Q&A: Buy-Side Analyst

Hey All I'm wrapping up my first year on the buy-side and I'm using this platform as way to reflect on the past year. Happy to pay it forward to those that would like advice or have any questions.

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Comments (83)

Jan 26, 2017 - 7:13pm

I look at it this way: no amount of water can turn that grass green if you don't find solace in what you do. Most people entering the industry don't experience a double digit drawdown the first month in like I did. It will humble you very quickly.

I never went the traditional IB, PE to HF route, but I will say my fund offers me autonomy, flexibility and balance. As you get older, you'll understand how important it is to find all three.

My boss started his fund because he was sick of the bureaucracy at his prior fund. We get in early and leave when the market closes, but that doesn't mean I'm not at my home computer at 11:30 modeling or reading. Weekends are my own, though we both end up reconvening on Mondays with more insight and knowledge than we had on Friday.

If you have the time, try to learn outside of finance. Most creative thinkers look outside their respected fields for inspiration - no different in finance.

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Jan 26, 2017 - 4:25pm

asset class? industry focus or generalist?

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Jan 26, 2017 - 8:11pm

Industry agnostic/generalist. Those with an industry focus, from my experience, operate and look at things from a subjective POV. From my experience, outsiders tend to be less biased which is helpful when you need to look at something objectively . Others will have a different opinion, and I'm sure I can agree with them in some fashion, but for me, being a generalist eliminates that bias.

Jan 27, 2017 - 5:42pm

Thanks for doing this AMA. I'm wondering if you could expand a bit on this point so I make sure I understand what you're getting at. Could you elaborate on the subjective POV and also the bias(es) you're referring to and why outsiders are less biased? An example would be great!

One other question on industry specific vs generalist. On the flip side of being less biased as a generalist, do you think it takes longer to take each idea from start to finish because you may need to spend more time learning the applicable elements of the particular industry and not just the company, whereas an industry specific analyst would already know what's going on with the industry?

"Successful investing is anticipating the anticipation of others". - John Maynard Keynes
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Jan 28, 2017 - 8:32am

as an industry-focused guy please invest in my sector. generalists in my experience are really bad at modeling companies in my space and lack the knowledge to really generate alpha

"My dear, descended from the apes! Let us hope it is not true, but if it is, let us pray that it will not become generally known."
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Feb 4, 2017 - 8:47pm

That's exactly what I feel. The reason why I'm scared of being a sell-side analyst if buyside doesn't work out.

Absolute truths don't exist... celebrated opinions do.
Jan 27, 2017 - 2:11pm

Fund of funds have the capital most small shops want, so they are a VERY valuable resource. For instance, we have a number of fund of funds on our distribution list who track our performance. If we reach a certain return level, you bet we're going to be marketing to them first.

Most funds want a decent amount of capital mainly for marketing purposes, to deploy capital in new and existing positions, more cash in pocket when they take management fees, hire more people, attract more investors, etc. Of course like any multi $bn fund, the more money you have, the harder it is to produce great returns on a consistent basis. Renaissance and Bridgewater are the outliers, so let's not compare.

I think there is a perception that FOF don't really do anything besides take meetings and throw capital somewhere hoping they get a double digit return every single year. Complete opposite. Manager selection is no joke and the due diligence required is very comprehensive. Like any investor, if fund of funds don't produce, investors will pull out.

If you work at one, use the network of managers/analysts you've met and see if they'll take a meeting to discuss career moves. You'd be great for investor relation roles and could possibly network your way to an analyst position.

Jan 26, 2017 - 10:26pm

Hey mate, appreciate you taking time out of your day for this. It really helps young guys like me to get a larger understanding of the industry.

Firstly, what path did you take to get into the HF and how did you land the job?

Secondly, what percent of your work is modelling?

Thirdly, what is you something you wished you knew before you started?

Finally did you go to a target school?

Sorry for the barrage of questions.

Best Response
Jan 27, 2017 - 10:33am

1) Interned at prop trading HF in the back office (literally scanning and filing for the first few months), found my way around into other internships in and outside of finance, and eventually got connected with my current boss who needed another analyst.

2) I would say about 25-35% of my work is modeling. The rest is developing an independent opinion on management, identifying catalysts, understanding the business model, reading 10-Qs and 10-Ks, understanding the regulatory environment, market research, etc.

3) Long answer, but I feel this will impact most people. I don't care if you're from a target, Liberal Arts or a non-target, don't conjure up an excuse as to why you can't break in.

