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Wanna Jump Straight to the Buy Side?

Mod Note (Andy): #TBT Throwback Thursday - this was originally posted on 10/17/12. To see all of our top content from the past, click here.

Deciding to Recruit For the Buy Side

Most of my friends are going into banking. Not because pitch books and road shows are their thing, of course, but it opens a lot of doors. 100 hour work weeks, camaraderie in the form of all-nighters editing PowerPoint slides and sharing Seamless meals, and having no skin in the game never really sounded appealing to me, but I guess to each his own, right? Needless to say, it turns out I'm not the only one who's not overly excited about the idea of working on the sell-side, and this includes my friends lucky enough to get return offers or full-time gigs at their respective banks/research houses. But as most of them will tell me, "starting on the sell side is the quickest route to the buy side, and I'll be a hedge fund rockstar in just two years!"

Wait a second... wouldn't the quickest route to the buy side be... starting on the buy side? Or was I missing something?

Fortunately, I wasn't. And if you're sure you want to be investing for a living, going straight to the buy side is the best career move you can make. With recruiting all but over, I'm happy to be starting my career with the job title "Research Analyst" and doing something I'm actually interested in doing.

Anyone interested in making a career out of investing should be trying to make this jump. The argument that banking or sell-side research makes you a better investment analyst is bullshit. Being an investment analyst makes you a better investment analyst. But if you're planning on interviewing for the buy-side right away, there's a few things you need to be prepared for. I'll try to highlight a few of those below.

The Stock Pitches for the Interview

1. Have two stocks to pitch. And know everything there is to know about them.

If this sounds hard, you're not actually as interested in investing as you thought you were. If it sounds fun, keep reading. You should be able to explain exactly what these companies do in very simple terms (if they don't already know them), be able to paint the picture of why the market is divided on the stock, identify the catalysts in the short and long term that make this a great business that will eventually realize its intrinsic value, and provide some intelligent thoughts on valuation and why the stock is worth investing in today. I'd stress illustrating the long-term growth profile of the company over anything else, and make sure you highlight what the drivers are of that growth. Analysts want to know that you look at all aspects of a company, so mentioning management, industry economics, and company-specific competitive advantages are all essential. On valuation, you don't have to be an absolute wizard but you should know the typical industry multiples, show where the company is undervalued relative to competitors, and have some insights into how the company manages its cash flows and if there is a shareholder-friendly focus coming from management.

Obviously having one stock to pitch is always important, but I strongly recommend two. In a standard superday you'll most likely be talking to several analysts individually, and pitching them all on the same thing isn't a bad thing, but knowing just one business is something anyone can do. If you mix it up, it's that much better. You're likely not going to be asked for more than two ideas in any interview, so knowing three or four is probably not as beneficial as the jump from one to two.

Check out a detailed thread on WSO about preparing for hedge fund stock pitches.

Why Investing Answer for Hedge Fund

2. Have a reasonable (and legitimate) explanation for why you're passionate about investing.

A lot of the decision-making around who to hire coming straight out of undergrad seems to come simply from who actually wants it the most. Often, the simple "walk me through your resume" question gets substituted in buy-side interviews for a slightly different question, "tell me why you're here.", The answer isn't too different since either way you're trying to lay out a narrative, but if you can't point specifically to your experiences in the past (both on and off your resume) that show why you're a good fit for an investment firm right away, it's probably not going to work out. This is where having personal investing experience comes in handy, as you can usually point to that (but be ready to talk about your investments, see #1), or being part of some investing group may be just as good if it's not bullshit. Either way, you need to come across as someone who's completely okay with sitting at a desk doing directed research and crushing 10-Ks for a year or two, so conveying a strong interest is actually important.

Pay Starting in Buy Side Finance Job

3. Be prepared to take lower compensation at first. Trust me, it's justified by better hours and over-justified by a much higher ceiling as quickly as a few years out.

Even if you think you're better than Warren Buffet, you're in your early 20s and haven't proven yourself to anyone yet, so don't expect any more than you'd be getting had you worked on the sell side. In fact, it may suck but you should probably expect less. Some of my offers were pretty bare. Even among respected firms 70k base with 10k signing and 10-15% bonuses for the first year are pretty standard. And for someone just starting out, that's going to be plenty. Most places will pay less, some places may pay more, but it's not about your first year's pay. What's more important is what your ceiling looks like and how quickly you are going to gain experience and hopefully move up the ladder to a position with more responsibility. Though it's easier to make 150k in 1-2 years in banking, it's easier to make 400k (or way, way more) in 4-5 years at an asset manager or hedge fund.

You Shouldn't Care About Location

4. Location is irrelevant.

Unless you can't handle early mornings in San Francisco (I know I couldn't), geography can't be a big deal to you, since many of the best places to work on the buy side aren't even in New York. For a while I was convinced that if you work in finance and you're not in New York, you must be a failure. I'm starting to think it's the other way around. I don't have much to add aside from that, but if you really want to jump straight into an investment research role, you can't be dead-set on a certain city.

Any other monkeys taking this path? Thinking about it? Advise against it? As always, I'd love to hear. But so far, I'm not having any regrets...

