Q&A: HF out of Undergrad,

Haven't posted in a while but wanted to given the interesting hiring climate I imagine most college seniors are facing today and the changing landscape across HFs... ####My background: Pretty non-target school with a handful of solid internships across IB/HF, involvement in the student run fund, dual major in finance and math. Full story can be found on earlier posts... but TL;DR would be I interned at a BB in a top group, did not get a return, recruited for FT IB, got an offer and turned it down to pursue L/S HF out of school. ####How I did it: Again, network, network, network... The main difference I expect and found during recruiting and networking with hedge fund professionals versus bankers and/or private equity is 1) less focus on background/prestige and 2) ability to pitch or source ideas. Everyone knows it, but the primary reason a PE shop or hedge fund is reluctant to hire out of undergrad is not only because you know nothing, but they don't have the time or resources to train you & need someone capable of modeling. You aren't expected to generate serious P&L from the get-go, so you need to be a value add in other ways. The number 1 way you can demonstrate this to a hedge fund is by building models and writing pitches/research reports. I made a shortlist of every hedge fund I was interested in, found their email domain either via their brochure or Bloomberg at school, and sent both a long and short pitch to a PM or analyst. I can tell you that they are looking for 1) how you think and 2) your ability to model. I'm finding it increasingly common for several people to make the leap to HF out of undergrad more recently. ####Comparisons to banking: In hindsight having been on the job almost a year, it's a different level of intensity/stress I'd imagine from being FT in IB. FT in IB requires you to be ultra-sensitive to deadlines in terms of client facing materials, whereas HF risk $mm of dollars daily (or more) and can, but are not always, time sensitive. You are tied to your performance and the fund's performance and comp reflects that - in IB you're bucketed based on performance, attitude, effort, skill (I'm assuming) whereas HF it comes down to how well did the fund do and how much did you contribute to that profit or loss. If your ideas are not good and losing $ for the firm, you will have a more difficult time. ####HF's should be at less risk during times like this I think the one positive in a moment like this is that HF's should and can make $ in (most) market environments, whereas I've read posts about IB layoffs and potential bonuses being clawed back. Not sure to the truth of this, but ideally a HF is designed to outperform in these sorts of scenarios and therefore should be at less risk than an IB with M&A frozen for the time being. Average day: in at 7a, out at 9p or so... Don't want to drone on too long if these bullets and points aren't useful and do want to answer any potential questions you guys may have...

Hedge Fund Interview Course

  • 814 questions across 165 hedge funds. Crowdsourced from over 500,000 members.
  • 11 Detailed Sample Pitches and 10+ hours of video.
  • Trusted by over 1,000 aspiring hedge fund professionals just like you.

Comments (113)

Apr 21, 2020 - 9:05am

1) Frankly I wouldn't be able to give you an on-track recruiting timeline for hedge funds considering I recruited closer to my graduation date in a less structured approach, however I'll try my best. The smaller funds are likely hiring on a need basis, therefore recruiting 6-12 mo in advance likely won't bode well whereas I do know and have seen people intern during their MBA at larger hedge funds with potential for a return offer. I imagine these sorts of roles, for both internships and full-time HF roles likely recruit late autumn/early winter ahead of your start role in June. But I should emphasize there isn't nearly as strict of a timeline for hedge fund recruiting comparatively to banking.

2) No, I had one small one-month HF internship during UG and then had done IB SA prior to graduating, so I wouldn't believe it's absolutely necessary (but likely helpful).

3) No. No one at my firm has their CFA. It DOES absolutely help though and I have plenty of friends who went that route, whether they were in front office finance roles or not. It's a great way to demonstrate your finance capacity and understanding of financial analysis. Great way to make yourself a more attractive candidate if you don't have relevant finance experience.

Apr 21, 2020 - 9:09am

Yeah so it's far more difficult than summer recruiting. The timeline is condensed into a 1-2 week period after the summer internships conclude as banks have a handful of spots to fill (or no spots to fill, occasionally). Now obviously this varies by bank but the larger, more "popular" banks (let's call them) will be done before you step onto campus in the fall in terms of filling their FT classes. I had superdays for banks from the week after my IB SA gig ended throughout September/October... it really depends on where you're looking.

Also keep in mind the dynamics change, people leave/renege, and spots open up randomly. I'd gotten a call from a BB months into my senior year asking about my interest in a FT spot for a specific coverage group as I had demonstrated my interest earlier when spots were taken, and then I was front of mind when a spot opened up. Let me know if this was at all helpful, happy to go into more depth.

Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
Apr 21, 2020 - 10:34am

I actually have the same question for #1... I think it depends on how you plan on networking. Most will be reluctant to go grab coffee/drinks and do those sorts of in-person networking at least in the nearer future; however I think reaching out post-earnings to hop on the phone and network should be fine. I will say that hedge funds have probably put off hiring additional personnel at the moment, though, so be wary of that.

2) I used this website, in addition to Bloomberg/FactSet via my school and some other sites (trackhedgefunds.com). Then I went to the SEC website, found their brochures, and read through to figure out what their strategy was before reaching out. In terms of what led to deciding, I knew I wanted to be in a fundamental role, was pretty sector agnostic given I had only summered in IB and had no real long-term sector expertise, and developed pitches across 3 different industries.

  • Prospect in IB-M&A
Apr 21, 2020 - 11:30am

Thanks for doing this. People say that banking straight out of undergrad gives you a lot of optionality, including the move to HF. How come you decided to skip that? Was it because you knew that you only wanted to work in HF?

