Preparing for the Buy-Side?

Banker88's picture
Rank: King Kong | 1,835

I'm currently a first year analyst in the FIG group of a BB. Started getting contacted by headhunters in the past few weeks but have not met any of them yet. Not 100% sure whether I want to go into PE or HF after IB, and was wondering on ways to prepare in general over the next few months for buy-side recruiting.

-Any suggested resources / guides to read about the junior roles in PE, HF, and about specific shops?
-How to prepare for meetings with headhunters?
-How to prepare for PE & HF interviews (is it ok to pursue both)?
-How important is networking for buy-side recruiting compared to networking for IBD?
-What to be doing in the office to increase exit opp chances?
-Any specific types of funds to be targeting as a FIG analyst?

I realize these are a lot of questions, and I'm just curious to hear best practices from people who have successfully moved to the buy-side. While I have plenty of time until summer 2012, the recruiting cycle is actually starting fairly soon and I want to be on top of things. Thanks much.

Comments (18)

Jan 4, 2011

Unless your BB is goldman sachs, FIG has screwed you over to only FIG specialized buyside.

Jan 4, 2011

when i read that OP is a 1st yr FIG analyst getting contacted this early, my first instinct was that he works at GS

boutiquebank4life:

Unless your BB is goldman sachs, FIG has screwed you over to only FIG specialized buyside.

Jan 4, 2011
bankbank:

when i read that OP is a 1st yr FIG analyst getting contacted this early, my first instinct was that he works at GS

Unfortunately, I don't.

Jan 4, 2011

It is not okay to pursue bold PE & HF options with the same head hunter. Best way to get blacklisted for being indecisive. Head hunters get paid 10-50% of your salary for placing candidates. They want the best, most focused candidates so they can get paid quickly. It is a short season for most of them...a sprint.

Best Response
Jan 4, 2011

This is not necessarily true and it doesn't even make intuitive sense in a lot of cases. It's better if you do know exactly what you'd like to do, but it's not "not okay" if you don't. For top candidates (probably for most candidates), the more buyside clients the HH puts you in front of, the more likely you are to receive and accept an offer and the more likely the HH is to collect its fee (i think standard fee for HH when placing a banking analyst into a junior buyside role is 1/3 of 1st year base salary).

If OP is a mediocre candidate from a mediocre group on the street and is not completely decided, then maybe the HHs get annoyed because it's not as easy to place OP. But, if OP is a fig analyst getting chased this early, I would assume that he is at least in a top group. If you are a top candidate from a top banking group, the HHs will throw you in front of as many clients as they can, PE and HF, because they know you'll likely get and accept offers from someone. This is good for some obvious reasons and bad for other reasons. In my experience, individual recruiters within larger HHs are assigned certain buyside clients and they will try to put you in front of their own clients while the other recruiters within the same firm will try to put you in front of their clients. I had experiences where different recruiters from the same HH would schedule me for conflicting interviews and try to get me to skip interviews scheduled by their coworkers so that they could put me in interviews with different clients.

All that being said, you probably don't want to tell the HH that you have no idea what you want to do. If you're really not sure, just tell them that you're interested in both and make up some BS justification for it (e.g., "i'm not 100% decided. i really like doing very detailed diligence and analysis so it seems like PE would fit that interest, but I know that there are some hedge funds that also do intense analysis so I think I should meet with some of them, as well." Then the HH will probably send you to some wave theory, tape-watching trading firm and tell you that "they do really intense analysis and I think you'd be a great fit!" kidding. mostly.).

Also, for purposes of interviewing with the actual buyside firms, it would be to your own benefit to know what you want to do or to at least fake it better than required for the HHs. I get the feeling that this is more important for HFs...I think they want to make sure that you are really interested in being an investor and working and thinking like one. I think PE at a junior level is a lot more similar to banking and is still a lot of cranking and processing work (less than banking, though).