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Comments (289)

Apr 19, 2016

There are not very many buyside analyst-type jobs out of u-grad, usually they prefer experience. If you do have the chance, I would recommend it. However, make sure it's not some portfolio/administration type job, otherwise you'd be much better off going to the sell-side out of school. At that level, comp is probably similar, maybe slightly less, on the base salary as sell-side, and with some discount, say 20-50%, on the bonus.

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Apr 19, 2016
IBPEHFVC:

There are not very many buyside analyst-type jobs out of u-grad, usually they prefer experience. If you do have the chance, I would recommend it. However, make sure it's not some portfolio/administration type job, otherwise you'd be much better off going to the sell-side out of school. At that level, comp is probably similar, maybe slightly less, on the base salary as sell-side, and with some discount, say 20-50%, on the bonus.

By portfolio administration job, do you mean something like PAG in BlackRock?

Apr 19, 2016
IBPEHFVC:

There are not very many buyside analyst-type jobs out of u-grad, usually they prefer experience. If you do have the chance, I would recommend it. However, make sure it's not some portfolio/administration type job, otherwise you'd be much better off going to the sell-side out of school. At that level, comp is probably similar, maybe slightly less, on the base salary as sell-side, and with some discount, say 20-50%, on the bonus.

I know exactly what you mean by PM admin or assistant because I see most of the PM's here do have an assistant that helps them plan out their scheduling and often times executute their trades for them after the PM sends them exactly what they want to do.

But as a Jr. Analyst role, how much will I be expose to, and i noticed the Jr. PM roles are mainly with HF's.

Apr 19, 2016

Why don't you ask your boss?
They should know what step you should take.

Apr 19, 2016

It varies from shop to shop.

For instance, T. Rowe promotes from within. Almost all of their PMs come from research, starting as research associates and moving to analyst, then junior PM.

PIMCO is pretty adamant about PMs having advanced degrees (mostly MBAs). They hire 1 or 2 a year from top programs.

Fido mostly hires from undergrad, promoting people until the path forks between advancing in research and moving to a PM role.

There are more models, but you get the idea. Every firm has its own ideas.

Apr 19, 2016
J_monkey:

Why don't you ask your boss?
They should know what step you should take.

Too early in the internship, i'll definitely ask him halfway through my stint there.

West Coast rainmaker:

It varies from shop to shop.

For instance, T. Rowe promotes from within. Almost all of their PMs come from research, starting as research associates and moving to analyst, then junior PM.

PIMCO is pretty adamant about PMs having advanced degrees (mostly MBAs). They hire 1 or 2 a year from top programs.

Fido mostly hires from undergrad, promoting people until the path forks between advancing in research and moving to a PM role.

There are more models, but you get the idea. Every firm has its own ideas.

I've always been interested in ER, I guess it will serve as a good starting path en route to becoming at PM.

Apr 19, 2016
West Coast rainmaker:

It varies from shop to shop.

For instance, T. Rowe promotes from within. Almost all of their PMs come from research, starting as research associates and moving to analyst, then junior PM.

PIMCO is pretty adamant about PMs having advanced degrees (mostly MBAs). They hire 1 or 2 a year from top programs.

Fido mostly hires from undergrad, promoting people until the path forks between advancing in research and moving to a PM role.

There are more models, but you get the idea. Every firm has its own ideas.

Don't underestimate the amount of MBA hiring from these large firms for their analysts. For instance, Fido hires plenty of MBAs every year (maybe like 6) as well as undergrads. T Rowe also gets almost all of its analysts from MBA. PIMCO doesn't have the centralized research in the same way, but they also hire several MBAs every year for the portfolio management group. Most of the time at a long-only to become a PM I think it's largely a function of luck...you need some retirements, to be a superstar, or more likely you will have to be poached away to start running money.

Apr 19, 2016

What the fuck are "PM sector" and "PM shop"? Must be industry vet terms.

Apr 19, 2016
Flake:

What the fuck are "PM sector" and "PM shop"? Must be industry vet terms.

Lol my bad.

I'm at an investment management firm and currently interning under three of their portfolio managers.

I think right now the best path is pursuing a buy side ER gig.

Apr 19, 2016
Lotin:

I think right now the best path is pursuing a buy side ER gig.

I agree. That seems to be the typical path toward becoming a PM.

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Apr 19, 2016

Downside comes from the fact that some might view sell-side experience as a rite of passage and a kind of hazing before being allowed to enter the buy side, and diving in w/o that prerequisite might come off as not really belonging. Also you may not learn as much at entry-level buy-side role in terms of foundational knowledge especially if it's not really front office. That being said, if you get a decent buy-side gig right out of undergrad, I don't see why you wouldn't take it.

Apr 19, 2016

I'd say there are a couple downsides (take with grain of salt as havent started FT yet, but have looked into this):

-Lack of formal training versus a BB. HF training etc can be hit or miss or nonexistent. Also there is a genuine support network at a big institution and you have some capacity for help if you are having a hard time.

-You are thrown into the fray right away and there is a lot of pressure to produce in a HF right away. A big AM like BlackRock might be different. Basically you have a very steep learning curve and you ahve to prove to your PM everyday that you are worth keeping around.= lots of pressure.

