What career path will be the best to take if I want to land a hedge fund job?

Rank: Chimp | 15

I am close to graduating from college, my goal is to land a job in a hedge fund. Im aware that chances are that won't happen straight out of college. What career path should I take in order to be able to have the right exit opportunity to land a hedge fund job in the next 1 to 2 years after graduating? Thank you

Comments (24)

 
6/26/17
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7/4/17

If you are unable to make it to IBD, I would suggest equity research. In the meantime, definitely try to keep an active portfolio.

 
7/4/17

It completely depends on the strategy of the fund you want to join.

For example, if you want to join a global macro discretionary fund you may be better off being a strategist or economist at an IB / big AM.

IBD route prepares you for event driven and L/S as does ER.

If you want to be in a systematic hedge fund / CTA you'll need to do some kind of programming research.

Completely depends on the strategy of the fund on a best route, that being said, starting in a IB as a junior keeps a lot of doors open.

 
7/4/17

Problem with ER is the industry is downsizing bigly.

 
7/7/17

Investment banking, preferably in M&A, is the best. I am in the industry, and my firm would never hire someone with sellside ER experience. We are long-term value investors and the mindset on the sellside is too short-term oriented (so we don't want someone "trained" with that kind of mentality) and I think most will agree that the analytical work on the sellside is questionable. Most reports are "updates" on the quarter and where models are driven by what the guidance that management provides. Plenty of people in ER go to the buyside, especially at the junior level, so you just have to find a fund that values that kind of experience. Harder if you get more senior, since it's more marketing and sales than anything else.

 
7/16/17

Is it possible for ABS-oriented IB analyst switch career path to HF at some point down the road?

 
7/17/17

Fixed income is a whole different beast man. It's extremely macro oriented so I guess you could probably jump over to a macro HF. But the issue is that you're switching industries entirely. It also depends on the products you work on. Traditional ABS like Gennie's, Fannie's, and Freddie's aren't going to make you bank unless you're a programmer and you have a superior arb start (This requires god like intelligence, no fuckin joke). RMBS, CLO's and maybe distressed credits would probably be the route. Distressed credits can be super event driven so that could be a natural move as well. But just a pro tip man, don't go into fixed income thinking you're going to switch into equities at a HF because it'll be tough.

 
7/18/17

Thanks man, that helps a lot. Personally I don't really have a preference between fixed income and equity, it's the game of analysis that I'm into.
I'm currently working in Asia, focusing on the greater China area. ABS is a little different here, as it's more of an Asset Management business rather than investment banking. We not only make arrangements for debenture, but also manage the cash flows for the securities. The SPV itself is an asset management plan actually.
The kind of business I'm working on is to explore the interest spread between standarized bonds and unstandarized credit assets. We use trusts to issue loans to firms or to invest in different kinds of projects, then repackage the share of the trusts into ABS, sell it to the market and buy back the equity tranche to amplify the leverage, kinda like a pre-ABS fund (it's a new business in Asia and China, but probably aold in US).
My ultimate goal is to move to a HF in US, maybe using MBA as a stepstone. I'm taking in a lot of materials to learn the macro stuff too. Since my skills set is not transferable to HF, there is a lot of work to do.

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7/18/17

if you have an MBA go recruit for HF? L/S depends on sector expertise. I assume you want to be an analyst and not a trader?

 
7/18/17

Would almost always suggest going to smaller fund over sell-side. If you ascribe to the belief that the industry is consolidating then headcount will be shrinking. Firms that are hiring will have an opportunity to first hire the existing buyside guys and could make it tougher for sell-side guys trying to break-through.

A MF could not care less about your AUM at your prior fund. It's 100% walking through your investment process, do you have good ideas (origination), and a bit about your track record / P&L. They really just use these 3 items to assess the most important: will this person make me / my LPs money? If you can demonstrate that you can make $$ and are a cultural fit, you'll be hired.

 
7/18/17
JackandDaniels:

A MF could not care less about your AUM at your prior fund. It's 100% walking through your investment process, do you have good ideas (origination), and a bit about your track record / P&L.

So having previously worked at a large HF like Millenium etc doesn't count for much?

And I'm assuming you could just inflate your P&L...?

 
7/18/17

I think multi-manager pod systems are totally different. Your pod @ Millenium may manage $300mm of $20bn+ (or whatever it is now).

You probably won't have a direct P&L if you're a junior anyway. If you're senior enough to have it, you can track it. I wouldn't inflate anything - ever. It's a small industry. People talk. If you're going to a single-manager MF, they may be hiring 1-2 people per year. They have an intense vetting process during interviews and when they call your references. If they find out you were lying / can't trust you before you even start, you're canned. It's about being objective in the business. Are you right or wrong. You can't change the narrative to fit your thesis or you are 100% toast.

 
7/18/17
  1. Depends. There are pros and cons, but generally the more directly applicable work you do, the better. So, doing L/S investing at a small fund is clearly better preparation for a MF L/S role. Having said that, sometimes the name/branding of your former employer plays a role in you getting looks from the big funds, which means making a case in favor of a top sell-side sector team becomes easier. This is especially the case when you're more junior. If you're more senior then your PnL is more or less what only matters. Unfortunately, often times you don't have an auditable track record until you manage your own chunk of capital, which means that your PnL record is technically all backward looking fluff anyway.

Wouldn't really take into consideration the sector aspect of sell-side versus buy-side as a starting point for a career - you can equally, if not to a greater extent, become a sector specialist on the buy-side if you wish.

