Summer internship decision: HF vs. BB S&T

Hi all.

I'm a junior interested in pursuing a career in trading - probably something like rates or fx. I think I would enjoy macro-related products in general, but am open to trying things at this point. I am considering several offers for this summer:

1) ~$5-10bn AUM macro hedge fund. Not a big name, and pretty small in terms of headcount.
2) A role on the FX desk at one of the top-3 FX banks (DB/Barclays/UBS)
3) SA role at another BB (like GS/JPM/MS). Desk selection happens later on, so I don't know where I'd be.

I really liked the culture at the HF, and am attracted by the higher comp and possibility to have more authority earlier on (if accepted for full time after the summer). However, I generally like to be risk-averse and see the value in having the "brand name" on my resume - this matters especially if I don't get the return offer from the fund, and also for purposes of moving around later down the line. (I'm uncertain as to the prospects of switching between funds on the buy-side, especially the fund's name isn't a very well known one.)

Has anyone been faced with a similar decision, or have any knowledge or insights into this issue? Specifically interested in what people think about starting out at a hedge-fund right out of undergrad, vs. getting the sell-side trading experience at a bank first. I know this kind of thing has been discussed on these forums before, but a lot of my searches bring up things from 5+ years ago, and I'm sure the industry landscape has changed a lot.

(I'm not sure if I should also post this in the HF forum - mods, feel free to move it if you think that's more appropriate.)

 
Best Response

One of my buddies worked at a large well-known credit hedge fund last summer in an investing role and didn't get a return offer for full time because they just don't hire undergrads for such roles. Make sure the HF will be open to taking you on for full time given your summer performance.

Another point about working at a bank is that you will get introduced to many products that you might not even have known about. Like let's say you were interested in macro stuff and mortgages seemed a lot more interesting to you than vanilla rates or fx trading, you might not get exposed to it with such depth if you started out at a macro hedge fund that doesn't deal with them in the first place. What if you found credit derivatives a lot more interesting after learning about them?

You also get to build a sizable network with people in both the sell side and the buy side as a BB trader and can always make the move to a HF later. I also believe that being able to look at the flow and being in a sell-side environment where you can communicate with other many smart traders across different product groups is a significant advantage to learn as a trader. Also, as a market maker, you will be exposed to many technicalities of trading and managing risk that you might not at a HF where, depending on your role, you might be focused more on generating trade ideas.

 
therapist1:

One of my buddies worked at a large well-known credit hedge fund last summer in an investing role and didn't get a return offer for full time because they just don't hire undergrads for such roles. Make sure the HF will be open to taking you on for full time given your summer performance.

Another point about working at a bank is that you will get introduced to many products that you might not even have known about. Like let's say you were interested in macro stuff and mortgages seemed a lot more interesting to you than vanilla rates or fx trading, you might not get exposed to it with such depth if you started out at a macro hedge fund that doesn't deal with them in the first place. What if you found credit derivatives a lot more interesting after learning about them?

You also get to build a sizable network with people in both the sell side and the buy side as a BB trader and can always make the move to a HF later. I also believe that being able to look at the flow and being in a sell-side environment where you can communicate with other many smart traders across different product groups is a significant advantage to learn as a trader. Also, as a market maker, you will be exposed to many technicalities of trading and managing risk that you might not at a HF where, depending on your role, you might be focused more on generating trade ideas.

You are romanticizing sell side trading a little bit.

a) communicating with other traders across the floor: essentially never happens. Most teams are silos and very close knit and there is very little contact outside your row, let alone on the other side of the floor. I worked ata BB for 2 years and didnt know hte name of the guy who sat in the next row.

b) building relationships: the relationships you build as a trader on the sellside are with inter dealer brokers, the relationships you build as a trader at a HF are with sellside research, company executives if you are involved in new issuance, sellside sales etc etc basically any resource the sellside has is at your disposal. You can call up an analyst at an ibank, ask him to send you a model on the compoany nad have him walk you through it

c) introduction to products, maybe but again once you pick one you are pretty silo'd. If the HF is a multi strat much more chance to do projects for multiple different desks (and more interesting products).

 

All valid points. Let me offer an alternate perspective...

Your concern about not being able to move around the buyside if you start at an "unknown" macro fund is irrelevant. If you perform well and build a good track record, that should speak for itself. And if you can't generate alpha on the buyside...then you have no business moving to another buyside fund anyway.

The flip side to learning from the flow on the sell-side is that you run the risk of becoming dependent on it. If your goal is to become a macro PM, why don't you start learning from and thinking like one from day one of your career? I did BB trading and would kill for the opportunity you have.

By the way...$5-10b AUM is by no means small...and I doubt it is "unknown" to the people who matter. Has performance been mediocre?

 

From the limited information you have posted, I would definitely argue the internship at the HF (I'm happy to hear counter-arguments). You will be surrounded daily by people making investment/trading decisions, rather than those selling products to clients or trading client orders. There's a big difference. And at the end of the day if you want to be the person that makes those decisions and has money on the line, no better place to be than a place where people are doing that every day. It's even better if they are good at it, since learning from the best often can help you on your quest to become the best (or very good).

Plus, worse comes to worse, leaving said big HF to the sell side is easier than the other way around.

Good Luck

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

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