-IF you want to leave the HF you will have less name recognition, especially if you want to change industry entirely, but also even in finance.

All that said, the opps at the right HF with the right PM that you gel with are pretty much limitless. I on the whole think people our age are too risk averse.

Apr 19, 2016

Yeah this makes sense. I should have asked if there were any positives, because the negatives seem quite apparent. Are there any benefits to start out with a buyside gig?

Apr 19, 2016
hoodinternet:

Yeah this makes sense. I should have asked if there were any positives, because the negatives seem quite apparent. Are there any benefits to start out with a buyside gig?

Positives for me:

-Unlimited potential upside if you start in a smaller fund with smart people trying to grow.
-Very intellectually stimulating as the research work youdo comes to fruition via a trade (or not) and then there is potentially gratifying or cruching feedback if your thesis plays out- win or lose it is interesting
-Not have to deal with ridiculous mind-numbing bureaucratic sell-side bullshit: facetime, people who dont do anything skating by via ass-kissing
-I think the smartest most un-bullshitty people work at funds

Apr 19, 2016
dmackorth:
hoodinternet:

Yeah this makes sense. I should have asked if there were any positives, because the negatives seem quite apparent. Are there any benefits to start out with a buyside gig?

Positives for me:

-Unlimited potential upside if you start in a smaller fund with smart people trying to grow.
-Very intellectually stimulating as the research work youdo comes to fruition via a trade (or not) and then there is potentially gratifying or cruching feedback if your thesis plays out- win or lose it is interesting
-Not have to deal with ridiculous mind-numbing bureaucratic sell-side bullshit: facetime, people who dont do anything skating by via ass-kissing
-I think the smartest most un-bullshitty people work at funds

Thanks. I think only 1-2 of these make sense if I want to do it right out of undergrad though. Sell side is still my preference but job > no job any day.

Apr 19, 2016

I don't think this is true at all....

Apr 19, 2016

i heard once you start at the junior level on the buy side and once you gain more experience you are unable to even consider using that experience to lateral to another firm that values that experience and will likely promote you.

t/f wso?!?!?!?!?!?!?

Apr 19, 2016

What the fuck kind of rationale was this?

Apr 19, 2016
BlackHat:

What the fuck kind of rationale was this?

Agreed. Also, let's define "junior" here. I guarantee that the 40 or 50 something year old running these shops very much considers a VP in banking a "junior" employee.

Apr 19, 2016
SirTradesaLot:

... let's define "junior" here. I guarantee that the 40 or 50 something year old running these shops very much considers a VP in banking a "junior" employee.

By "junior", I mean the analyst/associate level. My impression from your previous posts is that you yourself moved to the buy side at the MD level. Is that correct?

Apr 19, 2016
HedgeKing:
SirTradesaLot:

... let's define "junior" here. I guarantee that the 40 or 50 something year old running these shops very much considers a VP in banking a "junior" employee.

By "junior", I mean the analyst/associate level. My impression from your previous posts is that you yourself moved to the buy side at the MD level. Is that correct?

No, originally I was starting my third year as a VP when I went to the buy-side. I moved up there before I started my current firm with some colleagues a couple of years ago.

To answer the original question, I have seen people move up to senior positions from junior positions plenty of times. I've seen a lot more who don't do very well, but that's more of a function of most people not getting promoted to PM no matter where they started.

Apr 19, 2016
SirTradesaLot:

No, originally I was starting my third year as a VP when I went to the buy-side. I moved up there before I started my current firm with some colleagues a couple of years ago.

To answer the original question, I have seen people move up to senior positions from junior positions plenty of times. I've seen a lot more who don't do very well, but that's more of a function of most people not getting promoted to PM no matter where they started.

But you went into AM. I did mention AM is the exception.

Apr 19, 2016

Unless you're choosing between Blackstone PE (or some equally elite, institutionalized buyside job) and UBS capital markets (or some other group with limited exit opps), I would recommend starting on the sell-side because of the formal training and exposure to many different deals and/or industries.

I would somewhat agree on the point that you don't see a lot of people rise up the ranks from analyst/associate --> partner/MD, but it's fairly easy to move around once you are on the buyside. I think what tends to happen -- though I don't have any personal experience -- is that junior/mid-level people leave their shops for promotions elsewhere.

Apr 19, 2016
mrb87:

I think what tends to happen -- though I don't have any personal experience -- is that junior/mid-level people leave their shops for promotions elsewhere.

But if you read the Partner/MD-level bios of the buy side shops available on the web, most of them do not rise from analyst/associate ranks of other buy side shops either. That means most buy side analysts/associates do not leave their shops for promotions elsewhere either.

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Apr 19, 2016
HedgeKing:
mrb87:

I think what tends to happen -- though I don't have any personal experience -- is that junior/mid-level people leave their shops for promotions elsewhere.

But if you read the Partner/MD-level bios of the buy side shops available on the web, most of them do not rise from analyst/associate ranks of other buy side shops either. That means most buy side analysts/associates do not leave their shops for promotions elsewhere either.

So they come from Mars? When you say "most of them", is this from a quantitative study you performed?

