but its still a doable route.

Given you already invest, I would not go the PE route but start with understanding what shops are the right ones for your profile. there are mid-cap and large cap shops. Go to them directly vs. HH.

I however would also consider the following: if you want to do special sits, spin-offs and all the ST catalyst value stuff that doesn't have a real operational / market / long-term angle to it, your MBB skillset is useless and these funds therefore obv. less likely to take MBB candidates.

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Apr 12, 2020

Thank you, very useful insights.

Have looked at Cevian and indeed they have a lot of people coming from MBB. Unfortunately I do not speak Swedish and they seem to have only IR in London. Could not find anything on spin-offs from them, any names that you could mention?

Also, when you mention the need to have "understanding of the names", do you mean getting familiar with large / popular companies and their attractiveness as investments, so I can then discuss them?

Based on my short time investing on my own - I do gravitate towards more short to medium-term (0-3 years) catalysts, and enjoy looking at complex situations with spin-offs, restructurings, etc. But I am sure I would learn a lot at a long-term value fund, and I am still very early on my career, so getting to one of those would definitely be a great outcome.

Many thanks for the help, really appreciate it.

Apr 3, 2020

I'm actually in the same spot at the moment, though I worked on the buyside for 2 years before I moved to MBB. I had just started pushing on the networking before everything hit, but from some initial conversations it does seem pretty viable. There is a chance that bigger activist shops are open to it, but in my experiance, a lot of shops are just looking for really smart people so if you can pull together some investment pitches that sound pretty good it may be less about flexing your operational experience and more just a good stamp on the resume.

Apr 4, 2020

I think your answer is right for the first 3-4 years. Some shops just go by signaling and teach on the job. You therefore don't close doors with good names on the resume and your operational experience as a junior- / mid-level consultant isn't really worth "that much". At the same time, the whole "name stamp" career progression planning works less and less the more senior you become or once you move into the small-/mid-cap world (esp. in public markets where there is no name recognition in a way similar to IB / MBB) + mistakes of picking the wrong job become more costly.

I do not have a lot of experience in this but in my view the biggest obstacle for consultants (and some times junior bankers) wanting to move to public markets is that they do not fully understand how the funds actually invest and what the day to day entails and therefore they cant map their existing skillset against the jobs' requirements and see where they need to add "know-how" (with a new job or just outside of job investing exp.). The same argument can be made for why they want a certain job or not. The life for an analyst at a L/S (short-mid-term focused) or an analyst at a place like a cevian / valueact etc. will be very different.
Its worth to start developing the skillset that you will need for the job you want, or to answer his original question - turning that statement around - apply only where your skillset is needed if you want to maximise your chances. By the way: everyone is really smart out there it doesn't set people apart.

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Apr 4, 2020

Contrarian opinion: people in HFs with a finance background (lets call them "insiders") MASSIVELY overestimate the importance of their experience and training in banking and similar. If you havent had that training yourself, its really not rocket science, even though "insiders" will try to intimidate you and make you think that learning to model takes 5 yrs and is harder than astrophysics. It is not. You can learn it along the way, particularly when your experience as a consultant has presumably exposed you and made you proficient in business performance metrics, analytics, and such.

The real challenge is that most of the industry is populated by "insiders" with this finance background, so they will largely hire people with similar backgrounds. That is the biggest challenge for you: perception, and clubiness. Best way to overcome is to prove you can already model, by reaching out to the funds you want to work in attaching a pitch that includes detailed financial analysis and a model.

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Apr 12, 2020

Thank you for the advice and opinion, very useful to get an insider's perspective.

Based on my limited knowledge, this definitely resonates with me, especially regarding modelling - if I look at my friends in IB, the majority spend most of the day on pitchbooks.

While at MBB we almost never look below EBITDA, there is also a lot of modelling to do if you position yourself as someone that wants to do it (e.g. market and revenue builds, operating models, etc.). No one looks at balance sheets or valuation however.

As a follow up question, do you suggest any resource for learning / gaining exposure to the types of models done at HFs (either L/S or more long term value)? I am very familiar with e.g. LBOs, 3-statement models, but would love to look at some actual models used in analysing public investments. So far I have been coming up with my own way to model the situations I look at plus looking at ideas posted on VIC and trying to re-do the analyses they do there.

Thanks!

Apr 13, 2020

With regards to MBB to HF - maybe i need to be more specific: if you want to do similar work as you did in the MBB and focus on cases that are more "strategic/ operational" then there are strategies / funds that are more suitable for you and at these your odds are also higher.

In general I agree with the above, its all not complicated. If you show up / send materials that highlight you know what the role and the job etc. is about, it doesnt matter what the training is. A prerequisite here is that you know what you want to do and what the funds do.

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Apr 13, 2020

Definitely not easy but not impossible....Baupost has a few analysts directly from mbb based on LinkedIn search

However, I do agree that MBB consultants focus a lot more on everything above EBITDA. I did quite a lot of modeling as a consultant back then, but basically everything we do is before EBITDA - market sizing, competitiveness, revenue growth, operational efficiency, synergies, etc etc.

I'm in PE now and we actually spend significant time looking at balance sheet, liquidity, taxes, interests, waterfalls...definitely appreciate the more holistic understanding. (We do outsource a lot of those market stuff to consultants now tho)

Thinking to transition to HF now....but feel it's really not easy to develop an edge (so much in PE is about proprietary sourcing / experience of running a process vs. actually developing investment angles..)

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Apr 16, 2020

Thanks will have a look at Baupost. I thought it would be in the "bankers/PE only" group.

Re the modelling in consulting, definitely, all below EBITDA (and some capex as well sometimes). I did get to do an interesting case once, where I did a full 3-statement model of a bank and had to look at all the repos, loans etc they had.

Since you are now in PE - how was the transition coming from MBB, and do you feel it has contributed towards the skill set you would now need on the public side if you were to transition? Would be very interested in hearing about your experience.

Apr 21, 2020
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