Q&A: HF out of Undergrad,

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.

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.

In-line w/ FT banking.

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.

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.

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.

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.

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.

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.

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

Second above. S&T is wholly markets focused and I've seen people lateral to IB/ER within their bank and then move to PE.

Single manager, long/short equity with focus on a handful of sectors (3-4 sectors mainly).

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.

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.

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.

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.

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.

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.

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).

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."

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.

Yes + DCF + extensive revenue and expense builds... Lots of data as my modeling typically tries to rely on some sort of data set forecast to predict LT growth rates. Occasionally LBO/Merger Models.

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).

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.

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.

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.

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.