Apr 19, 2016

bios are 100% factual and never omit or exaggerate anything

Apr 19, 2016

Well most HFs aren't going to add someone straight from undergrad since generally all employees in what you'd consider a "front office HF position" need to be value-add from day one, and nobody coming out of undergrad (with very few exceptions) is going to know how to be a completely independent analyst their first day in the office at a higher end fund. The ones that do allow this are typically either small and unestablished or just bad to begin with so it's very prone to adverse selection. AM is such an enormous exception to make that it pretty much ruins the argument anyway. That's like saying it's a terrible idea to start on the sell-side if you want to go into PE, with IB being the exception.

That said, people who started and succeed in their first few years on the buy-side generally make much better senior analysts and fund managers than guys coming from the sell side who were maybe VPs or something like that. People that love investing, did it on their own in college/free time, etc. are not going to deal with the bullshit that comes along with working multiple years on the sell-side when they know for certain what they want to do for a living. And those guys are the best. Find 'em, hire 'em, overpay 'em if you have to, because there's nothing more effective than someone who's both capable of and loves their job.

    • 1
Apr 19, 2016

Post doesn't really make sense to me.

I know plenty of both PE and HF juniors (associates) who have gone to MD, it's just hard IN GENERAL to get into that top senior position because no one wants to leave if they get in those positions.

However, I do agree that most megafunds or larger shops have a 2 year and out program, but plenty come back to PE post-MBA.

Not to mention my shop and plenty of other mid to large mid markets give associates carry and can/have promoted associates to senior level (VP and above).

Some shops even pay for your MBA and give you a guaranteed spot back.

Apr 19, 2016
SanityCheck:

Not to mention my shop and plenty of other mid to large mid markets give associates carry and can/have promoted associates to senior level (VP and above).

May I ask at your fund how many Partners/MDs out of how many come from the ranks of buy side associates at your fund or other funds?

    • 1
Apr 19, 2016
HedgeKing:

If we look at the bios of senior people at buy side firms, whether they be HFs or PEs, we would find the senior level rarely come from the ranks of the junior staff, with the exceptions of AM firms. It seems promotion from the junior level to the senior level on the buy side is hard and rare. This brings up a question. Is going to the buy side at the junior level really a good idea?

Sure, your pay will keep going up as long as you do a good job, but your job function will more or less stay the same, just like a non-commissioned officer in the army. There is nothing wrong being a non-commissioned officer if you just want to perform one function well and find it meaningful, interesting, and rewarding. But if you aspire to be a colonel or a general some day, that's not the career route you want to take.

This is just... false. Not to sound like a dick but do you actually work at a hedge fund right now? I don't want to offer too many details but I work at a fund where none of the investment team members have any sell-side experience. If I think of the really good funds out there, most guys have very little sell-side experience or if they do went over at a junior level. The top banking analysts generally have superlative academic backgrounds, a proven ability to work long hours, and excellent modeling skills. Senior banking people are generally well-connected schmoozers that are able to bring in work. I really don't see how the latter skill set translates into identifying mis-priced assets and constructing a portfolio of them at all. The former does translate pretty well and signals a basic ability to hit the ground running.

Private Equity could be totally different, but I really don't see a lot of people on the investment side of the business in the HF space that spent 20 years in banking who one day up and decided "I'm going to pick stocks for a living."

There is a very large schism between analyst and portfolio manager at a HF. There aren't 5 pre-defined ranks that you progress through over time and get gold, silver, or platinum stamps each year when you are reviewed. That doesn't mean your career is static for 15 years. There are 22 year old analysts that make 100k and and 35 year old analysts that make millions but they still have the same title. Senior analysts incurred a much larger amount of responsibility and are probably close to the point where they can launch on their own, but their business cards don't say "Vice-President" or "Executive Director"

Finally, semi-senior banking titles are pretty lame. Who the fuck wants to be known as an "ED"???

Apr 19, 2016
Gray Fox:

I don't want to offer too many details but I work at a fund where none of the investment team members have any sell-side experience.
...
Private Equity could be totally different, but I really don't see a lot of people on the investment side of the business in the HF space that spent 20 years in banking who one day up and decided "I'm going to pick stocks for a living."

Your fund is more an exception than the norm, and you are only looking at a small subset of HFs. HFs are not all about "picking stocks". For example, many HFs deal with mortgage backed securities, asset backed securities, structured credit instruments, ..., etc., and many senior level people at these funds spent many years on the sell side dealing with these products before moving to the buy side. Distress HF is another example.

It's wrong to assume senior level people at HFs don't need client skills at all. Negotiating with the banks to buy large chunks of distress loans requires client skills. Dealing with various other interest groups involved in a bankrupted company requires client skills. Making a loan to a distressed company requires client skills too. These are all HF activities.

    • 1
Apr 19, 2016
HedgeKing:
Gray Fox:

I don't want to offer too many details but I work at a fund where none of the investment team members have any sell-side experience.
...
Private Equity could be totally different, but I really don't see a lot of people on the investment side of the business in the HF space that spent 20 years in banking who one day up and decided "I'm going to pick stocks for a living."