It's true, targets get first priority for BB ,PE, HF, Consulting positions and everything else under the sun - and rightfully so - that's what a $60K a year school, HUGE alumni and brand name provides. They're also extremely smart and they hustle. At the end of the day a IS, BS, CF statement are linked the exact same way. You have to be just as clued up as the people you're going against.

Be the catalyst
If you're from a non-target, be the econ/finance/accounting/philosophy/engineer/computer science kid that made it. Be the reason a certain bank decides to take on 3 kids from your school the following year. At some point, you'll look back and appreciate the journey. And when you're at some PE, HF or serving in a C-level position at a company, you can be a great alumni and ensure you'll have X amount of spots saved for your people.

Finance isn't everything
You can get rich, or least very comfortable, doing something entirely outside of finance. Look at the Forbes Billionaire's list... sure, a handful of them are in finance, but a majority of them actually created something. Go take risks. Some Fordham MBA asked Bill Ackman what career advice would he recommend to someone and Ackman's response was something like "we're in the most unique time in history. Go work at the next Facebook. Go work at a startup and gain some practical business experience. You'll be exposed to sales, payroll, operations. Gain skills running a real business." Not verbatim but something like that.

Follow your passions
I'm a huge wrestling fan, and these guys at a company called Flowrestling started filming wrestling tournaments and visiting colleges around the country. They did this for about 5 years and all the content was free. Some PE or VC firm founded by former collegiate athletes either bought out or gave an equity investment to the parent company, flocasts, and helped shape their business model to start generating revenue. Now they're raking in the cash with a subscription base model and have a monopoly on the entire wrestling community. They didn't go around the country because they thought they were going to get rich filming wrestling tournaments, they did it because they followed what excited them and got them going in the morning.

Lastly, everyone is chasing something. I remember reading a post on Quora that said something like IB people want PE and HF positions, PE people are tying to get into HF, HF want VC positions, VCs want to run the next Facebook. Point is, be true to yourself, follow your own guiding stars, be real with yourself and take risks. You'll burn out and eventually resent working in finance if you don't have the right intentions.

4) Non-target motherfuckers.

Jan 27, 2017 - 4:17pm

"Non-target motherfuckers." FTW! ...made me LOL, so I SB'd you!

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Feb 4, 2017 - 8:55pm

Much respect my dude, you keep it real. You sound like you grew up in an environment of struggle and honed your hustle whilst in the pits.

Absolute truths don't exist... celebrated opinions do.
Feb 4, 2017 - 8:56pm

Ask Me Anything: Former IBD+ Analyst now on buyside (Originally Posted: 12/21/2013)

Summer analyst recruiting is underway.

This'll probably be my last AMA on this forum but feel free to fire away. I did another one of these threads as well a while back (http://www.wallstreetoasis.com/forums/ask-a-2nd-year-analyst)

Don't worry if it takes me a while to respond -- busy these days but I'll get to it eventually. Have at it.

Jan 27, 2017 - 2:35pm

This is an awesome AMA. Seriously, thanks for doing this.

I don't know where I'll end up but right now the long term goal is to end up at a hedge fund. I'd really prefer to not go through Banking to get there for a number of reasons so it's encouraging to see others who didn't. Did you need to learn modeling before you got the job or is that something you learned/they taught you? What do you think is a good starting job that could lateral over into HF, especially for an econ major at a nontarget? Research?

Jan 27, 2017 - 4:14pm

Anytime. I purchased the WallStreetPrep program to learn the basics.. Every fund has their way of doing things. My fund has a pretty basic template, but I always spread the financials my way and according to the industry. You wouldn't model an O&G company using a REIT model template, obv. I also don't like the whole use blue, green, black, italicize, bold thing. Models are supposed to be clean, not filled with noise. I understand IB and PE have their way of doing things since info is passed around to multiple parties. HF is a little different, and if you have a great PM, you can slowly introduce your methodology and create a hybrid to satisfy both parties.

Jan 27, 2017 - 4:57pm

I have a mixed view on this. ER is definitely helpful. You shouldn't be surprised to know ER analysts who cover, say TMT, end of being poached to become strategy analysts, VPs or investor relations personnel at a company they've been following & interacting with for a few years. I once came across a VP of ER from CS who ended up becoming a CFO at a REIT. Simply put, and to reiterate what I said above, you can literally become quite comfortable and pretty wealthy when you transition to industry. Finance backgrounds are definitely helpful, so if you're in, you're straight. It's also very important to consider your long-term career moves and what you want to accomplish.

