Q&A: 3rd Year Hedge Fund Analyst

I've been reading WSO for years and it helped me out immensely when I was trying to figure out the best route to take in order to achieve my goals. Now it's time to try and return some of that value, so here goes. I'm currently a 3rd year Analyst at a $1 -$5Bn Hedge Fund. We focus on primarily on public equities with a relative value approach, but also do some private deals across the capital structure. I graduated from a target school with a 3.8 GPA and was lucky enough to join my current HF right out of undergrad (did standard ibanking internship while in uni). Anyway, I can answer questions about pretty much anything except raising capital and fund accounting, so fire away.

Comments (165)

Aug 1, 2018 - 4:26pm

I did get my CFA but It's certainly not required. I'd say maybe half of my co-workers are certified. I just didn't want it to be the one thing that could possibly hold be back at some point in my career so I took the pain and got certified.

Aug 12, 2018 - 2:11pm

Hey, I just graduated from High School, and I'm attending Baruch College. I know this school isn't ideal, I originally planned to go to UT Austin but my guidance counselor screwed the whole application up, I got into University of Michigan but it was just too much money. I'm telling you my situation because I want to transfer from Baruch to another Target school, but I would just like some advice on what I should do to have the best transfer profile. Also, what should I do to follow your footsteps in college to land into a HF.

Go ahead and JUMP!

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Aug 1, 2018 - 4:23pm

Something I try and ask those who go from banking to hedge funds but how did you position your experience in banking as a logical predecessor to joining a hedge fund?

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Aug 1, 2018 - 4:47pm

If anything, I used my banking experience to highlight why I didn't want to be a banker. In addition to being interested in investing, I discussed how things like alignment, critical analysis/reasoning, and the desire to keep digging until you really have a deep understanding of a subject are all very important to me, and how most work in banking is kind of the opposite.

That being said, having it on my resume helped get an interview and the experience itself helped me better explain basic finance concepts and derive implications when discussing more technical topics in the interview.

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Aug 1, 2018 - 4:51pm

If you don't understand something, ask, ask, and ask again until you understand (even if you're the most junior person). Chances are there are several other people in the room who don't understand either, and there's a good chance the person talking intended it that way.

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Aug 1, 2018 - 5:43pm

LMAO...I mean comp doesn't really matter to anyone does it? Pretty sure most of us here are just trying to make the world a better place. Let's just say it puts me comfortably in the 1%

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Aug 11, 2018 - 5:06am

would you say $500 is representative of the general HF industry (it seems like 3-4 years in)? It seems that banking is lagging a bit behind

Aug 1, 2018 - 5:04pm

Thanks for doing this - looking to potentially switch from PE to HF and so have quite a few questions:

  • What are you normal hours during the week? Weekend?
  • How do you split your time between (i) Idea Generation (ii) Pitch Making (iii) Other
  • How often are you working alone on an idea vs. with a manager?
  • What is your favorite and least favorite part about the role?
  • What skills/accomplishments do you need in order to get promoted?

Appreciate the help!

Most Helpful
Aug 1, 2018 - 6:03pm
  • About 10-12 hours per day. Rarely work weekends
  • I receive a ton of autonomy when it comes to how I spend my time, but I'd say I spend about 60% of my time staying on top of existing positions (talking to management/competitors/analysts, going to trade shows, reading, additional analysis etc.). 30% is researching and evaluating new ides (not generating the ideas, researching ideas from our ideas database). The remaining 10% is generating new ideas. When I first started, I spent almost 100% of my time researching and evaluating ideas (no existing positions under my name and not enough credibility to generate new ideas)
  • Most of the initial work is done alone. Then you bounce ideas off of fellow analysts and engage in some productive discussions/arguments. Once you feel comfortable you present and discuss with one (or more) of the managing partners. From there on, whenever anything of note happens, you generally discuss and evaluate with a partner.
  • To be honest, my least favorite thing is the travel. I really enjoy most of what I do, but 1 - 2 day due diligence trips to smaller cities can be quite taxing. There are of course benefits to travel as well, like when a trip to a decent city is either just before or just after a weekend ;)
  • No formal requirements, but I think the most important things are being able to quickly digest a lot of information and boil it down to a few really important takeaways (without missing key information), being able to cut through consulting speak to identify whether management is smart and has integrity or whether they're trying to sell the street a story and get paid more. Lastly knowing where to best spend you time. I think this last point is very important and is often overlooked. It's easy to get carried away in the weeds sometimes.
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Aug 1, 2018 - 6:08pm

usually less than 60hours and rarely on weekends.
there isn't really a cap on vacation time, but when you get paid based on performance, you learn to value your time. This by no means results in people not taking vacation, it just means that people are reasonable and don't take advantage of the lack or formal policy here. i think 3 weeks is probably a decent average.

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Aug 1, 2018 - 6:10pm

Hey bud,

Thanks for doing this. Want to get your take on how your fund approaches valuation and modeling?

I tend to eye-roll when a fund has a culture of modeling every line item given by the management (typically tends to be a fund with a lot of ex-bankers). Do you see value in detailed modeling? Or, are you at a fund where culture is "hey, I think this thing is trading cheap, and I think if X, Y, Z happen, this thing can trade at x times higher"?

Thanks again. Look forward to learning from you.

Aug 1, 2018 - 6:34pm

It's a little bit of both. We spend a lot of time building detailed models, but this is primarily to understand the true profitability of the company and analyze management's past actions. Accounting figures and Adjusted non-GAAP EPS/EBITDA can tell a very misleading story, especially once you start digging in to "one time costs", restructuring, "other adjustments", working capital, capex, etc. Add to that a slightly rosy version of the truth being told by management...This can be particularly important when they have made lots of acquisitions (have they created value of have they just spent shareholders' money and to get bigger).