Apr 21, 2020 - 11:34am

Yes. Banking is a phenomenal place to start and gives you an abundance of places to head into. It is the single best training ground alongside consulting to get direct business experience with more emphasis on the modeling aspects (vs. consulting). For those with a lower risk tolerance I highly suggest going the banking route, especially if you are not set on where you want to land in 3-5 years.

I knew that I wanted to work at a hedge fund and said why not at least try to land at one, knowing that I could come up empty handed and have to re-recruit for IB/ER. It was (in my view) a calculated risk that I was comfortable taking.

  • Incoming Analyst in Other
Apr 21, 2020 - 12:10pm

In a pretty similar situation myself in the sense that I'll be joining a fund out of undergrad as well. Any tips/advice? Things you wish you would have known or done differently your first year? How was managing life outside of work as well? 7a-9p sounds in line with what I was told I would be doing too so want to get an idea of how to manage stuff outside of work as well (gym, dating, spending time with friends, etc.)

Apr 21, 2020 - 12:20pm

Good question and congrats on your offer!

It will definitely vary, I tried to give an average. During my banking summer I spent nights until 4a in the office, whereas you will likely never have to do that in a public markets role. I've gotten out as early as 4:30/5 (on some Friday's) and it totally depends on the culture of your shop. I really enjoy the role and will work on my own discretion later than I likely need to.

Work smart, but don't burn out. The reason some people have a negative review of their banking experience is largely in part due to the hours which leads to less and less interest in the job (especially if you didn't care for banking in the first place). The job is also not about rushing through work and trying to be the quickest analyst, it's about adding value and thinking critically. If you can on things, take your time (and double check everything, $mm can be at stake). I wish I had slowed down and not rushed models my first year.

Managing life outside of work wasn't too difficult - I joined a gym and tended to go after work but occasionally made the effort to go beforehand. I lived with a buddy from UG and provided you aren't working Sat/Sun like some of my IB friends do, you should have weekends almost entirely free to hang out w/ friends, go out to dinner, grab drinks, etc.

  • Incoming Analyst in Other
Apr 21, 2020 - 1:04pm

Thanks, another question I have is about recruiting for future ops. Since you didn't go the traditional banking route, how was recruiting for future ops like if you had some in mind? I know HHs reach out to ib guys in their first year or so and set up calls and stuff but how does that work in this position? Do you reach out to HHs? Do they still reach out to you?

I'm joining a distressed fund but would maybe like to do distressed PE down the line in a few years or so. Does directly joining a fund out of UG make it easier in the sense that I know what I want to do and have some exp over others or are some funds just opting to hire ib guys.

Apr 21, 2020 - 12:10pm

Do you have any advice for pursuing a more quant-focused role at a hedge fund? I'm currently a freshman planning on studying my CS and math, and I'm having a tough time deciding between quant and IB (I know they're vastly different, but I honesty can't choose a path.) do you recommend I try to get a taste of both?
Thanks!

Array
Apr 21, 2020 - 12:24pm

So if you're totally set on the quant route, I really think those HF's are happy to hire anyone with a quant background. I unfortunately don't know a lot about those strategies or roles, but my best guess would be that some funds hire strictly developers who are writing algo/code to trade (comp. sci degree) and there are some that hire researchers who might be more math/stats degree oriented familiar with large data sets.

I think it will be hard to move from IB to quant HF, but not impossible. IB gives you more of the financial modeling expertise, the fundamental analysis piece that isn't as widely valued on the quant side. Quant shops are built to run regressions on data, develop code and trade on wholly quantitative metrics in most cases. I did the stats degree personally because fundamental shops are relying more and more on data collection and analysis, so I felt it would set me apart when recruiting for fundamental shops. I would likely get laughed out the door trying to work at a quant fund now, but who knows.

Apr 21, 2020 - 12:36pm

I see. And do you think there is more of a trend for hiring quants out of undergrad now versus masters and phd? I know that a lot of the undergrad hires tend to be big math Olympiad winners, and I'm def not at that level. But I think that I'm still relatively strong with quantitative sciences

Array
Apr 21, 2020 - 1:59pm

Personally just wanted a fast-paced, eat what you kill environment. My career progression is solely based on my performance and ability to generate good ideas, whereas PE is devoted to a hands-on (in most cases) approach to working with private companies to turn them into winners over time. Some associates won't even see the full life of a portfolio company from initial investment to exit simply because those processes can take a while. Nothing against that experience because it's arguably the best place to be right now, but it wasn't necessarily what I was interested in.

Also, it's different in the sense that you're literally there to think differently and that's how you succeed in most cases. There'd be no point to existing if every fund had the same process, strategy, and thoughts on what stocks and companies were good v. which ones weren't. Digging deeper than hundreds of millions of dollars worth of capital elsewhere to find a differentiated edge or view is exciting to me. Private equity is more of an operational, intensive approach to building companies that need your expertise and access to capital.

Apr 21, 2020 - 2:49pm

Thanks for doing this! I'm going into second head UG at a semi-target in the UK.
Where does going into S&T stand if your end game is a HF? I love trading myself, but hate the idea of M&A/ECM/DCM where you'd typically learn modelling skills. Is there still a route to ending up a PM from S&T or is that not possible?

Array
  • 1
Apr 21, 2020 - 3:47pm

Totally possible, but really depends on the strategy. Fundamental equity PM's are typically guys with fundamental modeling and research/banking experience. This is not always the case, but that's becoming increasingly more common vs. I know some L/S equity hedge funds run by legacy equity traders.