Your fund is more an exception than the norm, and you are only looking at a small subset of HFs. HFs are not all about "picking stocks". For example, many HFs deal with mortgage backed securities, asset backed securities, structured credit instruments, ..., etc., and many senior level people at these funds spent many years on the sell side dealing with these products before moving to the buy side. Distress HF is another example.

It's wrong to assume senior level people at HFs don't need client skills at all. Negotiating with the banks to buy large chunks of distress loans requires client skills. Dealing with various other interest groups involved in a bankrupted company requires client skills. Making a loan to a distressed company requires client skills too. These are all HF activities.

You should stop talking out of your ass. It's really incredible given your complete lack of firsthand (and likely secondhand, too) experience.

Apr 19, 2016
Gray Fox:

There are 22 year old analysts that make 100k and and 35 year old analysts that make millions but they still have the same title.

That's why I compare them to the non-commissioned officers in the army. An experienced sergeant can make much than a young sergeant, and more than a lieutenant. There is nothing wrong being a non-commissioned officer if you just want to excel in one thing and get rewarded for it. But if you aspire to be a colonel or a general, that's not the career route you would take.

Apr 19, 2016

Hedgeking ur a total idiot.

just 3 months ago the retard was asking about buyside promotions, LOL

http://www.wallstreetoasis.com/forums/does-buy-sid...

u can tell from that thread every1 thought this idiot was incoherent too

here are some more retard threads

http://www.wallstreetoasis.com/forums/bankers-clie...

"I would like to have more of these types of discussions. How do a young analyst grows over the years and becomes a senior banker and a trusted adviser to the corporate clients?"

LOL ur so retarded stay in college kid. forever.

Apr 19, 2016

"Client skills" aren't a real thing, for the record.

Apr 19, 2016

Name calling does not prove anything. Neither does getting upset and angry. Please present some facts. I am bringing up some legit questions. Please answer them with facts. Brushing them aside does make the questions go away. Neither does getting upset or name calling.

At your fund, how many Partners/MDs/PMs out of how many rose to where they are from the ranks of analysts/associates of the same or similar funds? Isn't this a legit question? How hard is it to answer it?

    • 1
Apr 19, 2016
HedgeKing:

Name calling does not prove anything. Neither does getting upset and angry. Please present some facts. I am bringing up some legit questions. Please answer them with facts. Brushing them aside does make the questions go away. Neither does getting upset or name calling.

At your fund, how many Partners/MDs/PMs out of how many rose to where they are from the ranks of analysts/associates of the same or similar funds? Isn't this a legit question? How hard is it to answer it?

Perhaps it's just the types of funds I've been historically drawn to or my misunderstanding of the question, but I can't think of a single instance where I've worked with a portfolio manager who was a hire directly from the sell side in an MD position or something similar. Most funds are gonna want you to have some actual experience, you know, managing money before they give you 9 figures of responsibility. Most I know moved into the role gradually from being a junior analyst to a senior analyst (at which time people get small money managing duties in a lot of cases, especially AM where you might be responsible for individually managed accounts) and finally to portfolio manager if that's the next logical step at your firm.

Before setting up the fund I'm currently at, my boss came from two other portfolio manager positions and was an analyst prior to that. This is pretty common in my experience...

Apr 19, 2016
BlackHat:

Most I know moved into the role gradually from being a junior analyst to a senior analyst (at which time people get small money managing duties in a lot of cases, especially AM where you might be responsible for individually managed accounts) and finally to portfolio manager if that's the next logical step at your firm.

I know for a fact that most PMs in AM rose gradually from junior analysts. AM has very different culture from HF anf PE though. AM is where people join when they are young and stay for the long careers. That's not the case with HF or PE. My question here is really for HF and PE.

Apr 19, 2016
HedgeKing:
BlackHat:

Most I know moved into the role gradually from being a junior analyst to a senior analyst (at which time people get small money managing duties in a lot of cases, especially AM where you might be responsible for individually managed accounts) and finally to portfolio manager if that's the next logical step at your firm.

Thank you for answering my question. I know for a fact that most PMs in AM rose gradually from junior analysts. AM has very different culture from HF anf PE though. AM is where people join when they are young and stay for the long careers. That's not the case with HF or PE. My question here is really for HF and PE.

Apr 19, 2016
HedgeKing:
BlackHat:

Most I know moved into the role gradually from being a junior analyst to a senior analyst (at which time people get small money managing duties in a lot of cases, especially AM where you might be responsible for individually managed accounts) and finally to portfolio manager if that's the next logical step at your firm.

I know for a fact that most PMs in AM rose gradually from junior analysts. AM has very different culture from HF anf PE though. AM is where people join when they are young and stay for the long careers. That's not the case with HF or PE. My question here is really for HF and PE.

You should stop while you're behind. 15 years ago, there were very few HFs and even fewer that hired junior guys. To get hired, you had to have experience. That is changing today, as many HFs are open to hiring analysts just a few years out of school.

Apr 19, 2016
DontMakeMeShortYou:

15 years ago, there were very few HFs and even fewer that hired junior guys. To get hired, you had to have experience. That is changing today, as many HFs are open to hiring analysts just a few years out of school.