I find people with backgrounds outside of finance way more interesting and are sometimes better fit for jobs at a HF. For instance, I'd favor a R&D person with a hard science background and is coming from a pharmaceutical/biotech company for my healthcare group, than a Goldman IB person who worked on deals in the space. I'd also favor someone from Nielsen who understands a highly niche market than someone from a BB or PE firm. You can always teach someone how to model and the various investment philosophies/strategies. It may literally take years for them to become subject matter experts. Why not just side step the process?

If I'm building a team from scratch, I would value someone with subject and industry knowledge. Deal don't mean anything to me. I want to see what you know, where you add value, and how you can make us money. Before everyone throws shit at me, remember my fund forced me to be a generalist. I still follow my core sectors/interests and I remain in the know so when I have full autonomy with idea generation, I can pitch those companies I've been tracking.

You can also not take my advice. No problem in that. These are just things I've noticed.

Feb 4, 2017 - 9:06pm

would brush up on valuation/modeling and business drivers. read through pearl & Rosenbaum and McKinsey's value at the very least and maybe a self-study modeling course.

it might not be 'necessary,' and your fellow interns probably won't have. however, it'll definitely give you a leg up. i got to work directly with a MD and ran the model for the project by myself cause they knew i had the prerequisite skills. The MD's recommendation at my end of summer review was a huge asset.

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Feb 4, 2017 - 9:03pm

What group did you work with in IBD? What position and group do you think is he most interesting.
(eg: M&A TMT)
What kind of person get into the top prestigious PE/HFs?

thank you for this.

Feb 4, 2017 - 9:07pm

What difference does it make to do a stint in IB before transition to the buy side vs starting off on the buy side right after undergrad? Does it affect career progress to the PM level? Is there a cultural difference between the IB guys and the guys who started working from the buy side?

Feb 4, 2017 - 9:09pm

Would you do it again?

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."
Feb 4, 2017 - 9:10pm

How much money did you save? How did you successfully manage your money

Feb 4, 2017 - 9:11pm

What feedback have you gotten from those around you from your time in IBD and buy-side, respectively (major differences, if any)?

Thanks for doing this!

"Do not go gentle into that good night"
Feb 4, 2017 - 9:12pm

KingCudi -- if WSO is any testament, anything is possible. 3 things you have to prove to the interviewers (1) you know your finance / accounting needed for banking, which is all studyable from guides and these forums (2) they'd want to work with you at 2am -- which you show by generating a rapport in the interview, and (3) you prove that you want it more than anyone else and you know why you want to do banking and you're willing to work 100+ hours a week to do it. FT recruiting is more competitive -- so you'll really have to design your resume so that people know that you have some relevant skills / appreciation for what corporate finance / advisory work is, network a ton, and study your technicals for those interviews. FT technicals are generally harder than those for SA b/c there's no testing period.

ultimately though important to know that bankers are just people who are looking for other good guys / girls to work with who have the stamina / excitement to handle it and who won't make too many mistakes.

runningshort -- not much you can do to prepare, except get yourself mentally ready to have a great attitude and be pumped about literally anything you have to do. can't hurt to read some books about investment banking or finance (for banking I've heard Investment Banking by Rosenbaum is good, and for finance, there are millions, but my personal favorites are Margin of Safety, Warren Buffett's essays on corporate america (his s/h letters), and Stock Market Genius by Greenblatt). wouldn't spend too much time memorizing excel shortcuts or anything. I mean I guess it'd help, but that's what the summer is for. People will know you know very little as an SA b/c you haven't been doing their job for 100+ hours a week. Summer Analyst programs are all about testing people's attitudes. Besides ability to do good work, attitude is probably the most important determinant in getting a summer offer (a good attitude can help someone who still has more to learn technically get an offer, while a bad attitude can negatively impact the chances of a great technical SA of getting a FT offer).

iloveoptions -- not going to say what group I was in, but it was an industry group where we ended up doing a lot of M&A type work as well. M&A / LevFin will probably teach you the most about finance -- but most of banking is pretty similar and you can teach yourself any of this stuff if you actually care enough. in terms of PE / HF -- the people that get the jobs in PE / HF know what they want and why they want it and know how to explain what they've done in banking in the context of how an investor would view it. the PE guys think it's cool you made a 120+ deck on a bunch of different transactions in an industry and how you got to run a merger model and an LBO, but what they care about knowing is -- ok let's take this company or this transaction, why would you LBO it? is it a good candidate? what are the returns? where is this industry going to be in 5 years? are the cash flows stable? do you expect a lot of incremental capex requirements. What's the IRR here? or the MOIC? it's being able to successfully transition the advisory hat into an investing hat as an analyst that shows that you got how what you did in banking relates to the decisions that principals (corp executives, private equity MD's, hedge fund managers) have to make in considering investments.