In my opinion, HF interviews were more difficult than PE interviews. It seemed like most of what I needed to do for PE was demonstrate that I could model and maybe do a case, and then spout off details about the deals I worked on in banking. Maybe they'd ask me some accounting/financial statements/corp finance questions as well. If you're a good banking analyst, this shouldn't be hard. For a FIG analyst, maybe you should brush up on some LBO modeling because I think a lot of generalist PE firms will have a standard LBO case or modeling test (even though they might hire you to work on only FIG deals). Know the details of your transactions (listed on your resume) very well, and have an understanding of why the deals were done. Have an opinion on whether the deal was good or bad. Understand how value is created in a transaction (e.g., in an LBO you create equity value through EBITDA growth, multiple expansion, and/or deleveraging).

For hedge fund interviews, you need to demonstrate that you are smart and interested in investing. Understand what drives asset value (asset value is the present value of future cash flows...what drives the PV of cash flows). Understand the deals on your resume and also have your own investment ideas (have at least 2 or 3...good if some short, some long). They will probably ask you about your PA. Understand risk and return (hedge funds always talk about risk adjusted returns).

When I was interviewing, a typical PE question was "walk me through the [blank] transaction from your resume." I didn't do as much hedge fund interviewing, but in my experience, the questions were less "typical" and were more about seeing if you could think like an investor. Someone might ask something like: "if you had to invest all of your personal money and all of your family's money in one company, which company would you choose." Some PE interviewers also asked questions like this, but it was much less frequent.

My best resource for interview preparation was friends and contacts who had already gone through the process (maybe 2nd year analysts or people that were analysts when I was a summer but had since moved to the buyside). Try to find these people and ask them lots of questions and see if they have any prep materials they used that they will give you.

BankingRUs9:

It is not okay to pursue bold PE & HF options with the same head hunter. Best way to get blacklisted for being indecisive. Head hunters get paid 10-50% of your salary for placing candidates. They want the best, most focused candidates so they can get paid quickly. It is a short season for most of them...a sprint.

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Jan 4, 2011
Banker88:

I'm currently a first year analyst in the FIG group of a BB. Started getting contacted by headhunters in the past few weeks but have not met any of them yet. Not 100% sure whether I want to go into PE or HF after IB, and was wondering on ways to prepare in general over the next few months for buy-side recruiting.

-Any suggested resources / guides to read about the junior roles in PE, HF, and about specific shops?
-How to prepare for meetings with headhunters?
-How to prepare for PE & HF interviews (is it ok to pursue both)?
-How important is networking for buy-side recruiting compared to networking for IBD?
-What to be doing in the office to increase exit opp chances?
-Any specific types of funds to be targeting as a FIG analyst?

I realize these are a lot of questions, and I'm just curious to hear best practices from people who have successfully moved to the buy-side. While I have plenty of time until summer 2012, the recruiting cycle is actually starting fairly soon and I want to be on top of things. Thanks much.

From my understanding, it is best to have a decent idea of whether you want to do PE or HF as the recruiting processes are a bit different. Also, while you may be pigeonholed with regards to being a FIG guy (I'm one as well), you can still get an excellent buyside job. It's also helpful to know whether or not you want to do a FIG specific shop or generalist as HHs will ask you about this. Keep in mind that the majority of large PE funds (the ones we have all read / heard about) make FIG investments, most notably Carlyle and Warburg Pincus. Some notable FIG specific PE funds are JC Flowers, Lightyear Capital and Stonepoint capital.

Jan 4, 2011

Banker88: do you specialize within FIG? If so, what sub-vertical? I ask because your experience will be slightly different if you're a banks guy vs. insurance vs. fincos / specialty finance

Jan 4, 2011

ask the 2nd years and other colleagues / alum in the industry. they are much better sources of info.

also check out M&I for info regarding interviews, recruiting and headhunters.

I'm making it up as I go along.

Jan 4, 2011

Thanks for all the responses guys. To answer some questions: I would prefer a non-FIG-specific shop, and as an analyst I don't specialize within FIG. Trying to get experience across the various sub-sectors, excluding insurance. Why, are certain sub-sectors better to focus on for PE?