Some of the best PMs were traders and there's definitely an aspect of that, but it's more common in the more quantitative routes where you go from managing a book at a bank trading say... credit derivatives to moving to a relative value credit hedge fund (for example) rather than a vanilla cash equity trader making the leap eventually to equity PM. It happens, but not as common.

Apr 21, 2020 - 2:50pm

Is it definitely the case that HF is the only "normal" exit opp from S&T, or do you know a number of S&T people who go onto PE, CF, etc?

"The beauty of me is that I'm very rich."

  • Principal in PE - LBOs
Apr 21, 2020 - 2:57pm

S&T is not relevant to PE or particularly useful for CF. If you want to do CF or especially PE do banking.

Most Helpful
Apr 21, 2020 - 3:55pm

More Money than God was good... useful history of the more popular/well-known hedge funds. Obviously the cliche recommendations: The Intelligent Investor, Principles.

Some lesser known ones I like in the finance space:
Barbarians at the Gate
Fooling Some of the People All of the Time
Predictably Irrational
Billion Dollar Lessons
Market Wizards
When Genius Failed
Street Freak
Money Mavericks
Influence: The Psychology of Persuasion
Margin of Safety
How to Win Friends and Influence People

Then a few more fun reads:
The Buy Side: A Wall Street Trader's Tale of Spectacular Excess
Liar's Poker
Flash Boys

Apr 21, 2020 - 3:29pm

Thanks for doing this!

Regarding going to trackhedgefunds.com... did you "screen" hedge funds, or have a method which enabled you to efficiently narrow down your potential targets?

Also, when you sent your research reports/picks to the funds, did you do this in your initial email to the analysts at the funds? Or did you send an introductory email introducing yourself, in which you asked permission to send your reports/picks in a subsequent email?

Thanks!

Apr 21, 2020 - 3:59pm

Didn't screen, just cross checked with the sec.gov website to see their brochures/filings. Took a while but in my view it was worth it.

I did do this in the initial email, typically to analysts but occasionally to PMs. Most hedge funds are sub 15 employees and if you can draw attention from a more senior investment team member you have a better shot at getting your foot in the door. That being said they'll be far less likely to entertain a pitch, so choose wisely. I do recommend attaching both a pitch and your resume in the initial email. Don't attach the model, though, unless asked.

Apr 21, 2020 - 3:53pm

Hey man, thanks for the info; I'm going to be starting my first semester of college (most likely at a non-target as a Finance major) in the fall of this year.

  1. What type of on campus clubs/organizations related to business would you recommend joining? Business frats?
  2. How would you recommend finding big people such as MDs or reps. from big firms and networking with them. I would say I'm a bit shy but want to become more social and outgoing before college. How would you strike up a conversation and what would you usually talk about with them?
  3. Would you recommend trying to transfer out to semi-target/target schools after my freshman or sophomore year of college?
  4. Do you think an MBA is worth doing to increase my qualifications?

Thanks for the help!

Apr 21, 2020 - 4:05pm

All great questions.

I wasn't in a business frat, my school wasn't really big on them and weren't hugely helpful. The finance societies and honors programs were typically better networks at least from my school. Definitely join the investment fund (or start one). Also, just have fun... I did a lot of non-professional stuff and joined clubs and a frat during college so enjoy and congrats on your (soon to be) acceptance!

LinkedIn! I paid for premium... I thought that was super helpful and see my prior post about my IB journey but basically trying to see MDs or PMs that had something in common, maybe played a sport I'm playing now at the club level at school or were involved in their school's investment club. I found it useful to expand outside the limited alumni network I had. Depends on the person, but I just made every conversation about them: their career progression, advice, parts of the job they liked, why they chose it, why not something else, even more specific questions once I got a flavor for the firm.

I actually thought long and hard about transferring. I will say, best decision I didn't make because I loved where I went to school. It was dreadful and difficult to land jobs and internships and I won't lie because the odds are stacked against you at a non-target, but with enough of a grind you'll be able to penetrate. Really depends on how much you like your school and if you think you'll be able to pull it off.

Eventually, sure. That or a CFA, depends on where you're trying to go.

Apr 21, 2020 - 4:08pm

Thanks for doing this.
I had a question just about how you formulated some of your pitches, specifically how you went about developing/pitching some of the ideas on the short side; whether it was tailored to each fund's strategy insofar as some of the thematic elements like if it was deep fundamental shop approaching them with an accounting/competition story in their sector or maybe as another just quick example if it was more of pair-trade oriented shop here's cheap/here's expensive here are some catalysts for mean regression or just generally had a fundamental competition/accounting based story that would play well/be of interest across to a wider audience. (maybe 2 or 3 funds) If you wouldn't mind describing that process a little more that would be really helpful.

Thanks Again!

Apr 22, 2020 - 8:20am

Good question. I tried to be more general, so therefore didn't want to send over a pair trade (especially because pair trades tend to be two names that are comps for one another in some way and I wanted to have different sectors covered). I developed 3 pitches, 2 longs and a short. The first long was more of a 6-18 mo long that had activism involvement and potential for significant cost takeouts that I felt the market wasn't appreciating. Not a particular catalyst on this play. The second long was again more of a contrarian approach with a catalyst, felt like it was primed to be acquired. The short was both short and long term, felt the business model wasn't sustainable, net losses, overvalued, secular headwinds, and incredibly over-levered. This one actually proved well as the company went down ~60% on the Covid sell-off.