s3admq -- everyone is different. for me because I didn't have a lot of finance training undergrad, I knew I needed to do banking. there are some people that go straight through to PE out of undergrad -- but given the broad skillset that banking gives you, I think it's smart to do banking first (even though it is a grueling 2+ years) because it keeps your options open. it's hard to know what you really want out of undergrad, so banking can help you make decisions. if you had asked me what I wanted to do post-banking in college, the answer would be 100% different from what I'm doing now, for reasons I could have never anticipated. no cultural differences. and finance is a marathon -- 2 years in the context of the career isn't a big deal, you realize. if you are on the buyside and you can survive long enough to be a PM -- 10-20 years, you're going to be just fine. a key point of all of this is to figure out what you love, what satisfies your intellectual curiosity, what you don't have a problem waking up at 6 or 7am to do. because that's where you're going to be happiest and most successful. it's all about aligning interests and making the best decisions for yourself. that's how I try to think about things anyway. finance is a huge grind, even if you like it. But if you like it, it can be really fun, even amid the stress.

xway00 -- I left because I knew I wasn't going to be competitively advantaged as an investment banker. I learned a ton from the program but rising through the ranks of banking would not have been the most efficient use of my skillset. I have all the respect in the world for people who do it and do it well -- I just decided that after working 100+ hours a week for a year or so that I had to decide whether what I was doing was for me long term, and I came to the conclusion that it wasn't. totally fine. lots of IBD professionals and lots of buyside professionals that are excellent at what you do. all about doing what matters most to you.

yeahright -- investment banking was probably the toughest 2 years of my life. it's not that it's busy all the time, it's just non-stop, you're enveloped in it. I learned a lot and made a ton of great friends, and it helped me decide what I wanted to do with my life. would I do it again? I guess yes if I hadn't already done it. what I'm saying is that for me it's something I'd only do once, but for that one time, when you weigh out the costs and benefits, it ends up definitely being worth it. there are substantial costs, and anyone who says otherwise is lying to you, but the benefits, I think at least, generally outweigh the costs substantially.

CuriousAnalyst -- I saved a decent amount because I was working all the time! And my asset allocation was pretty conservative -- essentially all in cash. Saving varies among people though. Some people party all of the time because NYC is an awesome city -- and it's very easy not to save in NYC even being in banking working a lot. All about personal preferences.

tangent style -- not sure what you mean by this, but feedback on my work has been pretty similar I think -- the skillsets (soft / hard) in banking and investing are very similar (you just use some pieces more than others). If you meant feedback on the experience -- most people say that banking is much more low stress because you don't as an analyst have to really know much about the businesses, but you're on call 24hr a day. in buyside, hours are better, but you have to know a lot more about the businesses because you're actually putting money to work (or you're helping someone who you know closely and who is paying you do it) so that can lead to stress, because you're either trying to predict the future a year or so out if that in HF, which is stressful, or you're trying to do it 5 years out for PE, which is also stressful! Lot of stress. But for those of us who seem to lust for all that is good capital allocation, it's worth doing. It's a problem that will never cease to exist and will always require the employment of good intellectual capital to solve -- as long as our country and the world is around anyway. (/philosophicaldiatribe).

Feb 4, 2017 - 9:13pm

Thanks Oppcost!

How involved were you with summer analyst selection when you were in IB? Who were some of your favorite candidates/who were your favorites to work with?

Also, any funny stories?

Thanks again! +1 SB

"Do not go gentle into that good night"
Feb 4, 2017 - 9:14pm

tangent style -- the best summer analysts had great attitudes, didn't take things too seriously, were always willing to help out, and because of all of those things ended up knowing exactly what they needed to do to get their work done right because they were effective communicators, and ended up having excellent work product.

I was somewhat involved with SA selection -- it ends up depending on the firm/group how involved any one analyst is -- but usually all of the analysts are somehow involved in the process because you end up working with them at some point and introducing them to the group from a culture perspective.

I mean the intense nature of banking inevitably leads to many funny stories. probably not anything appropriate for public consumption in this venue right now, haha. if you can look back at it and laugh, you know it's been a success.

Feb 4, 2017 - 9:15pm

oppcostofcapital - thanks for doing this. Couple questions I was hoping you could answer. Sorry this is long, but I'm sure it'll cover questions others have as well.

