Post MBA Hedge Fund Career - How should I plan?

RX_MVP's picture
Rank: Orangutan | 295

I'm currently working at a well-known multi-strategy hedge fund. Although my fund is fundamental driven (event driven, merge arb, distressed credit, convert arb etc), I'm doing quant work which covers risk model, pricing, portfolio optimization, macro, performance analysis. In addition, my team is doing a lot of ad-hoc projects for portfolio managers when they want have some quantitative measure or ideas.

My goal was to become a quant PM but 3 years at current fund changed me a lot. I'm not longer a firm believer of EMH and lose interest in signals/time series/statistics. In contrast, I begin to like and pay attention to merge deals, restructuring plan, bankruptcy and stock catalysts, since PM always brief us before big deals coming in as well as closing/exit. While I don't involve in the deal making process, I always enjoy doing some side studies by reading interesting articles/analysis.

I know fundamental hedge funds doing those "fancy" strategies are really hot. Even banker and equity research ppl can't guarantee a job there. But if assume I get in one of elite finance school (Wharton/Booth/CBS):

1. Do you think I have chance to break in?
2. If not directly after MBA, how about first doing Asset Management? (equity research, high yield research)
3. If not directly after MBA, how about first doing banking? (lev fin, m&a, but I know the quote from WSO that associate is for people who want to have long term banking career)
4. Should I decide a specific strategy in advance (or at least asset class)?
5. How could I use one year before MBA to maximize my chance?

Here is my personal analysis:

Advantage:

- Worked in big name hedge fund and had exposure to real deals. Could "polish" my resume to more fundamental related
- Have one year before MBA to really build investment skills by using company resource (study past deals, ask analysts etc)
- Fast learner (no finance background at all before current job, 1 month GMAT 750, 2 week CFA1, 1 month CFA 2)

Disadvantage:
- No banking/investing/PE/Operation/Industry experience
- Absolutely no modeling experience (unless CFA counts)
- Not native English speaker (as you can see in writing)
- Fundamental PM may have prejudice toward quant/technology background people

Neutral:
- Asian background. Depends on whether company has plan to expand to Asia. I want to go back to Asia in long run but also want to train in US. I'm fairly well connected in Asia via family (not those super rich or government official tho)

About specific strategies, here are my preference and thinking:

- Distressed Credit

I'm most interested in distressed credit partly because its complexity and hybrid characteristic. I think it really exposes analysts to the REAL business instead of focus on shallow indicator like earnings multiples. It is also one of most inefficient market so long term alpha is possible.

Also, I really think distressed credit has a huge potential in emerging market even though in US credit cycle already passed its peak (or bottom depends on your prospective)

I know it is probably the most difficult area to break in so I'm thinking maybe I can try to work as HY research analyst in big AM house like state street/fidelity, which are pretty standard as post MBA job. Not sure if it is feasible to switch to distressed after HY experience

- Merge Arb
To me, merge arb is probably the most "trading" like strategy among all even driven/special situation types. It requires more market sense in addition to fundamental analysis. So it could be a fit for me but not sure if I'm their typical recruits

-Capital structure arbitrage
I like its flexibility of expressing views via many different ways. Also I'm pretty knowledgeable at CDS/Convertibles. But this is pretty niche market and I doubt many funds hire MBA students for that.

- Event driven/Long Short
I kind of dislike pure fundamental equity strategies due to its popularity and market efficiency. But this is the area that hire most people

Comments (18)

Aug 28, 2014

One month for level 2 is impressive. I think an MBA will help you with the transition. You'll probably get a few looks from big AM firms as well as HFs directly if you're interested in doing some off-campus recruiting. My sense is the jump from AM to HF is a smoother transition than from banking Assoc. to a HF analyst, given the type of analysis you do at AM will be pretty similar. I don't think you need to be particularly specialized in terms of strategy as an incoming analyst, but you probably want to know which part of the capital structure you are interested in (e.g. equities or credit).