It's almost as important to cater to your audience and the fund's strategy as it is to develop your own process. The way I now screen for ideas is different from how other analysts screen for ideas and the way I approach learning about a company is different. Have we done pair trades in the past? Sure, but that's with a PM who knows how the names trade and has been following them for years, who spotted a discrepancy. For me to say "hey, i'm thinking we go long KO and short PEP" is an arbitrary idea in terms of differentiated thinking and doesn't really show that you can do fundamental analysis.

Apr 21, 2020 - 5:22pm

Hey OP, thanks for making this post. I graduated recently from a well known non target and didn't get any finance internships during undergrad due to changing majors late, (engineering to Econ) OCS over the summer, etc. I was also part of our student run fund. So far I've:

-borrowed a good amount of money to create a portfolio (I'm working to create a report outlining each thesis)

-began reading over CFA 1 materials (tests have been pushed back, I intend to take it within the next year or so)

I have about a year and a half left of military duty before I'll be looking for a FT job, so I have a good amount of time to learn and develop my skills. Do you have any suggestions on what non traditional candidates like myself can do on their own time to make themselves marketable for a fundamental HF? My plan currently is Military > MGT Consulting > MBA > hopefully buyside, but I'd kill to go straight into finance.

also, in terms of modeling, most courses are geared towards IB as I understand. Is this what HFs are looking for? Or is there something better I could focus my energy towards?

sorry for the long question, any feedback is appreciated. Thanks so much again for your time.

Apr 22, 2020 - 8:33am

First of all, thank you for your service.

In terms of your position, I actually think the engineering --> econ route tells a quite compelling story if you frame it the right way. I've seen a handful of engineers in HF/AM roles because of their critical and analytical skillsets, so use that to your advantage best you can.

For your portfolio, even running some sort of mock portfolio is fine - obviously with real capital at play you're inclined to take it more seriously, but just getting familiar with stocks and how they trade and being plugged in helps. For you, highly recommend the CFA. It will definitely further your interest and people will be more willing to help/hire you even just being a level 1 candidate. The quicker you can get through it, the better especially coming from a more non-traditional background.

To answer the question about marketing yourself, the CFA would do wonders. There are several banks that hire bankers or equity research associates out of military service (often times through a designated program). If you want to skip the MBA, your best bet would be to try and land either a banking analyst or equity research associate role and then recruiting over to the buy-side. Consulting is better for private equity in my view.

In terms of modeling, any material and practice you can get would be good. IB training is similar to what I do at the hedge fund level, I'd say I spend less time running merger models/LBOs unless my view dictates the need for such models and more time on DCF/scenario analysis, running upside/downside cases, etc. Hopefully this answers that but happy to elaborate.

Apr 21, 2020 - 8:51pm

Thanks for taking the time. Just started learning about HF and have a couple questions.
1. Regarding the pitches you sent to HFs, how in depth did you go about researching and what resources would you recommend utilizing?
2. How do you like to structure your pitches and what do you think is the most important part of a pitch?

Array
  • 1
Apr 22, 2020 - 8:39am

1) As in depth as I could. Hedge funds want to see someone who thinks differently from consensus. Anyone can write a pitch reciting a sell-side report, but you're essentially trying to exploit a mispricing in a security that others aren't realizing. I had access to Bloomberg and FactSet so I had the advantage there, but you don't need much. I think building a model is super helpful in terms of explaining the story from the quantitative side and understanding what drives a business. Then, and call me old school, but literally reading all their filings and transcripts to understand over time how the business has changed, how management's views have changed, and finding any sorts of inconsistencies are super valuable as people tend to get near-sighted in their views. If you can find some major outlier (i.e. a company cash-tied, PE-backed, bound to cut their dividend but long-only's love it because it has quality margins and dividend yield of 5%+) then you might have yourself a good idea.

2) Really good question... I think it depends. I tended to shy away from relative comparisons across companies and take a more absolute approach, answering the questions: is this a company that can continue to grow organically or not? What's going to happen to this business in a year's time? Explaining those in an absolute context in a pitch I think is more valuable than saying "well I'd rather own AMZN than AAPL because of valuation/margins/growth." If you can develop your own view and say "hey look, I think this company will do this because X, Y, and Z" your pitch becomes more meaningful.

Apr 22, 2020 - 10:25am

Thanks a lot! This is very helpful. Just one follow-up question on research for pitch - totally understand the importance of reading filings and transcripts. For someone not in HF, given that we don't have access to sell-side analysts, experts, and management teams for diligence, what are some ways we can conduct primary research to go beyond what's in filings and transcripts?

Array
  • 1
Apr 21, 2020 - 9:36pm

Thank you for doing this; enjoyed all your answers
How did you go about those 3 pitches? What was your research process?
And also you like to know your take on resume vs pitches? I understand they go hand-in-hand, but which should be focussed more. Cheers.

Apr 22, 2020 - 8:42am

Tried to answer this above... in terms of my process. I do think that's why reading up is so valuable, knowing what makes a good company from a bad one is actually quite important and most people get clouded by near-term prospects of what's going to change within the next few weeks. I can tell you that no hedge fund is trading based on a weekly view of a stock, or if they are it means that earnings are within that week.

Both are important for HFs... I think the pitch should be more focused on but they're definitely both incredibly important to have well done.

