Mod Note (Andy) - as the year comes to an end we're reposting the top discussions from 2015, this one ranks #25 and was originally posted 9/20/2015.
From Non-Target Undergrad Straight to PE
I've had some downtime the last few weeks before I start my new role and have been mulling over making a post on WSO, long time lurker, first time writer. I feel exceptionally lucky to have landed a buy-side gig (at at PE firm no less) straight out of undergrad with minimal experience, no "prestigious" internships, a horrible GPA, little to no alumni to tap.....frankly I could make a post dedicated to the list of hurdles I've faces for the last 3 years. I would like to throw my story out there as a counter to the conventional structured wisdom on WSO and present an alternative narrative to those aspiring to enter into principal investing and private equity.
Since my firm and school are quite small and I'd like to maintain my identity I will be intentionally vague about some details and focus on the meat of my story.
I graduated in 2014 as a finance/econ double major from a regionally well regarded liberal arts university with a strong track record of producing successful professional track graduates, but one with no national recognition, finance recruiting (we are one of the top schools in the country for accounting however), few if any alumni in corp. fin/IBD/PE/HF/PM/etc., and with no faculty from any of the above. In short, probably the worst setup possible from someone trying to get into a PE firm.
I had one internship sophomore year doing international trade and what I like to term "physical commodity arbitrage" for a company based out of Mexico. Unfortunately, I had a PE internship fall through right before junior summer began, but I'm still friends with the MD to this day (it's a small world people). My overall GPA was 2.9, and I'm rounding up, however my GPA my final 4 semesters was 3.4, and my MGPA was 3.5 - we have an unusual grading distribution and the median and average grade in a finance course at my school is a C+/B-, even in senior seminar - in other words I was one of if not the best finance student in my year. I also studied for CFA Level 1 my senior year and passed with flying colors.
I started out as an economics major, and figured out quite quickly that I hated the theoretical aspects of the subject and was more interested in it's application, so I switched my focus to finance beginning Junior year. I had a lot of time as a rising sophomore to do research and read - I actually spent part of that summer reading Security Analysis - 1951 - and figure out what kind of coursework I should take and what the 2nd half of my college education would look like. Upon returning from holiday I immediately started taking finance courses and in tandem started taking upper division accounting and digging into the world of finance. After about 6 months, I had figured out that if I wanted any kind of career in finance I would have to get out there, start meeting people, learn how to present myself, and develop a level of maturity beyond "above average", so I started attending alumni functions and went so far as to fly to several events in different top 10 metro areas to network. Nothing really came of it, but it was good experience. A few months later I coincidentally ran into an alumni who at the time was a director (now an MD) at a >$1B PE fund and ended up having an interview with him. It was my first contact with someone in principal investing and his story uniquely resonated with me as opposed to some HF and IM professionals I had met and found interesting. For me, the tangibility of PE, and the opportunity to be hands on with your investments and have a definitive impact was enthralling, and I kept in contact with him, and had a few meals. I also networked through an ex-board trustee who introduced me to a director at F50 company who introduced me to a young guy (30s) who runs a >$2B public holding co with a PE strategy, and he as well had a uniquely interesting story that resonated - he is extremely hands on with his investments as well. Those two people really sparked my interest in PE and are the reason why I chose to pursue a career in the space.
When I graduated I was a fish out of water - no job offer, no prospects, no nada. I spent time after graduation studying for CFA L1, took a few weeks after the exam to recharge from a senior year from hell (IBD hours every week), and started looking for a job in July. I had some prospects going when I decided to reach out to a boutique bank in town, and struck up a conversation with one of the MDs about how I'd never seen him at a CFA function. He invited me to meet his analysts and a day later they offered me a job. It was less than ideal - I was working as a "consultant" ie. a part-time analyst due to their level of deal flow, but I was working on PE due diligence for a few companies that our MDs were considering investing in and turning around (my MD was a M7 MBA with a MBB consulting background). I had, without realizing it, found a spot working in PE, even though I wasn't being paid well and had 0 job security. However the deal experience was invaluable, and I learned a ton.
When I was hired by this boutique Investment/Merchant Bank, the partners were very upfront that I probably wouldn't be there long because of deal-flow and their current analyst/associate pool, so I took a few interviews, including with several top notch boutiques and BBs, but really fumbled hard with my story and my work experience and although I managed to make it to final rounds with some exceptionally competitive firms was unable to land a single offer. I stopped working for this firm around November/December 2014, which looks rather bad on a resume to work for only 5 months before leaving. Christmas and New Year went by, and really everything from mid-January till now really blends together into one continuous timeline marked by incremental successes.
The one major event in between was I began studying for Level 2 CFA in February and ultimately passed the June 2015 exam. I cannot articulate strongly enough how important an event studying for level 2, and passing it, was for my job search. It doesn't matter what space you're in, no one with ever doubt your technical savvy if you're a CFA candidate with at least one, and preferably two exams under your belt - the material you are REQUIRED to know in order to pass those first two exams puts you far above most IBD analysts/associates in terms of financial and accounting knowledge. While it may not teach modeling skills, you really must have an intuitive grasp and truly understand the mechanical and theoretical aspects of financial statements to pass, which will get you past numerous technical questions/teasers and give you a unrivaled skill set to critically evaluate financial case studies which are part of the PE interview process and your day-to-day job.