Once you've become comfortable with all of that, it really gets more high level. Later on, running some different scenarios through the model can help with the discussion on when to sell.

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Aug 1, 2018 - 7:23pm

really rough estimate 20%-30% of analysts get one in. we're not very big, so statistically it's really not that relevant.
I'd say it's a similar path, the process just becomes more rigorous. First you have to get your boss to agree it's worthwhile to spend any time on whatsoever. Then determine, and later prove, that it really has the potential to be a good idea. If you think it's actionable, then pitch to whole team and have your thoughts and assumptions torn apart by the team, if consensus agrees with you , then you really dig in and do even deeper research. Then present to team again. There are often several iterations of this until everyone is comfortable enough to make a move.

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Aug 14, 2018 - 7:24am

Hi ActiveShare, thanks so much for taking the time to do this. I was particularly interested in learning more about what goes into the "deeper research'. Also, how much time do you usually get between the first pitch and the final pitch to the team? If the research process lasted too long, wouldn't you miss the trade? What's the holding period for one trade?

Aug 1, 2018 - 7:31pm

not really sure...there are no formal tracks, but I would imagine that with good performance, partnership is an option. The focus right now is on accumulating enough capital make a decent living investing my own funds. This would allow me to start my own fund relatively easily if partner is not on the table down the road.

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Aug 1, 2018 - 9:07pm

there really isn't a formal process. Sometimes a broker brings around the management team of a company you've never heard of and they appear smart, sometimes you see a company present at a conference and like them, sometimes you run a screen and find something interesting, sometimes you go to a trade show and keep hearing the same company name from various sources and determine that they probably have a pretty good competitive decision...

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Aug 1, 2018 - 10:17pm

Sorry, should have phrased it better.

1) Are you a bottom-up or top-down guy? From your reply, it seems like bottom-up, but I'm wondering how (or even if) you would look to play a macro/market theme thats on your radar

2) In which of the above processes have you found the most success/best ideas? From the shops we've worked with, it seems like this varies from analyst to analyst, and I'm always curious to see what works for different people

Aug 2, 2018 - 9:32am

If you can land at a good fund out of undergrad, I can't think of any rational argument not to. I think it's generally the case that you have to be at a target but I'm sure there are people from non-targets who were able to network their way in.
The reason is that a lot of smaller or mid- sized funds run quite lean in positions away from investing. As such, recruiting is a lot of work and narrowing it down is important so you don't have people spending all their time on that instead of doing what they were actually hired for.
Most important thing is to have a genuine interest and be aligned with the fund's strategy. If those things are true and you're smart and hard working, then everything else will fall in place.

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Aug 2, 2018 - 12:01am
  1. What was your starting comp? Not asking about your current comp, just what you started with as a 1st year.

  2. What type of strategy would you run if you had your own fund, and what fund philosophy would you have?

Aug 2, 2018 - 10:09am
  1. pretty similar to banking maybe a little heavier weighted to bonus
  2. I'd run a relative value based strategy similar to what we do here. I never would have gotten the position if I didn't believe it was the right approach (it's easy to tell if someone is BSing this in an interview). Not entirely sure what you mean by philosophy but I believe that in order to succeed, you have to have conviction, but never dig your heels in if evidence points to you being wrong. And you have to be willing to take some short term pain in favor of long term gains.
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Aug 2, 2018 - 6:53am

What is the background of other analysts at your fund (former IB/ AM/ ER, straight out of undergrad, target vs non-target etc.)?

How do you deal with stress related to the markets?

What about relative value appeals to you versus other investment styles?

What is the culture like at your firm?


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Aug 2, 2018 - 10:01am

It's a bit of a mix between straight out of undergrad, former bankers, and former consultants. However, it doesn't matter whether you have 3 years of banking experience or join right out of undergrad, you start in the same position. You won't get credit for past positions. The only credit you get is for how you perform here.

It's all mental...It takes a certain type of person to deal with the pressure...I used to play competitive sports and that helped me be able to deal with stress and pressure.

I believe that due to a flurry of factors (human psychology being a large one) most securities are mispriced at any given time. relative value lets you exploit that without engaging in the superhuman task of trying to forecast macro events.

everyone is aligned with fund performance so everyone is pulling on the same rope. Doesn't mean that everyone wants to go out and party together, but everyone wants everyone else to succeed. Also any thesis, assumption, or recommendation is fair game for criticism, even if its an intern criticizing a partner (as long as you can back up your criticism).

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Aug 2, 2018 - 12:30pm

How much valuation/modeling skills did you come in with from your internships? I am really interested in going down the HF path of a distressed or event driven strategy. I am going to be interning for my Junior SA at a top RX shop, and was curious to know if the experience from one summer is enough to make a jump?

Aug 2, 2018 - 2:23pm

I tried to improve my model skills as much as possible before my internship, so I felt well prepared. However, with a little practice, modeling is easy and is not high up there on the list when we look at hiring someone. It's a nice to have, but can be taught pretty quickly.

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Aug 2, 2018 - 5:03pm

thanks for doing this. can you talk about a call that you got right and your reasoning before the fact? i'm guessing you have a couple to speak to if your comp is 500k+

also, since it's topical, what do you think about eisman's long gm - short tsla RV trade?


Aug 2, 2018 - 5:54pm

can't talk about specific investments but the reasoning is rarely simple enough to briefly explain on a forum (our sales people don't even bother trying to speak about specific calls most of the time). Every once and a while the though process is really simple, but there's usually a lot more to it.

I'm very poorly informed on the GM - TSLA trade. I wouldn't enter into this trade because of the substantial downside in shorting something like TSLA that has such a large opportunity. However, if I had to chose between one or the other, I'd side with Eisman (especially now that TSLA has rebounded and GM is near 52wk low). Both companies seem terrible at producing cash flow, but TSLA is just burning cash like there's no tomorrow...at some point even Elon Musk will be challenged to raise capital at a reasonable cost.