  • Prospect in 
Apr 21, 2020 - 10:05pm

Thanks for doing this, it's very helpful. I have a few questions.
1: How different would you say your work is to RIAs and inestment analysts at private banks?
2: How important is it to be at a target for HF/AM/ Maybe RIAs or PBs? I know you got into a HF, but is it often that non targets get into buy side shops?
3: What are some differences and pros and cons of working at a smaller vs larger fund?
4: What can an analyst make in a really good year, is it true that the best analysts can make 7 figures?
Thank you again, this post is very helpful.

Apr 22, 2020 - 8:50am

Good questions.

I can't speak to private banks/RIAs, but in my unknowledgeable opinion I'd imagine private banking analysts are investing assets of behalf of the bank's clients in a very risk-averse approach. I would not imagine that private banks are taking large short positions in single-stocks and are probably more allocated to ETF's rather than single names.

It can be important. I want to answer yes and no to your second question. Hedge funds are less concerned about prestige in most cases and more on your ability to make $ and source good ideas. That being said, intellectual horsepower and capacity is sometimes generalized to target school grads and therefore become more attractive. Some hedge funds do care, some don't. There are plenty of non-targets at buyside shops, but I'd guess that predominantly given the natural progression from IB to HF that you'll see a higher proportion of target school grads.

Larger fund pro's: more security, more resources, more capital, less limitations.
Small fund pro's: access to PM, occasionally better economics, more nimble/tactile trading, leaner teams.

I'm out of UG, can't speak to making 7 figures as an analyst. I'm sure it's possible, depends on the fund entirely (how many people work there, what's the bonus pool look like, how much P&L did you contribute).

Apr 22, 2020 - 5:56am

Hi, I had another question,
with HFs, do you look at fundamentals like in AM or do you just look to make quick trades to make a quick buck (or a lot of bucks ;p )? Is there as much of a need to financially model a business/company to the extend you would if you were going for a long-term investment? or is it just something along the lines of "company x has just released figures abc and so price will go up so buy low sell high"?

Array
  • 1
Apr 22, 2020 - 8:54am

Some hedge funds do the trading quarters thing... they take a view on how a company's numbers will be into the earnings print and take positions accordingly. The fund I work for typically does not do that, tend to take a 6-18-24 month view on any given position. So yes, modeling is important; I'd go as far to say it is the most important piece to understanding the financials of a business in any case (short OR long term).

In both cases, you're looking to predict future numbers and what hasn't happened yet, so you wouldn't typically say "company X HAS just released numbers" it's more along the lines of "i think company X WILL release these numbers and here's why it will go up/down."

Apr 22, 2020 - 8:55am

Here to ask the pay question. Can you breakdown pay (Base + bonus) and progression?

Array
Apr 22, 2020 - 9:40am

Sure. Base in-line w/ IB. Depends on fund and how economics break down to be quite honest, some funds pay lower bases and higher bonuses, some vice versa, and some both high. My bonus is tied to fund performance + personal P&L, so if everything goes well I do better OR I might not get anything. Progression on base is probably equivalent to banking... maybe gets slightly higher quicker than IB.

Apr 24, 2020 - 9:57am

hey! thank you for doing it. I'm a 3rd year UG from semi-target, this year simmering in a PE boutique. Could you give us a few examples of possible datasets that you use to predict LT growth rate? I understand that it is very tied to the industry, but could you summarize an approximate framework how to choose the data for the forecast?

Apr 22, 2020 - 12:23pm

Thanks for doing this. It has been extremely informative.

These are all somewhat interrelated but I tried breaking them up.

1) How many pitches are you expected to come up with during a month? Quarter? Year? How long from when you look at the idea to actual presentation.

2) How do you source your ideas. Do you have a market cap you need to keep with?

3) Does your fund(s?) have a target holdings period. If idea goes south who makes the decision to sell.

4) Can you describe your research process? What do you present to your pm/investment committee?

5) At the junior level how much of your pay is tied to your ideas.

Thanks

Apr 22, 2020 - 6:07pm

It frankly depends on market conditions. Right now because of the volatility it's all systems go and as many pitches as I can muster in the timeframe, but before then it was as they came. Mind you some ideas I get are pitched to me either by sell-side analysts or my PM gets pitched and wants me to start digging in to then give him a recommendation.

Yes, $250m+ market cap

Good question, we don't have a definite holding period, but we tend to hold names in the 8-16 month range. Really depends on when we feel our thesis has played out but to earlier points, every name is different and we've had moments of trading quarters because we felt we had an edge vs. consensus. Our larger positions we've held for a longer time frame because it's likely part of a comfort thing and it aligns well with our value tilted strategy. Other smaller positions might get in the book because we've exposed a catalyst we believe in and it's more time sensitive.

I do a write-up in addition to my model. What this consists of is background, the thesis, risks to my thesis, valuation, assumptions, ownership, and then some more in depth research/data centric pieces that are typically included within the model.

Most of it. Now mind you, some of the names I have in our portfolio were suggested to me by traders or my PM, and therefore it wasn't 100% sourced by me, I just gave the final recommendation on it (which mind you isn't always followed). I only have a handful of names that I went from scratch, start to finish that are purely mine and sourced by me (as opposed to my PM).

Apr 22, 2020 - 4:52pm

Thanks for doing this. I've got a short pitch that has played out already (Down 70% from pitch date). Do you think it is still worth sending it out even though the thesis has been realized? As a showcase of primary research, contrarian view, etc?