From January to August, I really can't even begin to count the number of interviews I've had. For those of you who care, the list includes JPM, Goldman, Piper, RBC, Cowen, multiple other MM banks, several endowments/sovereign wealth funds in the 10's+ billions, probably 20-30 PE funds....it's a long list. I also turned down multiple offers during that time from things I didn't really want to do long term like portfolio management and real estate PE. I decided to keep interviewing full time because I saw continued improvement with my interview prospects, the frequency with which I was contacted by PE firms, and how far into the interview process I was able to get within PE/IBD. If I had been shaken out consistently in the first or 2nd round, I would likely have caved much sooner, but I was able to consistently make it to 3rd, 4th, and final rounds with strong firms, and lost closely to a pool of 2-3 other people, all of which were associate level hires to my fresh undergrad resume with ~6mo IBD + CFA L2 Candidate. I knew that if I kept at it, eventually things would fall my way and this back log of associate level hires would pan out.
Eventually they did, and I passed Level 2 CFA (2/2 so far baby), and I'm starting my new gig in October. I'll be working for a PE firm with a fixed capital base (yes, we are not a private equity "fund" per-say), working directly under the CIO, leading the due diligence process, portfolio company integration, transaction financing, participating/presenting in board & hold-co. level meetings, etc. and I'll have an office with a window, at 23, and all with the ridiculously stacked-against background that I have.
If I could identify two things that made me truly unique, and that ultimately differentiated me from a host of 2nd year analysts/1st year associates landing me a coveted spot which was advertised as a post BB/MM IB analyst program pre-MBA associate job (312 resumes last I checked with my boss), one is the ability to be articulate, and the other is genuine intellectual curiosity. It's unbelievable easy to find someone who can build a complicated excel model and has technical abilities, but asking that person to walk another person through the model, detail their assumptions, be concise in doing so, and answer questions while conveying understand, is a rare skill. At the end of the day, it's all about making things tangible for someone else - maybe that means thinking up a metaphor on the spot to explain a revenue accrual, or intuitively explaining the pitfalls of a valuation methodology in a way that makes sense to your grandmother, if you can do that, someone will eventually see that skill and recognize how rare and valuable it is when working closely with the partnership or a portfolio company. Secondly, having genuine intellectual curiosity - unlike investment banking, investing requires a creative mind and type, which is essential to vetting deals and seeing pitfalls/opportunities no one else does. At a typical PE firm, you will end up investing in maybe 2-3 deals a year, out of over 100 evaluated, or many more depending on firm size, every year. If you don't find the evaluative process interesting - picking up a new product, learning about it, understanding how it works, is made/marketed/serviced/used, and enjoy questioning facts and the status-quot, you may make it to final rounds, but will never get an offer.
I'll add a couple of things for housekeeping before I end this post.
The interview process was as follows:
Applied via LinkedIn - I have a flashy color resume, and yes, the color is red
Contacted 1w later, phone call next day
1st round: 30-40 minute call, long form elevator pitch followed by unique technical questions stemming from the firms current portfolio companies, invited to case study 2nd round at the end
2nd round: provided CIM (Confidential Information Memo, in case you're in undergrad) from one of the partners former investments, also given previous year of financial statements in excel - asked to create a full month-by-month lbo model with tax schedule over a defined investment period, and do a short write up on the investment - given 24 hours to return a model and materials - essentially a firedrill. I ended up running out of time, emailed the partner my work at the 24 hour mark, explained that I was having some difficulty linking the schedules he asked from back to the circular LBO model but that the rest of the model was build and functioning, and he offered me more time. (be honest, humble and willing to admit if you can't finish something, rather than turn in a half-ass product and hope it gets by)
3rd round: week after I turned in my model, partner setup a call to discuss it, the logic behind my assumptions, gave me another few technical questions, and invited me to fly up and meet with him
4th round: flew up the following week to meet with the partner, was given another case study in person - no modeling, just a really, really, really difficult scenario that required a lot of financial statement knowledge to solve, was immediately given an offer in the room upon solving the case study in ~5 minutes. Called from the airport to accept, with the stipulation that I would receive an office, with an outside window.
Comp was offered at 55+30, reset at the end of 15', very much in-line with the industry, if not slightly above after we renegotiate after he's seen a few months of work product (I'm a Level III CFA Candidate too, for crying out loud). Could have negotiated higher but I'd rather not fight for 5-10k more this year when i can ask for 30-40 more next year, at least. It's better to to prove yourself anyway.
I guess I'd like to end this post with a note to the community: WSO has been helpful, while there is plenty of bullshit here, there is also plenty of good information and it's been helpful to peruse it over the years, and educational to have to read between the two. It's been a far better resource, combined with a fair number of blogs and interviews, than my university career services was.