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Aug 2, 2018 - 7:58pm

What's your opinion on jumping straight to the credit arm of a large MF PE firm (GSO, Ares, Apollo) out of undergrad in comparison to doing banking with the end goal of ending up at a value oriented or distressed/special situations hf?

Aug 3, 2018 - 9:59am

Not sure I'm entirely qualified to answer but I'll give you my thoughts ...

I think that a value oriented shop will be looking for something completely different than a distressed or special situations fund. I think working at the credit arm of a large PE player would make sense for the latter, but would not be very applicable for a value oriented shop.

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Aug 3, 2018 - 9:24am

I work in a back office of big US financial company in Europe. My dream is to get to some hedge funds (or even investment fund), I was trying to send my CV few times to one hedge fund but they have never even open it (via online agency, you get information once they open file). As of now I have pass CFA level 1 exam. Any advices what to do in order get to to the place where you are right now?

Aug 3, 2018 - 11:56am

I'm going to be very blunt and honest. You will have to do a lot more than just sending you CV to one HF "a few times". Given your background, you will be fighting an uphill battle. If no one at the fund has spoken with you and likes you, it is highly unlikely someone with your resume would be considered. Just consider how many investment bankers and high performing new grads are applying to the same funds. Without knowing someone at the fund, you need a very strong GPA from a well known university, coupled with investment banking, private equity, consulting, or other investment fund experience in order to receive any consideration whatsoever.

Here's what you need to do: read a lot about investing and finance, and develop your own investing philosophy. Think about it and come up with what you think is the best way to deploy capital. next, start reaching out to as many people as you can who work in the industry. Try to meet up with them and have face to face conversations. Ask their advice, talk about investing and how you think about things compared to them, etc. etc... careful: don't be arrogant and think that just because you spent time thinking about your approach and because your method would have achieved good results over the past few months or couple of years that it is the best approach (or even a good approach). use the opportunity to learn about other ways, get feedback on your thinking and continue refining your thoughts. As you go through this process, your conversations will improve and someone may be impressed and like you as a potential candidate. Apply to firms once you've had at least one interaction with someone there (if you're from out of town, try to set up a trip to meet several people over a couple of days). Thoughtfulness and adaptability are a lot more important for this type of role than it is for investment banking roles, where the main requirements are often work ethic and fit.
If you've been out of school for more than a year and have only passed CFA level 1, then that will be held against you. So if that is the case, don't highlight it. If you're a fresh grad then it's ok to show.

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Aug 3, 2018 - 5:33pm

Thank you for all the advices! Do you have any books/pages which you could recommend?

Would you also recommend me to work on next CFA's levels or get some local Investment Advisor certification (in Poland I would get Polish license once I would have 3 CFA levels passed + 4 year of experience in Investment Advisory, to get only Polish certification I would have to pass 3 easier exams which I can make in about a year and no experience is required)?

To give you a better understanding of position, I'm 25 with bachelor's and master's degrees in Finance from top university in my part of country. There is also only 1 HF in this part of the country (t's still pretty uncommon in Poland, there are more of them in a capital city, I am considering moving there).

And here is my last question - if HFs were not very common in your country, would you think about moving your area of interest to for example private equity?

Aug 3, 2018 - 10:09am

I have some questions about your thoughts on the future of the hedge fund industry:
1. How do you think research at traditional non-quant funds will be affected by automation / AI? Do you think it will eventually begin to replace human jobs or simply be used as an aid to analysts?
2. Given that most hedge funds underperform over time, do you see the industry shrinking over the long-term?

Aug 3, 2018 - 12:10pm

Well I think that AI will be an aid to analysts, but by default this means that it is a threat to human jobs, since you will need less people to do the same work.

The idea that hedge fund underperform is in and itself a fallacy. What do they underperform against? articles love to tout that an index fund would have beaten most hedge funds over the past 10 years. the problem with this is that the index is not a benchmark for most hedge funds. most hedge fund mandates are not to generate a better return than the index, they are to limit downside risk. Also, the last 10 years have been a very unusual time with extremely low volatility, so it's a bad time frame to use when evaluating.
Despite this, I do think you will see the HF market shrink and the fees compress overall, as there are many bad fund managers charging 2/20. However, there are also many mangers who will continue to raise more money and will continue charging 2/20 (or more). Just like in any other industry where supply has increased substantially, there will be a consolidation period where some exit the market, others start competing on price, and the few with a real product advantage make all the profits.

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Aug 3, 2018 - 11:24am

Curious as to your recruiting process - touched on it a little in the original post.

Say for someone in an IB role currently as a summer looking to explore the investing HF side potentially out of UG, what's the best approach?

Aug 3, 2018 - 12:12pm

take a look at my reply to Piotr-M just above. You're in a better spot than him, but the process would be the same.

Aug 6, 2018 - 1:08pm

The thing that appeals to me about HF vs. PE is that you have more flexibility in what you invest in, and you get presented with mispriced opportunities far more often. In PE you're generally buying from and selling to well informed sophisticated parties. If you're looking at public markets, the chance that an asset becomes mispriced is a lot more likely.

Right now I'm just focused on doing the best job I can and learn as much as I can. I don't see myself moving to a different fund, but whether I stay at my current fund for my career or open my own fund depends on a myriad of factors that are impossible to predict at this point in time.

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Aug 6, 2018 - 12:32pm

Have spoken to a few analysts at top funds (gotham, tiger global) and they said that for valuation, they usually don't use dcf and use comp analysis because of the time frame of holdings and complexity of a dcf. Is there any particular approach you take while valuing businesses?