--What do you think were some of your key reasons why/how you were able to break into the buyside? Was it your school pedigree and/or combined with strong firm and group, networking (with HHs), and so on? By the way, I bring up school pedigree because I've met some alums at BBs in good groups who had trouble getting past HHs because of their 'non-target' school name on their resume. I think a lot of people on WSO say the school name doesn't matter as much for MM PE but speaking first-hand with many I know this hasn't been the case (i.e. school name will haunt you unless you get a MBA business schools">M7 MBA later on).

--Did your MDs and senior bankers help you with the process at all, and if so, how helpful were they? And would you say being helpful with buyside recruiting is something generally common and encouraged on the Street (I guess group-dependent, but still broadly speaking).

--For your analyst peers that wanted to break into PE, were they successful in doing so? Were they successful b/c of the similar methods you employed?

--How does one get more involved in recruiting for SAs and FT analysts? Were you able to do it as an alum of a target school? Or did HR randomly ask some ppl to help out?

--I realize more and more that I'm drifting apart from some of my college friends, and I'm sure you might see that a lot having worked in a 2 yr intense job like as an analyst in IB. How would you describe your social circle now? Do you still hang out with friends from your analyst days, from college, or completely new friends? Do you still chill with the buddies from college or maybe just the ones you were very, very close with?

--How if your life now being on the buyside, in terms of hours, pay, overall happiness, job satisfaction? Some specific numbers on the hours and pay, if you don't mind sharing, would help. More interested in the hours aspect than the pay.

One more thing personally dealing with:
--I'm currently dealing with your quintessential post-M7 MBA, waste time, lack of efficiency, create work for analysts, dump everything on analyst and just check work - Associate at my firm. My 'good attitude' only goes so far when the Associate is the problem. But obviously the Associate is higher on the totem pole (my 'superior' if you will) and unfortunately there isn't much supervision and oversight of those above analyst level at my firm. The staffer ALWAYS seems to be on the Associate+ level side, so I don't know if I can speak with him/her about the Associate. I've tried to have a one-on-one, heart-to-heart coffee chat with the Associate... but problem with him is that he won't listen. Physically/mentally unable to listen - won't let me finish sentences and just talks over me. He's also awful under pressure and sweats like crazy when he's on more than one project. How would you deal with and/or manage in this situation? Any suggestions? I'm sure I'm not the only one who's had this kind of Associate.

Float like a butterfly, sting like the bee.
Feb 4, 2017 - 9:16pm

Which is the harder industry to break into on the buyside: VC or PE?


I'm bi-winning. I win here, and I win there.
Feb 4, 2017 - 9:17pm

Where did most of the analysts in your group go after the two years?