Apr 22, 2020 - 6:11pm

Yes... but also start finding new ideas to send simultaneously. Once my thesis has played out on a pitch that's been ignored, I move on. There's no use in playing the game "I told you so" (I know you're not doing this). Point is, no one wants to know if you've been right in a hypothetical pitch. So have lots of people. It'd be helpful to include if you were specifically right on the way things played out (a company shut down production, a company cut their dividend, a company went bankrupt). However, people want to see forward thinking as opposed to something that's already played out.

I get that that's likely the most frustrating answer bc it means finding a whole new idea to pitch but just trying to be as honest as possible.

Apr 23, 2020 - 10:15am

Thanks a lot for your AMA!

I would love to ask if there is any tips on writing a stock pitch. As I am going to have an interview with a long biased hedge fund which is hardcore fundamental, I am struggling to prepare my stock pitch for it. Not really sure how can i stress on the fundamentals / just general advice on doing stock pitch in an interview setting.

Appreciate that. Thanks!

haha just an ordinary kid with enthusiasm in the market -- market-enthusiast/ Hongkonger
Apr 23, 2020 - 10:25am

I tend to break it down like so: background, the company fundamentals (i.e. what do they do, how do they do it, what are the costs involved in their business), the pitch itself, risks to my thesis, management, ownership, production level data and including a lot of my assumptions throughout. I also like to include why consensus is wrong or what's missing from the current stock price. For instance, if the market is valuing a business on a DCF that suggests its terminal growth rate is 5% but you know that the rest of the market is really only growing at 3% and that'd be a more appropriate terminal growth rate, then you may have an argument for a compelling short. That paired with the identification of a catalyst or process for what would have to happen for the stock to change/go down is tying it together.

Apr 23, 2020 - 10:37am

Thanks man! Tho i have another following up question which may sound a little bit stupid. Cuz i have never done a stock pitch structually.

So i think the stock pitch valuation must include different models like DCF / multiple / comps depends on preference and situation. While it may be easy to directly show that I have this xxx model and showing that the stock is undervalued by xx%. How can we actually present our valuation section of the pitch in the interview which i assume there wont be any display of your model / report.

btw thats a swift response! thanks a lot!

haha just an ordinary kid with enthusiasm in the market -- market-enthusiast/ Hongkonger
  • 1
Apr 23, 2020 - 9:21pm

Hey man, thanks for putting in the time for this AMA. Really helpful.

I'm in a shitty situation, recently graduated out of non-target in Canada, 3.2 GPA, and no internship experience. Enrolled in level 1 cfa to try and at least stand out compared to ivy league grads. Been very discouraged, but still hungry and trying. Your post gave me some light at the end of the tunnel haha.

Any tips on how I should network? Cold emails? Informational Interviews? How do I stand out further compared people from top schools? Were you using a direct approach like "Hi I'm really interested in working with your firm, I'd like to see if you're interested in my "ABC" stock pitch?". Obviously they see your interest but how do you translate that to I want a job at your firm in the emails?

Do you think providing quant-based analysis using statistical models will help with the pitch even if the fund doesn't use such analysis or is it more important to solely focus on traditional models like DCF and comparables?

Once again, much appreciated

Apr 24, 2020 - 9:17am

You sort of answered your own question. No one just sends a stock pitch randomly with no weight or intent behind it. I'm pretty sure everyone I emailed that I sent a pitch to knew that I was interested in their firm. You just gotta keep going, I think I mentioned this but I graduated without a job and only got in the door with my current firm several months after graduation, with an even longer interview process consisting of multiple rounds. Keep pushing! The CFA route is great + multiple pitches will be helpful. Also, if you're discouraged there are several other routes to HF that are a little bit more forgiving than hedge funds in terms of recruiting (equity research, they hire frequently).

Both are great if they can make your pitch more compelling, but I'd spend more time on framing it according to the fund's strategy. If you can include stats to show value-add, then totally do it.

Apr 23, 2020 - 10:27pm

Thanks for doing this herzyherzy ! Awesome detail in all the responses here.

From a networking/recruiting perspective, what do you like to see for research experience on a resume? For ex would it be more appealing to you to see "pitched xx" with investment rationale or bullet points focusing on research process?

Additionally, what are your favorite sources for news/staying up to date on markets or sector specific research?

Apr 24, 2020 - 9:24am

Hmm.. good question. I don't think your resume should include certain pitches persay, but if there's times where you can speak to a specific project or pitch with real results, then sure. That's a tough thing to answer because I'd imagine most people want to see 1) modeling ability/experience, 2) sourcing/generation of ideas when possible and 3) methods/process of research. No one is expecting your pitches at a junior level to be home runs, so if you say "hey I pitched $BA short before the MAX went bust" people will just say "wow, good for you." Resumes are tough because they're backward looking documents that need to indicate forward-looking performance.

WSJ, I read a lot of PE/IB newsletters still (Fortune Term Sheet, Axios Pro Rata). I have access to Bloomberg and FactSet + research so typically get company specific commentary there as well.

Apr 23, 2020 - 11:04pm

I'm always curious to hear how things work at other funds.

  1. Can you describe your fund's investment philosophy? Related to that, how much emphasis on valuation?

  2. What do you think your fund does exceptionally well as far its research process and investing goes?

  3. Is your firm's investment process formal or not so much? E.g., do you put together memos/decks, have formal investment committee? Or is it more as hoc, perhaps 1:1 with your PM and just putting together a 1-2-pager?