How much loss do you wait out until closing positions where the stock's going in the opposite direction of your thesis?

Will be interning at a fund this coming fall, any tips on how I can network efficiently to leverage that to a summer at a hf and then eventual ft role? Or any tips on networking in general?

Aug 6, 2018 - 8:39pm

it depends on the thesis/rational for the specific investment. If we find the right company we will at times take a very long term approach. In that scenario we will use a dcf. but if the thesis is expected to play out within the next couple of quarters or even year, then a dcf is somewhat pointless (can be used to support a multiples approach).

we don't think about it in terms of how much loss we're willing to wait out. We'll maintain (or increase) a position until something changes that indicates we were wrong.

In terms of networking, I think it's important to have read a lot about investing and have a well thought out investment approach that you believe in. That way you can have a productive discussion. Just don't get caught thinking that simply because you've spent a lot of time thinking about it that there's nothing that can be improved about your approach. Be open and use your networking discussions to improve your philosophy and with that improve future discussions and interviews. You'd be surprised how many people I sit down with and they say that they're really interested in the industry but haven't really thought about what how they'd approach investing...either you're lying about your interest or you're really damn lazy. either way, it's a big ding.

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Aug 7, 2018 - 3:50am

One more question, I'm interested in relative value because, correct me if i'm wrong, it combines value investing and catalyst/event driven investing and could be played out over a shorter time frame period than compared to traditional value investing, maybe not always but maybe most of the times? hence easier to exploit?

Do you have any funds I should be looking at or any other resources I could use to learn more? I try to look up holdings on whalewisdom and try to work those backwards sometimes to help me generate ideas for pitches I work on. I'll also try to network at those funds

Aug 6, 2018 - 2:35pm

can you talk about an investment idea you had, where you were wrong...
what did you originally think?
what did you miss?
why were you wrong?
when did you know that you were wrong?

just google it...you're welcome
Aug 6, 2018 - 9:35pm

Why you gotta hurt me like that? jk failures really are the best learning opportunities...

can't be specific, but a smaller company that had a very valuable software product for a core group of about 30 large companies. The CEO was a large shareholder himself, and was very passionate. The CEO wasn't that strong financially, but the CFO seemed quite strong. they were just getting starting with a lot of room to increase penetration with their core customers and possibly adapt the software to be valuable to smaller companies or companies in other industries.

Growth was good and margins were strong for quite some time. One day, the CFO left "for personal reasons" and an internal guy was promoted on an interim basis. We reached out and he confirmed that he left for personal reasons. Of course this doesn't really mean much, since termination contracts often involve clauses around saying anything that may be considered as negative towards the former employer. For the next couple of quarters, growth actually accelerated slightly, but margins and cash flow were weaker than expected. This was attributed to inefficiencies due to higher demand resulting in more implementations (overtime, additional contract workers, etc.). The street actually loved this and the stock went up a lot. We still liked their growth prospects, but the weak cash flow and apparent execution weakness made us uneasy, so we sold about half of our position here.

However, then growth decelerated and margins did not improve like they should have with lower growth. As a result, the stock started to weaken rapidly. Shortly after, they made an acquisition that did not appear very savvy. They paid a high revenue multiple and because of their weak cash flow, they had to issue both debt and equity to do the deal (remember, their their stock had been weak). At this point we bailed. It appeared that the interim CFO was too weak to stand up to the CEO.

We later found out that the their customers had started asking for discounts so they could increase the speed of roll-outs and make up the lower price with higher volumes. CFO thought that was a bad idea (CFO was right). CEO loved the idea of accelerating growth and pushed the CFO out. Their customers started smelling blood when they were willing to discount and then when their cash flow weakened, their customers got even more negotiating power over them, so the discounting increased (they couldn't afford for their customers to not make an order in any given quarter). The CEO panicked and bought another company with valuable technology to those same customers. He hoped to combine the two products and get away from discounting again. This may have worked out if they had more time (I doubt he would have been able to execute on this but who knows), but shareholders and debt holders were had lost faith in them and they were eventually forced to sell themselves for about 30% less than we had put our original position on for. Thanks to trimming our position early on it wasn't quite a painful as it could have been, but it was pretty bad non the less. The board in this case was full guys from their VC funding days who valued growth over anything and either agreed with the CEO or didn't want to stand up to him.

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Aug 6, 2018 - 9:41pm

Awesome, where do you do your research to scan for companies like this?

What concert costs 45 cents? 50 Cent feat. Nickelback.

Aug 7, 2018 - 6:18am

oh lol. I actually came across a chinese company when I took part in a trading competition in feb. I'm assuming that they have a similar story like the company you talked about - ceo hasn't changed since the company went public, but cfo has changed at least 2-3 times and all of them left for "personal reasons." All of the cfos were internal guys. price is up 800% since the last year, and they have a sketchy history (underwriter history, auditor history, alleged auditing malpractice, etc.). It's can be a really interesting short - I modelled a fair value about 80% below current price but it has low float so very risky too.

Aug 6, 2018 - 7:56pm

What technical resources did you use to prepare for the technical questions?
Any advice for someone nearing their second year of banking thinking of lateraling into the industry?

What concert costs 45 cents? 50 Cent feat. Nickelback.

Aug 6, 2018 - 9:37pm

I used the standard technical interview guides for my internship interviews. For full time I was confident in my knowledge and didn't do any technical prep at all.