Feb 4, 2017 - 9:18pm

1) school/banking group help to some extent but it's really how you present your resume, how you communicate with headhunters what you actually want, and how well you sell your interviewers that you want to be an investor for the long-term. my advice here is that you can't change your school but what you can change is your attitude -- be the hungriest person that that headhunter sees, and let them know why you can't see yourself doing anything but LBO private equity or anything but long/short equity or whatever the case may be, and the HH will help you get something. HH's get paid when they place someone and that person accepts the role, so if they know you'll take something and they think you can get it, they will try their hardest to match you. all about staying positive, figuring out what you want, and selling people on that. that's a constant in finance.
2) in cases where it was important, my group was supportive about references for post-banking jobs for analysts, but it does vary on the street.
3) yeah people were successful in breaking into PE for the same reasons -- they knew their technicals, they knew why they wanted to do PE, they sold their interviewers, and they found places that they actually wanted to work.
4) varies by group -- sometimes senior people ask certain analysts to be more involved, but generally everyone gets involved at some point.
5) I mean I still hang with the same people it's just harder because people move cities and change jobs and stuff and logistics become harder because your time is more rationed in finance than in college. I still hang w/ people from banking, college, even HS. but yeah I mean working in banking for 2 years doesn't "help" you see people haha. It's pretty tough but if you want to do banking you just don't have time for much else as an analyst in most groups. moreso in year 1 than year 2. year 2 def gets better.
6) Life on the buyside is better for me only because I really enjoy what I do. For me, thinking about different business models, capital allocation, and whether management is doing a good job is what I love about finance - so spending more of my time doing that than making presentations and doing more process-oriented stuff is more fun for me. some people are exactly the other way around. all about finding what you like. on the flipside, buyside is definitely more stressful because your opinions really matter and can make or cost significant amounts of money for your firm. hours are definitely better. If I work weekends, it's because I want to do extra reading or put extra time into a model or business I think is interesting. or it's reading WSJ/Barron's for opportunities. overall, I'm happier. first couple months/years are tough because it's a new skillset you have to learn and it's not easy, but I'm definitely happier now and I'm sure that happiness will continue to grow over time as I get more comfortable with what I'm doing every day. I'd say hours are in the vicinity of 60+ per week, with maybe a couple extra on the weekend. Sometimes in earnings season it can get closer to 70 or so, but that's rare. At least where I work, it's kind of expected that you'll manage your work in a way where you have at least enough time to sleep and usually go to the gym during the week, whereas in banking that was not a given. weekends are yours. which I love. I honestly want to work more on the weekends -- I just need a little more time getting used to having them and being able to chill out. Also, due to the mentally taxing nature of the job in the outset -- I tend to need to the weekends now to decompress and turn "off" a bit. It's tiring to have your mind "on" all the time. not sharing pay. in general -- pay on buyside is a step up from banking and you'll be making in virtually all cases much more than you need to live even in NYC -- so you should focus more on finding a job that's meaningful to you -- because if you're doing something you loathe -- doesn't matter how much you're making, you're not going to be happy.
7) If you have more questions about personal stuff, happy to take a Private Message from you on the situation. What I will say though is that banking is a team sport, and you don't get to write the rules as an analyst. Figure out what you need to do to make the team successful -- and then use that information to work constructively with your associate. Figuring out what the senior bankers want, and then working with the associate to make sure you're doing that and ONLY that -- will make your associate happy because the assoc knows that the sr. bankers are happy, and it'll make you happy because you'll have to do less and get more sleep. As the analyst -- you will only be happy if everyone else above you is happy. That's what you've signed up for, and learning how to make those people happy is one of the key competitive advantages you get from surviving the analyst program in banking. We've all been there. You just have to stay strong and get through it. Remember that you don't have to be there -- you're choosing to be there -- so get as much out of it as you can while you're doing it.

maybe I'm missing something, but what's MBA business schools">M7 MBA?

stillwinnning -- from what I've seen there are more PE associate spots, so I'd feel like that that'd mean it's easier -- and the banking skillset is closer to PE than VC -- but again, the number of PE spots relative to the number of banking analysts is a lot smaller, so you need to know your technicals, know why you want PE, and be able to sell your interviewers better than everyone else. Same applies for VC. finance has gotten a lot more competitive and buyside professionals want to know that you really want it and aren't just doing it because it's what you think is the "next step." to some extent you've gotta be passionate about it.

boobielover -- most analysts in my group as well as most groups did PE. banking and PE are the most closely linked -- so it makes sense. there are also a lot more spots available in PE than there are in HF or VC. yet others still go corporate.

Feb 4, 2017 - 9:19pm

Thank you so much for your answers. Sounds like you really love what you do and have a passion for it. +1. Would love to get coffee with you sometime... Anyways, thanks.

PS: MBA business schools">M7 MBA broadly speaking refers to the Top 7 business schools (MBA), but specifically it refers to a collection of top MBA schools where the deans meet every now and then. The schools include: H/S/W, Columbia, Kellogg, MIT, Booth

Float like a butterfly, sting like the bee.
Feb 4, 2017 - 9:21pm

Echoing Houston's question in regards to personality differences in PE vs HF. Any thoughts on the types of people that fit best in each?

"My dear, descended from the apes! Let us hope it is not true, but if it is, let us pray that it will not become generally known."
Feb 4, 2017 - 9:22pm