Apr 24, 2020 - 9:34am

Happy to share, and would be curious about hearing yours as well.

1) We are focused primarily on contrarian names that we believe are mis-priced due to a variety of reasons, emphasis on strong FCF, capital allocation strategy, and tailwinds that the larger market tends to undervalue. There isn't always necessarily a catalyst, these names tend to be out of favor usually and so valuation ends up playing a big part. We won't pay up for a name that we feel is being over-valued for the wrong reasons, and we'll hesitate to invest in deeper value names that we feel the market is pricing appropriately. The timeline also varies, we've traded quarters at some points and held certain names for multiple quarters.

2) A few things: first off, we dig deeper than most investors tend to. Our sectors that we primarily focus on tend to be ones that aren't as followed by larger hedge funds with large amounts of resources/data at their disposal. I personally think just by reading filings and transcripts dating back over 10 years tells you the entire story of a company and some investors/analysts have gotten lazy in skipping those crucial steps. I think we're nimble, which is something I like. I also appreciate our conviction, we tend not to second guess all of our ideas and have more confidence in our winners, even when they're losers.

3) It varies. Truly depends on our PM's knowledge of the name. If it's entirely foreign to him and he's never really looked at the company, a more formal intensive process is typically required to ensure he understands the pitch thoroughly. If it's a name that he may have covered in the past or been in the book before, we won't need to do a formal write up for it. Our firm is small, so practically all of us are the "investment committee" and our PM is the shot caller at the end of the day.

Hope this answered the questions.

  • Prospect in Other
Apr 24, 2020 - 9:42am

hi! Thanks for doing this, everything above has been super helpful. I'm just wondering for internships with HFs using your cold email strategy, is there necessarily a timeline that HFs will follow in regards to taking interns? I ask because obviously a lot of these funds don't have postings but I'd want to know if it's too early to reach out with pitches for SA 2021 and if I should wait maybe later into the summer months. thanks!

Apr 25, 2020 - 10:39am

Yes and no. I'd argue it's never too early to reach out and touch base or make connections, but at the same time most funds are not likely to know their needs that far ahead of time. However, that truly may differ for an internship - I can only speak to full-time hiring.

Apr 24, 2020 - 6:46pm

Hey man, thanks for doing this! I'm a freshman in undergrad thinking about hedge funds, but also considering ER. I've heard you should also send in some writing/models with your ER applications, so I'm wondering where the differences are in the HF application process. Also, what were you hours like (on avg. and at their worst)?

Apr 25, 2020 - 10:43am

First off - ER is a great, great spot to start out. Hours slightly better than banking (except during earnings), pay is comparable in most cases (not all), and it places quite well into hedge funds/asset management/even IR/corp dev. sometimes.

Equity research is more focused on getting to a rating than they are pitching an investment idea. They're similar in their foundations, but I've seen several research analysts who have neutral ratings on stocks that they'd be short solely due to valuation. Again, you're looking to be accurate in your rating and the framework for ER mostly depends on your risk/reward. If you have a target price that's

Apr 27, 2020 - 12:07pm

Well, it wasn't as much of a story to explain. Competitive bank, competitive group, they don't hire the proportion of their class that most banks do. Some groups/banks i'm sure you're aware of overhire interns and underhire analysts. I had good feedback and members of the team willing to go to bat for me, so it wasn't as dreadful to explain. Now, I will say FT IB interviews cared 20x more than my HF interviews on the no offer, naturally.

No - think of a second tier MM-ish (RBC, Jefferies, HL, etc.)

Apr 26, 2020 - 11:31pm

Hey OP,

Thanks for the AMA and the valuable insight.

1) How "macro aware" is your shop? What I mean by that is how concerned are you of the macro enviroment when you make your pitches to your PM?

2) Would you mind sharing a template you used for sending out the initial cold emails?

SB's in advance!

Remember, the grass is always greener on the otherside because it's fertilized with bullshit.
Apr 27, 2020 - 12:15pm

I'd say the macro drives in two ways... structurally/secularly as well as exposure/factors. On the structural sense, our research is fundamentally bottom-up but we need to be aware of more macro trends and the environment that the company is exposed to. If we know that there's a major shift to EVs in the next 5 years, while that may not be "macro" by the pure definition it definitely poses a more thematic piece to consider when pitching. On the factor side, we are constantly looking at flows to see if we should own growth/quality/value etc. etc.

Sure, think it's on my last post but:

"Hi XYZ,

My name is XYZ and I'm currently a student/analyst/research associate at (insert current location here). I've interned in XYZ and am very interested in learning more about hedge funds/long short investing/equity research/investment banking. I'd love to find a time convenient for you to hop on the phone/grab coffee over the next few weeks. Attached is my resume and pitch.

Best,
You"

If you can personalize each one, if you noticed something you both have in common (i.e. both played a D1 sport, both were in the same fraternity) no harm to toss that in too.

Apr 30, 2020 - 4:26am

Awesome.

I have found success by just starting to build a relationship via coffee first. Once you've got rapport established, it makes the process of sending them a pitch/asking for an internship far smoother. Do you agree?

Thanks again for the insight.

Remember, the grass is always greener on the otherside because it's fertilized with bullshit.
Apr 26, 2020 - 11:56pm

Thanks for making this. How much emphasis is placed on standardized test scores during recruiting?