  1. Responsibilities/what you learn is not really easy to BS. You speak with the person and you know within the first couple of minutes if that person knows what he/she is talking about. Give more credit to your prospective employers. AUM is hardly the most important factor. It's down to whether 1) they like you / you're a fit to the team 2) your thinking is not completely different to how the team thinks 3) whether they like your pitch / reasoning / believe that you have the skills to add value 4) your former team's record / how well known (or good) the former team is (albeit this is more for you even getting the initial interview, not much more, but is often considered for their own marketing/fund pitching purposes).

So, in a nutshell, you have two things at play: stuff that will get you the interview and stuff that will get you employed. To get the interview it's a bit like banking - you need a good school, branding in terms of work experience etc. It's more intangible once you're already speaking with them.

  1. Sector understanding in general translates well and it's very easy to pick up different regions of the same sector. However, if you're going for a sector specific team often times they will want familiarity / experience in the region they cover and familiarity of the companies in said region. So it doesn't always work out even though theoretically it shouldn't matter. This is due to some funds wanting "instant contributors" so they don't want to wait for you to learn the new region/companies.
 
7/18/17

(I am a VP at a large HF and do tons of interviewing)

  1. I would always say better to be in an investor/analyst seat at a fund than sellside ER. Rightly or wrongly, people who don't take direct risks are always looked at as a bit incomplete in their education. I tend to agree with this thinking, and there is also a reason why buyside guys tend to ignore the opinion of the majority of sellside analysts and use them just for information gathering.
  2. Knowing the name does play a role as it gives credibility, but beyond that its not a case of larger AUM is better. Once you are in the interview room, every interviewer has the mentality that they need to check what is under the hood thoroughly. You don't ever really assume that just because this guy worked at XYZ that he is a certain level. Most likely? Yes, but there are enough that slip through in the data set, and its quite crucial to get each hire right that you have to make your own judgement. HFs arent hiring grad classes of 20+ where a bad hire can hide.

(I realize point 2 sort of contradicts point 1, but thats the power of mental bias sometimes, when I see "equity research" I immediately think "not a risk taker")

  1. I sort of think you know the answer. Sector knowledge is partially useful, not fully. But its always useful to learn about other geographies and have a broad knowledge base. The best investors/traders ive come across are ones that properly look at the world holistically, even if they are a sector guy. Other than that, sort of becomes a "how long is a piece of string" type question.
 
7/18/17

Smaller fund is better, you will learn the secrets you won't on the sell side

Overwhelming grasp of the obvious.

 
7/18/17
George Kush:

Smaller fund is better, you will learn the secrets you won't on the sell side

Need to make sure you learn the right kind of secrets though. There are way more HFs nowadays than needed given the current aggregate AUM of the sector. Plenty of places that aren't great.

 
7/18/17

Curious what people's thoughts are on the CFA as it relates to buyside recruiting for a multi-manager platform, etc. I am frankly kind of amazed at how much it seems to be disregarded by the HF community. I would argue that what you learn in Level 2, while certainly academic in nature, is as relevant (if not more so) for understanding public markets as 90% of "skills" you learn in jr. sellside roles, either IB or ER.

 
7/18/17
johnwayne7:

Curious what people's thoughts are on the CFA as it relates to buyside recruiting for a multi-manager platform, etc. I am frankly kind of amazed at how much it seems to be disregarded by the HF community. I would argue that what you learn in Level 2, while certainly academic in nature, is as relevant (if not more so) for understanding public markets as 90% of "skills" you learn in jr. sellside roles, either IB or ER.

There will be very differing views from place to place. You're definitely right that long-only shops (especially the big ones) place more weight on the CFA qualification versus most hedge funds, however it's not like HF guys are ignorant of the benefits of having gone through the CFA material. I fall into the camp of people who believe that it's definitely useful for a broader / better understanding of it all, however the return on time invested is another matter. Learning by doing normally still trumps any qualification as long as you're not just going through the motions, but actually learning whilst doing. Which is probably why any relevant experience will always be better than just reading / taking exams. It's nice and all, but it doesn't really teach you accounting in the real world, it doesn't really teach you valuation in the real world - when you actually get down to it, you notice there are way more complications that the CFA can cover and you still have to learn it on the fly by looking it up online / speaking with colleagues etc.

 
7/18/17

Thanks for the reply. My contention is that, in the category of learning by doing, it's at least on par with a lot of what you do on the sellside. In Level 2, it's not just about DDM or whatever, but it actually delves a lot into topics like earnings quality, managerial discretion, etc. And I definitely won't remember everything in the curriculum, but I have been exposed to a hell of a lot in terms of fundamentals and analysis...a good deal of which I will be able to use to figure out things more quickly in the future.

I suspect there's probably a phenomenon such that if you go through the program, you know what it entails, so that's a benefit if you interview with a guy who has the charter. But I hope that it's not disregarded outright or even looked at as a negative.

 
7/18/17

The CFA goes deep into background material, which is sometimes a necessary prerequisite to a good decision making process...but the info learned from the CFA does NOT meet the threshold of "should i buy XYZ security at ABC price right now?" THAT is the education that you should seek. Unfortunately, the only way to get to that level of knowledge is a combo of academic and real world market experience. Both are lacking wighout the other. However, if you only have one, then the real world markets experience will trump the CFA every time. In the world of money management (aka...hedge funds), there is just no substitution for the ability to extract $$ from the market...and the CFA on its own doesn't get you there.

 
7/18/17

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