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Aug 10, 2018 - 4:08pm
  1. certainly not out of question for us, but we won't actively recruit from there. The reason is simply that recruiting takes a lot of time and we'd rather spend that time making money for out investors. We want to target as few schools as possible that are conveniently located and offer high quality candidates. We are not in a situation where we have to hire someone each year, so if we don't find a good candidate for a year or two, that is ok.
  2. Someone with that profile would have to make an effort to demonstrate that they are a good candidate. If I simply got a resume from someone with that background it would land in the waste basket. Again...this is in the interest of time. you have to understand that we get hundreds of resumes and simply don't have the time to talk to each candidate and find out if their a good candidate or not. About 30% of applicants have an obvious background (PE, HF, banking) and that is still too many to interview, so if you're background is not an obvious fit, you have to reach out, talk to someone and make a good impression to be considered. No one can determine you knowledge from books/clubs/personal accounts (everyone claims great success in their PA) without talking to you about investing and finance and seeing how you can think on your feet.
  3. No
  4. If you decide that investing is for you, learn as much as you can by reading and talking to people. That way when you network, your enthusiasm will come through and you'll be able to have an intelligent discussion. Being an academic is not very helpful in this industry but you can tell if the person you're talking to has spent a lot of time thinking about investing or has just done a bit of last minute prep. Good grades are a must, but excellent grades are far less relevant than being interesting and having some life experiences to talk about and learn from. We love hearing about times you completely messed up but were able to pick your self up and learn from it...
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Aug 9, 2018 - 9:35pm

Hey, thanks for doing this - I learned a lot reading your responses to other questions. Not sure if you're still answering questions, but I had two for you:

  1. You've repeatedly mentioned it's critical to develop an individual "investing philosophy" and "process". Can you expand on what this means? Do you mean like (i) develop a screener (ii) read their 10K/Q (iii) build a model, etc.?

  2. Coming from S&T (the trading side), would it be possible (and realistic) to join a hedge fund as an Analyst? Or is this wishful thinking and I'd only ever be considered for an execution trader role at a hedge fund? I don't have any special coding skills, just a love for the markets who couldn't get an IB job out of undergrad.

Aug 10, 2018 - 4:26pm
  1. I mean read about different investors and how they think about investing, talk to people about investing and then start thinking about how you would invest $100MM. What asset classes would you invest in AND WHY? how would you think about what percent you'd allocate to the various asset classes AND WHY? Within each asset class, how would you determine which specific asset to purchase (or short) AND WHY? When would you decide to sell an asset or even an entire asset class AND WHY? High level, that will be your philosophy/process.
    How you'd go about researching or finding the actual investments is secondary. First you have to know what you're looking for and have a well thought out reason why you're looking for it.

  2. Not impossible but very tough. I'm going to over generalize here (and maybe be a little blunt?) just so that you can get a sense for some of the preconceptions you'd be up against. In general, Traders tend to have very different priorities and thought processes and attention spans than investors/analysts. They often lack the intense need to dig and dig and dig until they fully understand everything about a specific investment. They often overvalue small but instant gratification of a successful trade quickly executed over a longer term thought out thesis that has been painstakingly researched over months.
    coding skills are not necessary most places but comments such as a "love for the markets" would act as a confirmation that you're a trader at heart who sees tickers and charts and not real companies, strategic decisions, value creation, and profit dollars.
    If you want to move into an analyst role, you will have to take an active role in combating these preconceptions.

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Aug 11, 2018 - 11:38pm

Can you elaborate on why a "love for the markets" is mutually exclusive from investing? I'm not interested in technical analysis (nor do I employ it at work). Our team starts with a macro view, but then narrows to sector-specific impacts when when trading and pitching ideas to the buy-side.

Sure, we don't build full valuation models, but I'm not sure I agree with your comment that a love for markets means we don't analyze strategic decisions, value creation, margins, etc.

Aug 11, 2018 - 7:04am

I'm heading into a masters degree in Finance this September, and am hoping to score an analyst position after. This sounds rather general and undecided, but I love to work when I can dive into a topic / a pool of information and learn about it as much as I can.

My question goes towards a specialization in my masters degree. They have two options, corporate finance and asset management, and I am tending to lean towards corporate finance, as AM track will only provide me with some risk analysis tools I know, and some more bs on comparing investment performance.

Do you care about choices like these when you look at a candidate? And do you actually need to worry about riskiness / volatility estimation at your job (I would not think so)?

Aug 11, 2018 - 12:34pm

I'd tend to agree with you. the AM track appears to be more relevant to a back office role.

In general we don't care too much which track you take. However, if there's an investment club, student run fund or something like that, I'd highly recommend that you take on an active role.

I absolutely have to worry about riskiness! you can't be an investor without thinking about the risk. However, volatility is not risk....it sounds like the risk you'd learn about in your program is highly theoretical and only relevant to back office roles.

  • 2
Aug 11, 2018 - 12:12pm

What do you think would be the best division to intern at during an industrial placement year whilst at uni? Does it strictly have to be IBD, or do you think you'd have just as good a chance of transitioning into a HF with an internship (at the same BB for example) in Asset Management, Equity Research or Sales & Trading? I would've thought being an analyst in AM and ER are quite similar to what an analyst does day-to-day at a HF, am I wrong? Thanks

Aug 11, 2018 - 12:25pm

IBD is definitely the best route. the experience you get during an internship is really somewhat irrelevant....it's too short and you're not going to get to work on anything really tough or meaningful. However, in general it is harder to get an IBD internship and as such it screens better when skimming over resumes.
I'd also like to point out that working AM or ER at a BB is indeed quite different from working at a HF (and S&T is wildly different)...we'd rarely consider someone with one of those backgrounds because of "bad habits" attained. unless they are specifically looking to switch because they don't agree with the research process, philosophy, and priorities at their current job

  • 4
Aug 11, 2018 - 1:11pm

Oh wow, seems I had got it all wrong. Thanks very much! Invaluable timing as I'm on the cusp of applications for recruiting season and need to decide what area to apply to. Is there a particular IB division that stands out as better than others? i.e. M&A favourable to Corp Finance etc...
Really do appreciate it.