What you said here is certainly true. But my question is not about how they hire the analysts. It's about how they hire the PMs. Do they hire PMs from the ranks of analysts? Or as someone put it, "There is a very large schism between analyst and portfolio manager at a HF."

Apr 19, 2016
HedgeKing:
DontMakeMeShortYou:

15 years ago, there were very few HFs and even fewer that hired junior guys. To get hired, you had to have experience. That is changing today, as many HFs are open to hiring analysts just a few years out of school.

What you said here is certainly true. But my question is not about how they hire the analysts. It's about how they hire the PMs. Do they hire PMs from the ranks of analysts? Or as someone put it, "There is a very large schism between analyst and portfolio manager at a HF."

The vast majority promoted from analyst to PM. Either internally, or they switch jobs and get a higher rank at a different fund.

Apr 19, 2016
DontMakeMeShortYou][quote=HedgeKing:

The vast majority promoted from analyst to PM. Either internally, or they switch jobs and get a higher rank at a different fund.

Thank you for the answer. Can I assume most PMs at your fund rose from the ranks of analysts? My next question is this. What's the numeric ratio between analysts and PMs? What's the chance of an analyst being promoted to PM after a number of years?

Apr 19, 2016
HedgeKing:
BlackHat:

Most I know moved into the role gradually from being a junior analyst to a senior analyst (at which time people get small money managing duties in a lot of cases, especially AM where you might be responsible for individually managed accounts) and finally to portfolio manager if that's the next logical step at your firm.

I know for a fact that most PMs in AM rose gradually from junior analysts. AM has very different culture from HF anf PE though. AM is where people join when they are young and stay for the long careers. That's not the case with HF or PE. My question here is really for HF and PE.

Again, it's fairly the same thing. I moved from AM to HF after two years, spent two at an HF as a junior analyst and then lateraled to another HF as a research analyst. After about a year I got some responsibility in managing money in an under-the-table fashion (making the investment decisions, just not in name) until I got enough trust to actually get manager duties in name just recently.

Apr 19, 2016
BlackHat:

Again, it's fairly the same thing. I moved from AM to HF after two years, spent two at an HF as a junior analyst and then lateraled to another HF as a research analyst. After about a year I got some responsibility in managing money in an under-the-table fashion (making the investment decisions, just not in name) until I got enough trust to actually get manager duties in name just recently.

Thank you for presenting your own career path. How frequent and how typical is that career path? I am asking this question because someone else mentioned "There is a very large schism between analyst and portfolio manager at a HF."

Apr 19, 2016
HedgeKing:
BlackHat:

Again, it's fairly the same thing. I moved from AM to HF after two years, spent two at an HF as a junior analyst and then lateraled to another HF as a research analyst. After about a year I got some responsibility in managing money in an under-the-table fashion (making the investment decisions, just not in name) until I got enough trust to actually get manager duties in name just recently.

Thank you for presenting your own career path. How frequent and how typical is that career path? I am asking this question because someone else mentioned "There is a very large schism between analyst and portfolio manager at a HF."

Fairly infrequent in terms of how quickly it happened but pretty common in terms of the typical trajectory of someone who's a lifelong buy-side analyst.

On a related note - Not sure what you're getting at with this thread and the way you're framing your questions and responses to people here though. What GF mentioned about a big cutoff between being an analyst and a PM is completely true, in that there's a ton of stuff a PM has to do and think about that detract from the more pure business-analysis duties of a research analyst. As a PM you have to deal with allocation issues, ease of trading into a position, dealing with clients, and other logistics that cut into the time you get to sit back and do what you've been trained to do, aka pick stocks. Example: A senior analyst of ours was given the opportunity to run a fund and after about 2 months of doing that, decided to step back into his analyst roles because being a PM took too much of his time away from learning about businesses and finding good companies to invest in. Analysts don't have to take tons of secondhand information from other people and try to make decisions based on it... they just perform the duty of being one of the trusted advisers to the PM handing out that information. This in no way means that analysts don't jump to PM, it just means the duties are different and it's not for everyone. I get paid waaayyy less than the guy who stepped back down to be an analyst even though technically I'd be higher up the nameplate hierarchy for an outsider looking in.

Apr 19, 2016

you didn't ask any questions lol

u made a dumbass inflammatory post that made 0 sense about commissioned officers and some stupid comment like

"But if you aspire to be a colonel or a general some day, that's not the career route you want to take."

roflmao, u are literally retarded. u sound like a english as a second language student too.

Apr 19, 2016
Press0:

you didn't ask any questions lol

Ok, can you now answer this question, for the benefit of WSO community? At your fund, how many Partners/MDs/PMs out of how many rose to where they are from the ranks of analysts/associates of the same or similar funds?

    • 1
Apr 19, 2016

If I offend the pride and the prestige of anyone, here I apologize. But Please answer my question. At your fund, how many Partners/MDs/PMs out of how many rose to where they are from the ranks of analysts/associates of the same or similar funds? I am talking about HF and PE, not AM.

Apr 19, 2016

HedgeKing, lets say you're assumption is correct. You say HF PMs are not promoted from within (from junior level ranks or laterals), so where do you propose they come from? And what is your idea of their typical background?