I wouldn't count on an analyst role at a big long-only as an "automatic" out of the b-schools you mentioned (I attended one of them). These firms only hire a couple up to maybe 5 or so analysts each year (across all the top 5-7 schools) since turnover tends to be extremely low. But if you hustle on the networking and stock pitches you should be able to land something.

And by the way, I would sure hope you're "not a firm believer in the EMH" if you're planning to pursue a career in active management. The good news is, the more assets that flow into passive strategies, the easier it is for us to do our jobs (in theory).

    • 1
Aug 28, 2014
jankynoname:

I wouldn't count on an analyst role at a big long-only as an "automatic" out of the b-schools you mentioned (I attended one of them). These firms only hire a couple up to maybe 5 or so analysts each year (across all the top 5-7 schools) since turnover tends to be extremely low. But if you hustle on the networking and stock pitches you should be able to land something.

Thanks. I know it is not easy from existing students and alums. But what I meant is that they have standard campus recruiting program so it is easier to plan/prepare ahead. HF recruiting is pretty adhoc so it is more unpredictable

jankynoname:

And by the way, I would sure hope you're "not a firm believer in the EMH" if you're planning to pursue a career in active management. The good news is, the more assets that flow into passive strategies, the easier it is for us to do our jobs (in theory).

Yes, that's my observation after working in my current fund. We are pretty decent sized and still could make constant alpha over years

Feb 23, 2015
jankynoname:

The good news is, the more assets that flow into passive strategies, the easier it is for us to do our jobs (in theory).

Pulling up an old thread here, but why would it make it easier? Seems like the flow of investors into passive strategies would actually make it harder for the remaining active strategies to compete against each other and generate alpha with the limited remaining assets available.

Aug 28, 2014

2 Weeks CFA1 / 2 months CFA2 with no finance background is impressive. Did you study Finance or something quantitative at University?

Aug 28, 2014
delayedresponse:

2 Weeks CFA1 / 2 months CFA2 with no finance background is impressive. Did you study Finance or something quantitative at University?

all my education background is at CS (not PhD level). CFA 1 is really easy for me, even at that time I don't know what balance sheet is. CFA 2 is considerably more difficult, especially at FRA and Equity. But good thing is that I always heard those terms in analyst/pm meeting so I have good senses about dcf/multiples

Aug 28, 2014

The distressed debt markets are hot right now, I'm getting lots of these opps from headhunters. I would see if you can make the jump now because that's probably your best bet.

I have a pretty decent network now of Bschool friends and most HFs (outside of the large ones who hire 1 to 2 a year) do not like MBAs. My friends at Wharton & HBS who did 2 year banking and 2 year PE are having a hard time getting Hfs. One took BlackRock (long only) and another ended up at a corporate dev job.

Guessing your chances post-MBA would be a futile exercise.

If you're not a native speaker it can hurt, so my big question to you is if you have a green card. It's hard for a lot of HFs to sponsor. Even U.S. citizens have a hard time post-MBA because if there's 1 spot at an ultra-competitive HF, it usually goes to the fratty WASP dude who has the same background as you. That's just how the world works.

Given that you're not really doing any real investing, you should try to learn as much as possible and start networking now.

Either way, it's not mutually exclusive, if you don't find anything then go to bschool

Aug 28, 2014
SanityCheck:

The distressed debt markets are hot right now, I'm getting lots of these opps from headhunters. I would see if you can make the jump now because that's probably your best bet.

I have a pretty decent network now of Bschool friends and most HFs (outside of the large ones who hire 1 to 2 a year) do not like MBAs. My friends at Wharton & HBS who did 2 year banking and 2 year PE are having a hard time getting Hfs. One took BlackRock (long only) and another ended up at a corporate dev job.

Guessing your chances post-MBA would be a futile exercise.

Thanks a lot for the suggestion. I know many HFs are not interested in MBAs but I would think maybe I get some "advantages" by working in HFs Pre-MBA. Honestly, I have no idea how I could directly look for a fundamental HF role now since all headhunters contacted me for quant/risk/macro positions.