Aug 12, 2018 - 12:40pm

Do you think it's better to pitch a micro/small cap in fundamental interviews, or something the fund would actually deploy capital in? In addition to there being less efficiency in micro caps, my experience is that it's easier to get a very granular understanding of the business (because it will often have only a few products and/or a very straightforward business model). But not sure how important it is to stay within the fund's investable universe.

Aug 13, 2018 - 3:34pm

I highly recommend pitching something that's relevant to the fund. If not it will be a very bring and one sided discussion. There more the interviewer knows about the company you're pitching, the more engaged they'll be. Doesn't matter if you end up with a different view on the stock or if your interviewer actually knows it better than you (he does this for a living after all).
The assumption is, that if you're pitching something small and obscure, it is because you didn't spend a lot of time researching the pitch and didn't want to talk about something your interviewer may know.

  • 2
Aug 13, 2018 - 4:59pm

You mentioned that your shop looks down upon those with experience at either sell-side ER or close-indexing asset management due to the bad habits developed. Do they also look down on buyside ER experience at HF's that have a different investment philosophy? Are they only poaching talent from a pool of firms with similar investing strategies? Or are they trying to only hire brand new talent?

Aug 13, 2018 - 5:09pm

good question. the truth is somewhere in the middle. It's a balance between just acquiring raw talent and acquiring someone who believes in our general philosophy and knows what to look for to succeed with our strategy.
We have in the past hired people from funds that have a completely different philosophy, but only because they wanted to switch here specifically because they were personally not aligned with their current fund's philosophy.

I can't stress enough, that is incredibly difficult to succeed somewhere when you don't truly believe in the fund's investment philosophy (of course there will be differences around the edges). - This is why it is so important to come up with your own (at least high level) philosophy before considering which funds to apply to.

  • 3
Aug 14, 2018 - 12:20am

when you perform analysis, how much of the information you use is privileged (whether through cost or access) and how much would you say is generally available through public filings?

at what point do you have conviction on an idea and decide to present to your PM or pass up channels?

would you say you're most often looking for value between two securities in the same industry? or will your hedging get more creative?

say you lost your job tomorrow, how might you look for excess returns as a retail investor? do you feel confident you'd succeed without the infrastructure around you?

Aug 14, 2018 - 12:27pm

the most most valuable information is publicly available, but getting access to management and such obviously requires a reasonable amount of AUM or a lot of tenacity. some things like industry reports require a subscription, but you could get by without them without much trouble.

not sure how to answer this lol at the end of the day you try to maximize your worth to the fund. If you keep on bringing things that aren't ready, you're wasting everyone's time. If you consistently spend too much time on something then you're just unproductive. It's just a judgement you've got to make for yourself.

I think that's the most common case, but not exclusively. could for instance also be between different types of securities for the same (or different) company.

no. I might, I might not. I'm confident that I wouldn't fail miserably, but I couldn't confidently predict whether my returns would be average, below average, or above average. It would certainly be harder without the infrastructure low trading commissions etc. My portfolio would also be very concentrated because I don't have enough time to research a lot of positions all on my own. Also still have plenty to learn.

  • 5
Aug 14, 2018 - 7:53am

for a current research analyst (myself) who has a goal of working in a hedge fund, what would you say is the most important to focus on to get there? do you think getting the CFA significantly improves the chances? Especially if the person did not go to a top school (me).

Aug 14, 2018 - 10:20am

most important thing is to work on your personal investing knowledge and develop a solid investing philosophy that you believe in, and then continue improving it as you read more and speak to people.
CFA will NOT significantly improve your chances - debatable whether it would improve them at all given that you're already working as a research analyst. I would like to say that once you've graduated and you're out in the industry working, the school you went to doesn't matter any more and it's all about you're personal performance. However, I think that, unfortunately, school pedigree will follow for a long time in some way or another. Won't necessarily be held against you, but will benefit people's perception of your competition that has a big name in their resume. - The efficient market hypothesis most certainly does not hold true when it comes to recruiting.

  • 5
Aug 14, 2018 - 2:01pm

Hi, nice thread. My turn:

  • What tabs do your excel files have? (BS-IS-CF, comps, debt schedule, etc)
  • Do you use DCF or multiples?
  • How many years do you forecast?, if applicable
  • How do you reach your range of target price? (tweak some margins, apply some growth, etc)
Aug 15, 2018 - 10:10am
  • There is no standard. this changes based on the company and what's important. BS, IS, CF, DCF (levered and or unlevered), and Comps are always there, as are management incentives (what metric they get paid on and how they've performed on those specific metric vs. other important metrics), debt schedule is rarely relevant, analysis of acquisitions they've done in the past, competitor performance....
  • both for different situations
  • depends
  • far too many variables to list and which ones are relevant depends entirely on the company... There is no one size fits all in this industry, you have to be able to determine what's relevant and adapt.
  • 4
Aug 14, 2018 - 7:17pm

Did your ability to handle emotions (esp. when prices move a lot) change or improve as you worked more? How did the growth curve look like there?

Aug 15, 2018 - 10:18am

Yes, I think the more you're exposed to tough situations, the better you get at handling them. the growth curve, like most places, is very steep and without much guidance. You don't get training on things that a reasonably intelligent and motivated individual could figure out on their own. This makes it more fun and challenging, while not wasting senior peoples time. Also helps separate the wheat from the chaff ;)

  • 2
Aug 15, 2018 - 1:38pm
  • Do you use Bloomberg terminal to extract all the data? what sources if else (company website?)
  • What/how many files have you saved in a folder for any company you follow?(eg: for Google maybe u have last 10Ks and Qs in pdf, industry reports, excel model., etc
  • How do you divide your time on quantitative/qualitative analysis?
  • If you see a stock for the first time, how do you determine if it's worth to look into it or not?
  • Your worst error?
  • Your biggest win?