Apr 19, 2016

What is the objective of this thread? What are you trying to achieve by asking the same questions over and over? You just continue to question the posts of highly regarded forum members.

Apr 19, 2016
yeahright:

You just continue to question the posts of highly regarded forum members.

Bondarb is a highly regarded forum member I respect very much. Here are some of what he said in a previous thread. His view agrees with mine.

"One thing that is misunderstood by the majority of WSO posters is that at a hedge fund you are hired to do a job, not to join some training program. So if you are hired to be an analyst in research that is where you will stay...you may get a raise if you do a good job and occasionally you see people "graduate" to more senior roles but more often portfolio managers and other senior hires come from outside the firm and are experienced hires. "

"I can only speak for my own experience, but I work at a very big-name macro fund and i can tell you that competent 25-28 year olds can absolutely be buried in analyst roles...maybe they have the ability to one day be called "senior analyst" but becoming a real decision-maker is still a very different path. The people who make the real decisions where i work are experienced hires or were able to cultivate very tight relationships with senior people (like me). There is no "track" to getting these super high level jobs....its a wild mix of luck and being a scrapper."

Apr 19, 2016
HedgeKing:
yeahright:

You just continue to question the posts of highly regarded forum members.

Bondarb is a highly regarded forum member I respect very much. Here are some of what he said in a previous thread. His view agrees with mine.

"One thing that is misunderstood by the majority of WSO posters is that at a hedge fund you are hired to do a job, not to join some training program. So if you are hired to be an analyst in research that is where you will stay...you may get a raise if you do a good job and occasionally you see people "graduate" to more senior roles but more often portfolio managers and other senior hires come from outside the firm and are experienced hires. "

"I can only speak for my own experience, but I work at a very big-name macro fund and i can tell you that competent 25-28 year olds can absolutely be buried in analyst roles...maybe they have the ability to one day be called "senior analyst" but becoming a real decision-maker is still a very different path. The people who make the real decisions where i work are experienced hires or were able to cultivate very tight relationships with senior people (like me). There is no "track" to getting these super high level jobs....its a wild mix of luck and being a scrapper."

wtf is wrong with your reading comprehension? how does any of that agree with your viewpoint?

Apr 19, 2016
HedgeKing:
yeahright:

You just continue to question the posts of highly regarded forum members.

Bondarb is a highly regarded forum member I respect very much. Here are some of what he said in a previous thread. His view agrees with mine.

He works at a multi-manager macro shop, where the role of "analyst" is a lot different than at more fundamentally driven funds.

Apr 19, 2016

It depends on what type of fund you go to. If you're at a distressed shop doing obscure legal deals and extracting alpha from absolute clusterfuck restructuring projects, it's probably a lot more helpful to be a former Houlihan restructuring MD than to be promoted from a position where you're a junior guy finding these deals in the first place. But if you're at an L/S equity fund the job is probably best aligned with the analysts who source the ideas, so what Bondarb said makes sense to me since the shop is much different than a typical equity shop. But I sure hope being a junior analyst is a good thing since that's exactly where I'm heading.

Apr 19, 2016

What kind of heresy is this lol

Apr 19, 2016

I didn't read every post, so maybe this was covered, but two points I wanted to make are (1) culture and (2) existence.

I'll start with #2. If you really think about it, PE as we know it hasn't been around for very long...late 70s or so, really. In many cases, a lot of these senior level guys who are 50 or 60 or 70 years old wouldn't have even had the opportunity to work at a 'junior level' on the buy side. That means looking at their resume and past experience would make for a poor point of comparison.

#1...culture. Partly because of the aforementioned point, the culture of the buyside has never really lent itself to the hiring of 'junior' level folks. A hiring VP at a PE 15 years ago was probably only looking at experienced bankers, not kids fresh out of undergrad...not because there was a rule book that told him what to do, because that is what was familiar to him. Also, I would say that even the 2 IB --> 2 pre-MBA PE --> MBA --> PE track is relatively new as well. Most of the senior guys I know bounced around between IB and commercial lending, etc. and then moved on the PE...many founding their own funds.

I would say outside of the last 5 or so years, I don't recall ever hearing much about PE firms hiring out of undergrad...so again, there are no, or very few, 'junior level buyside' people to even look at. I suspect that, as time goes on, you will see a greater and greater number of junior level people on the buyside progressing into senior roles, etc.

Regards

Apr 19, 2016
cphbravo96:

PE as we know it hasn't been around for very long...

Indeed. PE is still evolving and changing. My own prediction is that the focus will gradually shift from finance to operation, and PE will look more and more like the conglomerate of the old days.

Apr 19, 2016
HedgeKing:
cphbravo96:

PE as we know it hasn't been around for very long...

Indeed. PE is still evolving and changing. My own prediction is that the focus will gradually shift from finance to operation, and PE will look more and more like the conglomerate of the old days.

I would tend to agree with this. PE shops are having harder and harder times raising capital for new funds. That means fundraising is becoming more competitive and the returns required to get the attention of an LP will need to be substantial. Gone are the days of only applying financial engineering to a deal and flipping it for a profit.