Array
  • Intern in HF - Other
Apr 27, 2020 - 6:07pm

Hey, thanks for doing this. So I'm going to be spending my sophomore summer at a really fantastic HF this summer and was wondering if you had any specific recommendations for resources to improve financial modeling skills. I don't know if they take anyone out of undergrad so I don't expect much in the way of training and want to make sure I provide value and have a shot at converting it to full-time down the road.

Apr 30, 2020 - 8:28pm

Apologies for late reply... crazy last few days.

Honestly just practice. I think the more comfortable and familiar you get with being confident in a model makes all the difference in terms of your ability and understanding of a company. People love to take broad thematic views on sectors whereas getting into the weeds and understanding what that extra $ of gross profit means and how it was achieved through a model is your value add.

Apr 27, 2020 - 6:07pm

Hey, thanks for doing this AMA! Great info here. Few quick questions:

1) I've been working at a boutique (no-name) M&A advisory firm while in school for the last two years. The modeling aspect of the job was pretty much just templates, so I'm learning how to build 3 statement and DCFs from scratch on the side. Do you think it's worth highlighting my banking experience or will funds just brush it off?

2) I've noticed that many funds don't allow their employees to list their funds on LinkedIn. Do you have any advice on how to figure out which fund the person's at? For example, "NY-Based Hedge Fund" is pretty broad. I've been thinking about sending a short blurb w/ a connection request, but I'm not sure how viable that strategy is and whether or not people would take kindly to it.

3) If there's not much information on a particular fund, how do you figure out their strategy assuming you haven't talked to anyone there? Many hedge funds also seem to have very bare websites.

Thank you for your time! I appreciate any advice you may have.

Array
  • 2
Apr 30, 2020 - 8:32pm

1) Definitely highlight it. People will love to see that you've had exposure and taken the initiative to do something like that. Obviously don't lie on the bullets, but explain that you've taught yourself on the side the modeling aspect in your free time given the more administrative-type tasks assigned during the internship/experience.

2) Yeah that's really only like

Apr 29, 2020 - 9:06pm

Out of all of the colleges on my list (MIT, Upenn, Harvard, Columbia, Stanford, UC Berkeley, Yale, NYU, Duke, UCLA, Princeton), which are optimal for an undergrad to exit into an IB/HF role?

If I intern or get an analyst position for ER or IB during undergrad, will it be easier to find a HF job out of undergrad?

Apr 29, 2020 - 9:18pm

Nam rerum voluptatum exercitationem et. Sapiente fugit at non possimus molestiae non. Consequatur quisquam voluptas in animi vel ut. Laboriosam in neque sit omnis.

  • Analyst 2 in IB - Cov
May 3, 2020 - 8:07am

Et et dolorum voluptas recusandae non. Enim harum neque et voluptas rerum sapiente. Molestias ex quaerat corporis provident quo nemo. Sed debitis perspiciatis quas libero consequatur. Aliquam dolores mollitia reprehenderit magni non.

Veritatis suscipit assumenda ipsam. Quaerat consectetur optio voluptatem veritatis. Repellat voluptatum qui necessitatibus numquam maxime aut. Ut praesentium qui repellat fugiat. Quidem ut qui sint rem et vel dolores. Praesentium harum enim voluptas ducimus quos. Non suscipit amet id harum ipsum velit.

May 14, 2020 - 9:49pm

Perspiciatis corrupti ut sed occaecati et. Inventore consequatur dignissimos quia quibusdam corporis tempore quis. Voluptas qui natus facilis ipsam blanditiis culpa. Sunt similique fugit ut non officiis. Reiciendis assumenda excepturi commodi et eaque sunt.

Voluptas qui provident quibusdam perferendis animi officia ut. Ad ex dolores praesentium nihil sapiente debitis. Maiores illum dolore sit quo autem quibusdam delectus beatae.

May 15, 2020 - 10:44am

Consectetur expedita et qui ipsum blanditiis in odit illum. Modi ut quas cum iure. Sed soluta tenetur alias quas.

Possimus amet est soluta nesciunt tempore. Ab eos quod sapiente iure ipsam. Recusandae omnis dolorem laborum aut fuga molestiae sed.

Commodi quaerat quibusdam illo et aliquid. Vel consequatur officia facilis nihil. Nulla enim at numquam. Cupiditate quibusdam molestiae labore officia distinctio sed sint. Optio animi rem ut est molestias numquam error. Consequatur ex ipsum illum doloribus. Nesciunt in ipsam nihil harum voluptatem iusto.

Jul 7, 2021 - 11:34am

Doloribus in earum numquam quia nostrum. Cumque optio excepturi odio quo eligendi.

Non accusantium repellendus provident provident ducimus. Labore non dolores et dolor ut dolorum possimus magnam. Ratione voluptatem voluptate sit odit distinctio qui autem. Sit illum magnam vero ex nisi eaque enim. Autem sunt sed velit itaque et et.

Necessitatibus iusto porro consectetur in vero. Iusto hic ad est animi ratione quos. Aut nisi autem eius iusto eaque delectus culpa.

Start Discussion

Total Avg Compensation

November 2021 Hedge Fund

  • Vice President (20) $488
  • Director/MD (10) $359
  • NA (5) $306
  • Portfolio Manager (7) $297
  • 3rd+ Year Associate (21) $288
  • Manager (4) $282
  • 2nd Year Associate (28) $241
  • Engineer/Quant (52) $238
  • 1st Year Associate (64) $187
  • Analysts (195) $166
  • Intern/Summer Associate (17) $122
  • Junior Trader (5) $102
  • Intern/Summer Analyst (215) $82