Also I'm a bit curious about "The distressed debt markets are hot right now". What make you think that except headhunters' call? From my observation and conversation with PM, it seems like most if not all US distressed securities are at pretty high price level

SanityCheck:

If you're not a native speaker it can hurt, so my big question to you is if you have a green card. It's hard for a lot of HFs to sponsor. Even U.S. citizens have a hard time post-MBA because if there's 1 spot at an ultra-competitive HF, it usually goes to the fratty WASP dude who has the same background as you. That's just how the world works.

I should have green card when I look for internship, or at latest when I look for full-time. I still remembered the difficulties/troubles without a green card when I graduated from college. It is rarely mentioned on WSO tho :)

SanityCheck:

Given that you're not really doing any real investing, you should try to learn as much as possible and start networking now.

Either way, it's not mutually exclusive, if you don't find anything then go to bschool

In addition to read books and try to "reverse engneering" my fund's past trades, what do you recommend me to learn? Do you think I should learn those fancy spreadsheet modeling?

Aug 28, 2014
SanityCheck:

The distressed debt markets are hot right now, I'm getting lots of these opps from headhunters. I would see if you can make the jump now because that's probably your best bet.

I have a pretty decent network now of Bschool friends and most HFs (outside of the large ones who hire 1 to 2 a year) do not like MBAs. My friends at Wharton & HBS who did 2 year banking and 2 year PE are having a hard time getting Hfs. One took BlackRock (long only) and another ended up at a corporate dev job.

Guessing your chances post-MBA would be a futile exercise.

I would disagree with this 100%. It depends a lot on the school but buyside recruiting right now seems pretty strong from my school. Everybody I know, except for maybe 1 person, that was trying for HF or long-only AM got an internship this past summer. If I can make the transition from military officer with no finance background/no CFA to a decent sized long-short HF via an MBA then you can definitely make the transition.

Start making your own investments and detailing a thesis to why you chose those investments. If you want to work as an analyst and say you don't own any individual stocks in your PA your interview will be dead in the water. Write up a stock pitch and send it to somebody in the industry(friend/co-worker) and get their feedback. If you do go the MBA route the resume and top MBA brand can get you into the interview room but after that it's up to your level of preparation,

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Aug 28, 2014

Headhunters are a good gauge, especially because I have a 4 year relationship with some of them and it's not all bullshit like it was in the banker days.

But mostly first hand experience, I've interviewed quite a bit in the past 6 months. Sure, the domestic markets may be overheated and that results in aggressive financing, but the debt markets are still hot. Lots of capital ready to go to work so they need juniors to fill seats. I know for a fact several debt funds lost kids recently and are hiring.

Reading books, getting involved on message boards, investing clubs, building up a network, etc. Networking is huge, which a lot of minorities tend to forget. Regarding your question, I would at a minimum understand why the resulting models & thesis ultimately resulted in your PM pulling the trigger, and why another idea didn't.

Best of luck.

Aug 29, 2014
SanityCheck:

Headhunters are a good gauge, especially because I have a 4 year relationship with some of them and it's not all bullshit like it was in the banker days.

But mostly first hand experience, I've interviewed quite a bit in the past 6 months. Sure, the domestic markets may be overheated and that results in aggressive financing, but the debt markets are still hot. Lots of capital ready to go to work so they need juniors to fill seats. I know for a fact several debt funds lost kids recently and are hiring.

Reading books, getting involved on message boards, investing clubs, building up a network, etc. Networking is huge, which a lot of minorities tend to forget. Regarding your question, I would at a minimum understand why the resulting models & thesis ultimately resulted in your PM pulling the trigger, and why another idea didn't.

Best of luck.

Agree, credit/distressed are getting recruited aggressively. Or, at least, I am.