I've seen a bunch of decent shops struggle to raise money recently and then others that have their LPs trying to put in more than the shop expected. The shops that are doing well fund raising hit some triples and some homeruns with their prior portfolio. This is a bit anecdotal, but the difference I've seen has been the experience of the senior level guys. Not all of them come from the operations side, but many do and the others have 'specialized' in certain areas and use that industry knowledge to extract all possible value with the least amount of effort. Admittedly some of the ones I'm thinking about focus on healthcare and biotech, so substantially high growth industries, but their formula is working and that's what counts.

Regards

Apr 19, 2016

I completely agree with cphbravo, the recruiting landscape has changed drastically in PE in recent years. These days someone who does not enter PE at the pre-MBA associate level is going to struggle to break in at all.

In response to your question, every single one of the partners at my shop joined either before or immediately following their MBA. At my prior shop, roughly 50% of the partners joined directly out of an MBA program (some with prior PE experience, some without). The others joined from other private equity firms or from executive roles at large companies. No one joined from the sell side, although some worked on the sell side prior to obtaining their MBAs.

I have no idea about the HF universe, but your argument definitely does not hold water in the PE world. In fact, many PE firms seem to prefer to promote from within rather than hire directly into senior-level roles because they want to "test the person out" before granting them Partner status and substantial carry...

Apr 19, 2016
CompBanker:

I completely agree with cphbravo, the recruiting landscape has changed drastically in PE in recent years. These days someone who does not enter PE at the pre-MBA associate level is going to struggle to break in at all.

In response to your question, every single one of the partners at my shop joined either before or immediately following their MBA. At my prior shop, roughly 50% of the partners joined directly out of an MBA program (some with prior PE experience, some without). The others joined from other private equity firms or from executive roles at large companies. No one joined from the sell side, although some worked on the sell side prior to obtaining their MBAs.

I have no idea about the HF universe, but your argument definitely does not hold water in the PE world. In fact, many PE firms seem to prefer to promote from within rather than hire directly into senior-level roles because they want to "test the person out" before granting them Partner status and substantial carry...

Thank you for your reply and insight. I randomly picked a number of PE shops with AUM between 5B and 15B, and looked at their Partner/MD bios on the web. About 1/4 to 1/3 came to buy side at associate level, and most are not recent hires. Excluding founders, about 1/5 to 1/4 used to hold senior positions on the sell side. The rest are from industry, consultancy, accounting, government.

The trend I observed from these bios though, is not the shift toward internal promotion, but the gradual shift toward hiring industry executives with significant operation experience, not just as senior advisers, but as MDs and Partners. This may indicate a gradual shift in focus in the PE industry from financial engineering to the operation side of the house.

Apr 19, 2016

Hedgeking i think ur retarded and need to learn how to read english properly.

at least pass reading comprehension at a 5th grade level, then come back and learn something.

Apr 19, 2016

i think hedgeking is right for a lot of HFs - if you look at the stats, these days only about 40% of total HF capital is allocated to L/S equity funds. and in a lot of other areas where more capital is today (specifically credit, FI, macro, ABS, MBS), most of the senior guys joined after becoming fairly senior on the sell side (but specifically, on the S&T sellside - so they were still risk managers). This board is biased towards people who do banking, fundamentals, etc. but HFs today are majority not fundamental L/S...

Apr 19, 2016
xqtrack:

i think hedgeking is right for a lot of HFs - if you look at the stats, these days only about 40% of total HF capital is allocated to L/S equity funds. and in a lot of other areas where more capital is today (specifically credit, FI, macro, ABS, MBS), most of the senior guys joined after becoming fairly senior on the sell side (but specifically, on the S&T sellside - so they were still risk managers). This board is biased towards people who do banking, fundamentals, etc. but HFs today are majority not fundamental L/S...

Thank you for your input, insight, and support. Some of those senior guys also come from the product areas dealing with those instruments on the banking side. This board is biased toward M&A and fundamental L/S.

Apr 19, 2016

you fucking idiot that's because this is the INVESTMENT BANKING forum. why don't u go post this in the HF forums.

also ur original post was talking about PE too so ur dead wrong there and ur mostly wrong about HF too its just that people are starting to feel sorry for you after 40 replies of people flaming the shit out of you.

seek help and most importantly seek a english tutor.

Apr 19, 2016

I think you might want to research Jonathan Gray...

Apr 19, 2016

Sorry I meant 'Best buy side prep'

Apr 19, 2016
ar169:

Sorry I meant 'Best buy side prep'

Apr 19, 2016
peinvestor2012:
ar169:

Sorry I meant 'Best buy side prep'

Haven't been in one of these ancient caverns since 01

Apr 19, 2016

Read books by great investors. Not those technical analysis, which you can easily pick up within 2-3 months if you are not stupid. Research reports help as well if you can get some. Participating in the investment club at school and try to get an internship on buy side to see how it is like. Could be unpaid/vonlunteer at small shops; i know it's hard. If you are at a target, I assume you will have plenty chances to participate in some sorts of competitions.

Apr 19, 2016
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Apr 19, 2016

"Success means having the courage, the determination, and the will to become the person you believe you were meant to be"

Apr 19, 2016
Apr 19, 2016

"Success means having the courage, the determination, and the will to become the person you believe you were meant to be"

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