Thank you,

Aug 16, 2018 - 3:36pm
  • don't use Bloomberg data as it is unreliable and you it prevents you from understanding what the numbers actually are (what do they include/exclude, what adjustments have or have not been made, etc...) Also, that would take away a lot of the fun work for interns ;)
  • all 10Ks and letters to shareholders that you can find (up to say maybe a max of 30yrs). 10Qs, industry reports, analyst reports, relevant article, credit agreements, presentations conference call and presentation transcripts and such probably for latest 5-8 years.
  • too interconnected to separate. Can't really do one without the other
  • depends how I come across the stock. could be that management appears smart, could be that their financial show strong returns, could be another investor said something interesting about them, etc..
  • nothing massive up until now (knock on wood) would say maybe getting too carried away with minute details and losing track of the big picture
  • getting a name in that made us lots on money
  • 5
Aug 17, 2018 - 8:41am

- don't use Bloomberg data as it is unreliable and you it prevents you from understanding what the numbers actually are (what do they include/exclude, what adjustments have or have not been made, etc...) Also, that would take away a lot of the fun work for interns ;)
- all 10Ks and letters to shareholders that you can find (up to say maybe a max of 30yrs). 10Qs, industry reports, analyst reports, relevant article, credit agreements, presentations conference call and presentation transcripts and such probably for latest 5-8 years.
- too interconnected to separate. Can't really do one without the other
- depends how I come across the stock. could be that management appears smart, could be that their financial show strong returns, could be another investor said something interesting about them, etc..
- nothing massive up until now (knock on wood) would say maybe getting too carried away with minute details and losing track of the big picture
- getting a name in that made us lots on money

You will work through 30 years of 10K's?

Aug 15, 2018 - 10:07pm

I'm also an IB intern looking to get into HF straight away. What's your best advice (blogs to read, things to think about, classes to take, etc.) to distinguish yourself in an HF interview straight out of undergrad? Appreciate any advice you can give. Thanks!

Aug 16, 2018 - 3:48pm

I've written about my advice a little further up. Haven't identified specific things to read since I think there are plenty of good books to read and a lot of lists of must reads. Not sure my list would be any better, more useful, or even that much different from what you've probably seen all over the place but i'll throw a couple suggestions in at the end. I don't really read any blogs as I haven't found any that I really find valuable. classes obviously depend on your college, but anything finance, accounting, or investing related.
Some of my favorites - by no means exhaustive and in no particular order:

Irrational Exuberance - Robert Schiller
Common Stocks and Uncommon Profits - Phil Fisher
The Most Important Thing - Howard Marks
Fooled by Randomness - Nassim Nicholas Taleb

  • 3
Aug 18, 2018 - 3:13pm

Hi ActiveShare, thank you for giving back!

1a) Upcoming 2nd Year finance UG, from what I've gathered from your responses, IBD is the least worst place to be to move into a HF. I'm doing a Summer internship this coming year but have no insight days or any finance work experience, if i cannot get an IBD placement, what do you recommend is next best? The idea being to crack into a HF straight out of UG.

1b) If a HF internship is better, should i be prepping myself to pitch at least a basic idea and learn modelling etc, to attain this placement? Time frame 3 months

2) Say i find my philosophy, investing style, would cold emailing HR and fund managers with CV, Cover letter, 1 shorter side (length i mean) stock pitch and 1 longer side stock pitch be sufficient to get interviews?

Lastly, can all this preparation for Q2 be done in two years by the time i graduate?
Of Course, i'm desperately trying to find finance related work experience right now to have a better chance for the appropriate summer internship.

Thank you, and I wish you the best with the partner/solo mission coming up on the horizon

Aug 20, 2018 - 3:01pm

1a) Probably consulting or AM

1b) For an internship I'd focus more on knowing at least 3 stocks that you can speak about intelligently. make sure the names you know are at least somewhat relevant to the fund (i.e. no micro caps if they invest in mid-large caps, no international if they focus on US, etc.). Don't have to be a buy, but you should have a recommendation on each (buy, hold, sell) and be able to speak about them in quite a bit of detail (management, returns, margins, history, main driver, etc.) You should understand how models work for the interviews, but you can focus on improving your actual modeling skills after you've secured the position. It's very rare to be tested on modeling during internship interviews but you should be pretty good once your internship starts so you can make a good impression.

2) Unlikely. We get a ton of cold emails with exactly what you described. Reach out to more junior employees and try to meet with them. Your preparation for these meetings should be similar to the interview prep above. Send them your CV and pitches after speaking with them so they can look over your work after already hearing you speak. This path shows more initiative and is more likely to get a response, but don't forget or be scared to follow up. emails from kids wanting to meet up frequently just get buried or forgotten if they come while i'm busy or traveling.

Lastly) depends how hard/quickly/efficiently you work and learn. If you can't get it done in two years, you'd likely have a rough time convincing me that you deserve a shot at a HF though ;)

  • 8
Aug 20, 2018 - 11:52am

Thoughts on growth vs value vs cyclicals, or is this a function of your fund's philosophy?

Do you think a great management team is more important than being in the right industry?

What are criteria for shorts? Based on relative over-valuation/pair-trades? Fundamentally broken business models? Quarterly informational edges (i.e knowing company will miss consensus estimates)?

How do you think about where your edge lies? Informational (proprietary data, market flow information, gauging market sentiment and whats priced in), or analytical (spotting beneficiaries of secular growth, doing more granular work on the operational model vs the street)?

