What investment banking group is best (and worst) if you want to work at an equity L/S hedge fund?

What group would best prepare you for a job at a long/short hedge fund down the line and why? Alternatively, are there any groups which would absolutely not help you and maybe even hurt your chances?

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Comments (8)

Mar 16, 2015

a) depends on the bank
b) Not really though some explicitly credit-focused groups may be less helpful (even this has major exceptions-plenty of L/S funds recruit from lev fin/restructuring groups for example). I'm ignoring things that are explicitly unrelated to fundamental business/industry analysis, like groups that sell currency and rate hedging implements to corporate clients, etc.

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Mar 16, 2015
FinancierExtraordinaire:

go prop trading if you want to work at L/S hedge fund.

the type of work in IB doesn't really prepare you well

Is this a joke?

Mar 16, 2015

I think he's making fun of all the IBD people saying "Do XXX if you want to work at so and so hedge fund, trading doesn't prepare you well"

Mar 16, 2015
FinancierExtraordinaire:

No i'm serious man, maybe i can learn something here but the way I see it:

to be successful at L/S hedge funds you need to know trading/hedging strategies, have a solid understanding of the markets to be successful, the best way to prepare for that is working at some prop trading shop.

if you are in IB, in M&A, you look at one mandate at a time, go really in-depth on the company you're divesting, think about synergies when building the CIM, prep data rooms etc, but the skillsets don't really match well with L/S strategies in a fund no?

let's say you are not in M&A, you're in ECM or an industry group. So you handle the debt and prep prospectussesse, offering documents, you might argue if you are in an industry group you'll know that one particular industry really well, I don't disagree, but I don't think you'll know enough depth to develop solid L/S strategies just with 2-3 years of IB experience in an industry group (in ECM I would argue it's worse cause its a lot of paperwork with little thinking at the end of the day).

If you are in trading, not even a prop shop, but lets say a bank, at least you are seeing how people pitch stocks daily and even if some of that's bullshit I feel you'll learn more than if you are in an IB role.

You do realize HFs employ traders as well, right?

Not saying it's not important to understand market dynamics but it's not a primary part of the analysis so it's much easier/quicker to learn what you need to there as opposed to accounting/modelling, which are the primary aspects of an investment analyst's role.

More practically, IBD is where HFs and headhunters recruit.

Mar 17, 2015
FinancierExtraordinaire:

:

No i'm serious man, maybe i can learn something here but the way I see it:

to be successful at L/S hedge funds you need to know trading/hedging strategies, have a solid understanding of the markets to be successful, the best way to prepare for that is working at some prop trading shop.

if you are in IB, in M&A, you look at one mandate at a time, go really in-depth on the company you're divesting, think about synergies when building the CIM, prep data rooms etc, but the skillsets don't really match well with L/S strategies in a fund no?

let's say you are not in M&A, you're in ECM or an industry group. So you handle the debt and prep prospectussesse, offering documents, you might argue if you are in an industry group you'll know that one particular industry really well, I don't disagree, but I don't think you'll know enough depth to develop solid L/S strategies just with 2-3 years of IB experience in an industry group (in ECM I would argue it's worse cause its a lot of paperwork with little thinking at the end of the day).

If you are in trading, not even a prop shop, but lets say a bank, at least you are seeing how people pitch stocks daily and even if some of that's bullshit I feel you'll learn more than if you are in an IB role.

Serious question: Do you work in finance? I don't mean to pile on, there is just a lot about this that is not reflective of how things work and I want to know how to best help.

a) I assume the original poster wants to be an analyst at a fundamentally-driven equities fund. It's possible he meant something else but in general that's what people mean by L/S equities.

b) Bank prop-trading is severely curtailed vs pre-crisis, especially holistic/fundamentally-driven stock-picking.

c) Non-bank prop-trading is generally quantitatively-driven (at places like Jane St)

d) In either case people at prop trading desks are not "pitching stocks" to one another regularly.

e) You have a focus on "strategies" that I think misses the forest for the trees. It's true that funds may use hedges and derivatives to structure trades and/or manage the overall portfolio exposure, but at the end of the day at most L/S equity funds those are ways of expressing a view on an underlying stock (or stocks), not the view itself.

f) Typically the actual view to be expressed is underpinned by fundamental research and analysis (with a million variations on how, how much, and what is emphasized); this work is done by analysts and these analysts USUALLY have some sort of banking or research background.

Mar 16, 2015

If you don't mind elaborating, aside from prestige and deal flow, why does it depend on the bank?

Mar 17, 2015
fortheppl:

If you don't mind elaborating, aside from prestige and deal flow, why does it depend on the bank?

Well prestige and deal-flow are a part of it (for better or worse)
Otherwise it's in part because banks are set up differently; ie in an LBO, who owns the model (sponsors, lev fin, industry, etc) can vary by bank.

Mar 17, 2015