G Spread -- this isn't specifically about me but this is what i'd suggest for anyone:
1) attitude -- be positive about everything, even stuff that just sucks. because there are a lot of difficult parts of banking. Sometimes it's hard to see the forest through the trees but key to remember that ultimately benefits > costs -- if you chose to be there, at least.
2) technical ability -- don't take on too much at one time and do the simple tasks that you get right. check your work, check it again, and then check it once more. and then print it out and check it with a red pen.
3) communication skills -- let people know what you're working on. underpromise on timing and overdeliver. managing expectations = success within a banking group -- applies to virtually people at all levels in the group.
4) have fun! you will be doing a lot of awesome stuff that very few people at your age have the privilege to see or experience, so take it all in. Ask questions when you're curious, get to know the people in your group, and take in the whole experience with a smile.
5) make it clear that this is something you could see yourself doing for at least 2+ years, maybe longer.
6) ask questions -- people will know that you know virtually nothing (which ends up being true in many cases -- and that's ok). what's important is that if you don't know how to do something, before you open up that PPT or XLS or email to write, you know EXACTLY. EXACTLY. EXACTLY. what that associate or VP or partner is looking for. this is key because it builds trust that you know what your assoc/vp/partner wants, and as a result they'll eventually trust that you can deliver quality materials to a client. Also, doing only what the assoc/vp/partner wants and nothing more will save you time. if something's taking you too long -- sometimes that's right because it's a pretty onerous task, but sometimes there are shortcuts. ask other analysts or summer analysts if there's a way to bypass what you're doing. If it's data entry -- generally there are some excel formulas or tricks with copying and pasting from PDFs that you can use to dramatically decrease worktime. don't be afraid to ask. as a full-time analysts those little tricks like Ctrl+1 and the shortcut for conditional formatting (Alt HLR, Alt N, in Office 2010) are what will get you to your bed sooner so you can get a good night's sleep and feel like a normal human.

I think that's everything. all feeds on attitude / communication / having fun / not taking yourself too seriously / knowing what you need to do / doing it / and learning as much as you can possibly fit into your brain in 10 weeks about all that is advisory as it relates to helping corporate clients (management teams) be good stewards of capital for their investors (LPs, public market investors, etc). small aside -- you help them do that as a young, aspiring banker by helping them raise capital in the equity and debt capital markets (ECM / DCM) via IPOs, PIPEs, and debt raises among others, and you help them do that by helping them manage their capital efficiently (buying a great business, selling off an unprofitable division, evaluating the impact of a share repurchase versus a dividend for shareholders). All exciting stuff and you get to be on the front lines. So get pumped. This is the absolute most positive way you can look at it -- so I would suggest keeping the idyllic vision of what banking is in the back of your mind and refer to it whenever your brain is tired or weak from trying to find Indonesian market data on random industry websites, for example. It's all part of the dream.

re: switching offices, generally about a year. sometimes at least 2.

re: boots, I think I just dealt with the snow and didn't buy boots.

Illuminate -- PE is for people who love process, who love the thrill of getting a deal done. it's a lot of modeling, a lot of industry benchmarking, a lot of negotiating confidentiality agreements, etc. essentially you have to know everything about an investment to be comfortable investing in the company for 5 years, so that can get intense. one of the nice things is that you do have bankers on your side who send you information about companies you might want to buy (CIMs, confidential information memoranda) and they will help do some analysis for you (hopefully in exchange for fees for their sake) and help you raise debt when you need to complete your big glamorous LBO transaction. As an associate, PE will feel similar to banking, but your hours will be better, and what you think about a business will matter a lot more. When you're closing a deal though hours can get crazy. On the flip side you really get to know CEOs and management teams and you become more familiar with the internal workings of a business as you really have to care about all of the aspects because all of it impacts the thing that matters the most to PE professionals, well the 2 things, equity (levered) IRR and/or MOIC (multiple of invested capital). You increase this stuff, you increase your carry (the money you get paid as a PE manager to invest your clients' capital well), and the closer you get to being on a beach somewhere.
HF is for people who love the analysis side of investing. For people who want to spend more of their time thinking about businesses, how they compete in their industries, whether the market is undervaluing the securities of those businesses for non-economic reasons (the best kinds of reasons, haha). It's more independent -- less teamwork until you're talking with your PM about whether the investment should go into the book, and you spend the vast majority of your time reading public filings, talking to sell-side equity research and the companies that you're considering investments in, and updating your model and seeing it how it impacts the way that your firm values that business. From an intellectual perspective it can be a lot more satisfying because you're spending a higher percentage of time thinking about what the "right" answer is relative to PE, where you are also absolutely expected to do that, but you end up spending a good amount of your time managing people and process so that you can actually make an investment happen. For HF, generally all it takes to invest in a business is the click of a button and a phone call. If it's a bigger investment -- maybe it takes 2 or 3 clicks and a few more phone calls. But it's essentially a bunch of reading, talking, discussing, analyzing, and finally making a decision based on how this business fits in with your investment philosophy and how the world works. It's supremely challenging and supremely exciting all the time. It's difficult every day, and over the long term, in addition to being intelligent and being able to analyze companies the right way, one of the most important competitive advantages a HF analyst or PM can have is discipline/intestinal fortitude.

so in a nutshell -- PE is for people who love the thrill of executing and closing a deal and love process, while HF tends to suit people who love just thinking about businesses all day. Both fields have similar work and depend on similar issues, but the concentration of what you spend your time doing varies heavily. HF will probably be more stressful than PE, and as an associate, there's more of a track for bschool from PE so some call PE a more risk-averse option than HF. In my mind, both are stressful and the reality is you need to think about what you'd want to spend your time doing. Because the actual practice of investing, of capital allocation, of making sure that assets you have at time T are protected at time T+1 and T+2, never really ends and it's just up to you to decide whether you want to be in the game.