When you pitch an idea, are you expected to have a view on structuring/execution - i.e options, technicals overlay



  • 2
Aug 20, 2018 - 3:27pm
  • imo if you do value properly, it includes both growth and cyclical components. growth prospects can be factored into value (not speaking graham style cigar butts). and the same is true for cyclicals if you do a decent job at estimating what point in the cycle we're at.
  • depends. on average, yes. the market is generally good at acknowledging that a company is in an attractive industry and as such they are often fully valued. A diamond in the rough on the other hand can often be priced attractively. Also, a lack of capital discipline by a company in an attractive industry can easily destroy value or only create minimal value over time.
  • could be any of those except for the last one, although we'd look at them all in the same way, as being relatively overvalued. ex. If a broken business is trading at the same valuation as a good one, it's relatively overvalued since their earnings will grow slower or decline.
  • more analytical. a lot of investment decisions tend to be influenced by emotion (fomo, herd mentality, etc.) and being able to identify that and just stay away from emotional decisions is a surprisingly significant advantage.
  • generally we're expected to come prepared with our recommended execution strategy, but if it's time sensitive it's better to bring it forward and get the team to help than wait too long.
  • 6
Aug 20, 2018 - 3:30pm

imo it's reputation and on campus recruiting (generally go hand in hand). most of your learning will come after you graduate. You want the best opportunity to get in front of as many high quality employers as possible. If you're smart and a hard worker, you'll be able to shine in interviews and on the job.

  • 1
Aug 20, 2018 - 1:27pm

Is it just age discrimination playing a part in not getting a look from most hiring managers? Or is it because my experience, MBA, and soon acquired MS are not the right pedigree? If you have had a successful "first half" of your career (at least monetarily and academically), where do you think the best fit for a trader/broker/accountant/investment manager/customer relationship manager/and whatever other title/hat a small business person holds would be?

Joseph Santagata
  • 2
Aug 20, 2018 - 3:44pm

Would have to know more, but accumulating degrees can be perceived negatively (far more so than age), especially if they're from second tier institutions. Knowledge gained in school is such a small portion of what is required. Funds want to find the smartest people, so they go to the schools with the best reputation that are the hardest to get into. Target universities are simply used as a filter to get to the smarted people, not because they think the students there will get a better education and will know more finance theory after they graduate. As such, additional degrees are really not that valuable. It could also be that you're simply sending in your application and waiting for a reply, whereas your competition is actively reaching out to employees and trying to meet with them to showcase themselves, and demonstrate initiative and enthusiasm.

As for the second part of your question...do you have experience in all of those fields? If you've had good success monetarily and are interested in investing, why not try to go at it as your own boss and live from investing your own money?

  • 5
Aug 20, 2018 - 9:17pm

Hey there

Just curious, what newsletters or blogs are you reading on a daily or weekly basis to stay up-to-date with current global macro situation (US-China trade war etc.)

Aug 29, 2018 - 5:34pm

nothing in particular...get research from all the banks, read bloomberg, reuters, etc...try not to focus too much on noise unless it would really have a significant impact on a company's long term competitiveness. In this day and age, a lot of it is noise and the news and economist sentiment on macro situations can do a 180 over night

  • 1
Aug 20, 2018 - 10:56pm

I come from a similar background, and am lucky enough to be joining an HF out of undergrad come FT. A few questions (apologies if you've answered these somewhere in here, the thread is really long):

  • What's your take on multi-manager v. single manager? What type of fund are you at and how do you think the velocity of idea generation affects your process?
  • How has your work changed since your first year on the job?
  • Any regrets jumping straight to HF?
  • Thoughts on staying at the same firm for long stretches of time? Pros and cons v. moving around? I know some people prefer to lateral between companies and industries, but I think I'd be inclined to go FT at the place I summer'd at and stay there for the long-run.
  • 1
Aug 29, 2018 - 5:50pm

first of all, congrats and I hope you absolutely kill it!

  • I'm at a single manager and I like it that way. Get to focus on and get aligned with one strategy that I believe in. I think it also simplifies performance evaluation and internal politics.
  • Hasn't changed that much...I spend a lot less time building models myself and spend more time traveling and meeting with management teams. I have more of a voice in meetings and investment decisions and have more freedom in determining what I spend my time on and what I push to the side.
  • None whatsoever!
  • I'm a big believer of staying long term. If you identify and join a good fund, then the only reason that I can see to jump to another fund would be if you're not performing, and as such not getting paid well and not getting the promotions and respect you want. You can generally get a promotion, signing bonus, and /or salary bump out of a lateral, but if you're performing at your current fund, performance comp would more than make up for it, since it really increases as a result of trust earned over time. At this point in time, I think I'd only leave to start my own fund.
  • 6
Sep 4, 2018 - 1:03pm

Thanks for the kind words and advice. Great to hear that you're getting more involved in meetings, conferences, etc. Honestly seems like one of the more interesting bits of the job. As for the point about staying long-term, I'm glad you said what you did -- I've now heard this from multiple people, and I feel like it rings more true each time a voice is added to the chorus.

Aug 22, 2018 - 7:17am

Thanks a lot for giving some of your time. I'm an investment banker considering a move to HF and had a few questions:
- Did you IB internship bring you valuable skills for your current position?
- What was the interview process like?
- How do you come up with your short ideas?

Thanks again

Aug 24, 2018 - 2:29pm
  • No.
  • First round was about 2hours spread over two interviews with different people. Second round was about 6 hours long and included a case study. Most discussions were conceptual and tried to get an understanding for my thought process as opposed to testing technical skills. Technicals required for finance are really not difficult and if an otherwise ideal candidate isn't techically strong, they can easily learn technical skills on the job.
  • Everything comes down to (relative) value, so coming up with a short is no different from coming up with a long. instead of meeting a management you think is smart, you might meat a team that seems to either not understand capital allocation or is only interested in getting bigger so they can justify a higher salary. Often you find a long and in analyzing competitors in the industry, you quickly find a potential short.
  • 3
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