This is the first time I have ever gotten any attention from recruiters (had both a very weak educational background and first job out of school). The calls literally started the day I added "CFA" to the end of my name on linkedin, and havent stopped since (which also coincided with finishing my first year at a credit fund).

I am curious: where are the junior kids who used to fill these seats going? do they leave the industry? going for MBA? starting their own shop?

What Im getting at is: why do all these empty seats exist right now? Arent we all just shuffling seats in a vacuum?

(I know first-time CLO managers are part of it - but these first time managers generally arent stealing talent from bigger shops. They cant afford to pay their employees with piddly fees from a single CLO)

Sep 12, 2014
SanityCheck:

Headhunters are a good gauge, especially because I have a 4 year relationship with some of them and it's not all bullshit like it was in the banker days.

But mostly first hand experience, I've interviewed quite a bit in the past 6 months. Sure, the domestic markets may be overheated and that results in aggressive financing, but the debt markets are still hot. Lots of capital ready to go to work so they need juniors to fill seats. I know for a fact several debt funds lost kids recently and are hiring.

Reading books, getting involved on message boards, investing clubs, building up a network, etc. Networking is huge, which a lot of minorities tend to forget. Regarding your question, I would at a minimum understand why the resulting models & thesis ultimately resulted in your PM pulling the trigger, and why another idea didn't.

Best of luck.

Appreciate your input. I will network along with waiting for bschool.

The thing about trying to look for a job directly is that I have zero fundamental background (education, working experiences). All HH contacted me are for quant positions. I highly doubt people would even interview me by now.

Aug 28, 2014

You may be right.

My data points are from Wharton and HBS only and only for full-time (class of 2014). Mutual funds took majority if not 100% of the summers, so my buddy is all set at BlackRock. The other guy interned for a long/short and they didn't extend him an offer.

Either way, given OP can do both, I would network while preparing for bschool. Gauging your chances of offers is way too preliminary at this point, especially since everyone I know were of a different background (2 years banking, 2 years PE).

Aug 29, 2014
SanityCheck:

Either way, given OP can do both, I would network while preparing for bschool. Gauging your chances of offers is way too preliminary at this point, especially since everyone I know were of a different background (2 years banking, 2 years PE).

Yes this is definitely true. The MBA is a nice reset switch but given the OP's current job I imagine he has contacts at other hedge funds or other people in the industry. I agree that networking and trying to find any openings that way might be more or at least equally as likely to land a job. And the great thing is you can do both concurrently and if the networking doesn't work then go back to school.

Sep 12, 2014
MilitaryToFinance:
SanityCheck:

Either way, given OP can do both, I would network while preparing for bschool. Gauging your chances of offers is way too preliminary at this point, especially since everyone I know were of a different background (2 years banking, 2 years PE).

Yes this is definitely true. The MBA is a nice reset switch but given the OP's current job I imagine he has contacts at other hedge funds or other people in the industry. I agree that networking and trying to find any openings that way might be more or at least equally as likely to land a job. And the great thing is you can do both concurrently and if the networking doesn't work then go back to school.

It is very impressive to land a ls hf offer from military background. You must be really outstanding.

Is it possible to share your school? Is it one of W/B/C or H/S or others?

Aug 29, 2014

im a second year MBA student at Columbia Business School. I am confirming that many of my classmates who just graduated (I can confidently say over 40 in class 2014) have a public investing job post-Columbia. I am sure students at HBS and Wharton have similar success stories.

if you are extremely driven and determined, you will find a job. PM's like driven folks who would go through walls.

Sep 12, 2014

So nobody think doing a couple of years M&A banking or restructuring banking after MBA and then hedge fund would a good choice? Or I should stick to buy-side even if the role is not that hedge fund related (like equity analyst or credit analyst in big AM house)?

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Sep 18, 2014

Just being curious... You guys mentioned reading books. How would you let HF know this?
For example, would you write in CV that you read lets say 40 books in the last year about investments?
Or do you recommend any other strategy?

Oct 12, 2014
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