Anyway, this thread was not meant so much to focus on the FIG aspect, as it was just for general tips on preparing for buy-side recruiting. How did others on the board decide what types of buy-side shops to pursue? Unfortunately the 2nd/3rd years are not great sources (told you I'm not at GS/MS).

Jan 4, 2011

I think for the most part everyone has started to be contacted at BBs regardless of your group.

Jan 4, 2011

The reason I asked is because if you get to do a lot of specialty finance work, specifically on financial technology companies, these are "regular" companies with "regular" financials so you get a more typical experience in that you're building LBOs etc whereas your counterparts in the banks sub-sector won't do this since it's not really logical to "buy" a bank as a PE firm.

For PE, I think you have to make a decision on firm size as well as desired work responsibilities. From my understanding, megafund pre-mba associate positions are very similar to banking in that you're running a ton of analysis and are essentially a modeling monkey again (10kleverage, slayingalpha et al please correct me if I'm wrong here). With more MM firms, you will obviously be responsible for the analysis as well but i believe you get to delve into more of the operational aspects of portfolio companies (refer to some of Compbanker's posts on the topic). While some people think it's glamorous / cool to work at KKR ( I happen to be one of them haha), it really comes down to what you're interested in with regards to work experience as well as lifestyle as megafunds tend to have worse hours than MM shops. That being said, nothing in finance is every 9-5 but I think we're all clear on that already.

As for HFs, I'm a bit hazy on this. From my understanding, it comes down to understanding where your interests lie in terms of investing. Would you be more comfortable in a long / short style HF vs. macro vs. distressed vs. merger arb etc? A lot of the headhunters provide brief descriptions of the different HF investing styles but I'd also do your own research (I believe Mr. Pink Monkey had an excellent thread a while back detailing his HF experience). To go back to your background, I've heard that hedge funds love FIG analysts (no idea why but this is what I've heard) so in some ways, you may be at an advantage here.

My last bit of advice is to take a long introspective look at yourself Are you someone who follows the markets on a daily basis and track certain stocks / sectors? Have you had a PA for years? If so, you might be better suited for a HF. On the other hand, are you more like me in that you follow general themes but are more interested in reading about big-ticket M&A deals and LBOs? In that case, PE might be the route for you or perhaps....even a career in banking (GASP). Hope this is helpful.

Jan 4, 2011

Interested in this as well as I'm in a similar situation. I'll be taking TTS Financial Modeling later on in the spring.

Jan 4, 2011

Not proven, but this is what I do now.

Write stock reports and/or make presentations about stocks you want long/short, does not need to be 20 pages long (1-3 is enough).

I am a student and I want to be an investor. So after digging here and there, talking to people in the industry I came to the conclusion that nothing is better than to actually start doing the job that you want so bad (i.e. research companies, craft investment theses, do valuation, talk to people in the industry, and etc).

If this is what you are inspired to do, hit me up and I try to help you to get started.

Good luck!

Jan 4, 2011

Investment competitions, hands down. Your access varies based on your college, but as someone who has had a small part in organizing a few (and competed in half a dozen) if you find some in your area and contact the people running it you have a decent chance of being included no matter what your background. These are often sponsored by school investment clubs or sometimes finance companies (sometimes both). The trick is that you have to both know what you're doing and put lots of time in (more than anyone else). If you do this, have a well thought out pitch and demonstrate that you understand the company/industry, you have a decent chance of winning (dynamite on a resume). Even if you don't, you will meet tons of like minded people and build up a nice network.

Nothing else you do in undergrad comes close to helping you break into the buyside (or finance/consulting), in my opinion and experience. You can demonstrate skill and interest in a very tangible way at the same time. Now, if you're still in the learning phase (I'm assuming you're early on), you don't want to enter one of these things and get slaughtered. Join an investment club, read books, learn accounting, etc, but have an investment competition in mind as a goal if you can find and enter one.

Jan 4, 2011

investments pitching competitions, those might help. Other than that practice and nothing else.

Jan 4, 2011
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