Feb 4, 2017 - 9:23pm

Hi oppcost,

Currently a 1st-year in banking in BB lev fin, and as I begin to have more time on my hands at work (with things slowing down near holiday season), I'm thinking whether I see myself doing IBD for a career. Very glad I joined this group and learned a ton so far, but the constant process-oriented work flow is starting to bother me just a bit. I'm gravitating towards considering buy-side recruiting, as I've heard things tend to kick off around feb / march. So I have a few questions for you re: buyside recruiting

a) How wildly do these "modeling tests" differ across shops? I'm specifically interested in credit / mezz funds as well as MM buyout funds. the term "modeling test" seems so vague to me, so if you can give me some insight as to what sort of analysis to expect, that would be helpful.
b) How would you go about recruiting under the radar in a group setting that encourages staying after 2 years?
c) What is your take on recruiting as a 1st year vs. 2nd year? While locking down a buyside gig that you are thrileld about after only couple months into your job is great news, there are some things that I still want to learn (more the qualitative / soft stuff like covenant negotiations, etc.) - this might mean I need to stay another year or so to really, truly understand what is going on vs. being "familiar" with it.

Thanks for all the help!

Feb 4, 2017 - 9:24pm

a) obviously modeling tests vary by firm -- at PE some range from pen and paper LBO to show concepts to completing a partially done excel LBO to creating one from scratch and adding in advanced functionalities such as pik toggle. it is intentionally vague but usually past interviewees and HH will give you color on test beforehand. in your prep you should be ready for the worst (creating a lbo model from scratch with different scenarios, even better if it includes a 3-statement model). HF is anywhere from completing a half-done model to building a full operating model from scratch with all three statements, revenue build, etc. Again, be prepared for the worst case scenario and things will be a lot smoother in your interview process.
b) figure out who you can trust and only tell people on a need-to-know basis as the process advances. also talk with other analysts who have left or are thinking about leaving / older and see what others hve done.
c) to make everyone happy best way to do it is to get a job for 2 years out as early as possible -- sometimes you can get it in your first year and sometimes you get in your second year. most important thing is that you get a job that you like and want to do. I think staying 2 years helps solidify the soft stuff and gives you a lot more intestinal fortitude when you get over to the buyside -- esp because buyside is not a walk in the park, and yet knowing you can survive banking for 2 years takes your mindset a long way in comparison to anything you have to do on the buyside. wouldn't necessarily worry about learning that stuff in the 2nd year though -- obviously it's important but you can learn all on buyside -- staying 2 years in banking confers the most value to analyst via the acquisition of mental toughness.

Feb 4, 2017 - 9:25pm

If you had 3 important questions that you could ask to the interviewer at JP Morgan, what would they be? I am a MS student who received interview call from JPM Asset Management summer analyst program. I wanted to impress the interviewer by asking sensible questions related to the problems the company is facing and then try to provide solutions to those problems by giving my opinions. So I was wondering what would you ask bout and if they ask for opinions about those questions what would you suggest? Please help me I want to get this position! Its a summer analyst rotational program at JPM in private banking! I want to impress them!

Feb 4, 2017 - 9:26pm

Oppcost -

1st year at MM here, really appreciate the insight. I'm sure you get this question often but:

How heavily do HHs weigh GPA in PE recruiting? How can one with a low GPA best situate themselves for PE recruiting?

Jan 27, 2017 - 5:18pm

I wish I had an answer other than idk, but seriously, idk. As mentioned above, you need to show what you know, where you add value and how you can make money. If you email a fund and interview buy they don't have capital to hire, offer to work for free until you have a few positions in the portfolio. So many funds are losing many and need people to work for the low. Don't past up a great opportunity. If you absolutely need the money, go somewhere else.

Jan 27, 2017 - 9:58pm

Hey thanks for doing this! I am about to start working at a rating agency in NYC covering FIG. I understand you work in equities, but what should I really emphasize working on during the job and how can I leverage it to something else in the future? Would a hedge fund consider me or would I have to lateral somewhere else to get in?

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