Why is WSO anti-buyside out of undergrad?

I was wondering why everyone on WSO is so against joining the buy-side right out of undergrad, given the opportunity? I've spoken to a wide range of people with ranging seniority on the buy-side, from analysts that chose LMM over BBIB to analysts at MFs or large-cap HFs. Nobody that chose the buy-side before IB regrets their decision. Also, many of the people later in their careers who got to the same spot they could've gotten to if they didn't do IB say that they would just join the buy-side right away instead of doing 2+2/2+2+2.

Also, just based on common sense, why would an LMM analyst that has closed twice as many deals as an associate at an MF be less qualified than a PowerPoint monkey from IB to do MFPE? Logically, that doesn't make sense whatsoever. Or how is an analyst at a small boutique HF with actual direct investing experience (PnL contributions), less qualified than someone who formats logos all-day, for a spot at a large-cap HF?

I'm only in college, so I may be naïve, but I feel that the IB "training" isn't as worth it as it seems. Especially since more top firms are recruiting straight from undergrad. Plus, our careers will be very long and I doubt they would actually be linear. Also, if things don't work out, you can literally just go get an MBA and do a hard reset, and start back from scratch (making great comp) mitigating any "risk" from joining the buy-side out of undergrad. 

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Comments (49)

Most Helpful
Mar 10, 2021 - 10:11am

Okay so here is my take it with a grain of salt. I typically answer this question with two key points: 1) The typical undergraduate student does not have the fundamental skillset (created in banking) to become the best private equity investor they are capable of being. 2 years of working in IB is like going to the gym, you are building muscles (like knowledge of the deal process, basic accounting, finance, excel, ppt skills) by doing reps 80hrs. a week for 100+ weeks. While these skills are similar and necessary to have in PE, you most likely won't get the same intensity/reps working at an LMM that is comfortable hiring someone with no banking experience. While they will still be expecting a high caliber of work, the hours are shorter and your managers tend not to have the time to nit-pick your work on a level that gives you the level of attention to detail banking does (this is not to say nobody is checking your work, but are you confident in writing a 80+ page investment memo for an investment committee that may or may not be looked over before it goes to the founding partners?). In banking, you will most likely have an associate who sanity checks your work so they don't get chewed out for your mistakes. In PE the associates will be preoccupied with managing portcos, performing due diligence, and sourcing deals...much less time to hold the hand of an analyst who's never been on a deal team before 2) Think about your long-term career. Why would you pit yourself against people who have two years of banking experience? They will most likely be faster, more accurate and better polished than you (keywords most likely). Also, banking experience makes you more hirable...how much leverage are you going to have with your PE employer when negotiating salary if he/she knows it's harder for you to jump ship than the other associate who has two years of BB experience.

I've seen people make this type of thing work, but I personally wouldn't take the risk. Put yourself in the position of a PE director - who would you rather work with, pay more, promote sooner...the guy/girl who was 2 years of experience staying up until 3 am producing pristine, error-free work? Or the guy/girl who just got finished up a four-year-long bender and has never had an existential crisis in a handicap stall because they fucked up a calendar invite

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  • Research Associate in AM - Other
Mar 12, 2021 - 4:11pm

While this perspective is helpful, I would echo others here saying that most people are risk averse and there are simply not many people receiving offers for solid buy side roles out of undergrad. Many IB kids justifying the needless grind.

  • Principal in PE - LBOs
Mar 10, 2021 - 10:55am

It depends on the role. You get a pretty consistent training at any decent sized bank or consulting firm but in PE (especially LMM) it's much more of a mixed bag. There are some PE firms that established programs where analysts get proper training, are integrated into the deal team, paid well, etc. but there are a lot of others where they don't know what to do with analysts you're treated more like an admin than a member of the investment team. In these latter roles, you're more responsible for things like CRM management, industry whitepapers that lead nowhere, sourcing (if you're lucky) and other menial tasks. After a few years there, you'd be in a much worse position than a banking analyst (and you'll have been paid way less to boot). 

All of that is to say that you should be careful when looking at buyside roles right out of undergrad. There are some great roles out there but, more often than not, you'd be better off going the traditional route. 

  • Analyst 1 in PE - LBOs
Mar 10, 2021 - 12:40pm

Went to the buyside out of undergrad at a reputable MM PE firm, coming from a decent background at a target. Regret it every day. There is just no way in hell I can get a comparable level of structured training / execution reps as my IB friends. My fault for going to a less structured program - my days are basically spent trying to get people's attention to alert them to the fact that I'm doing literally nothing all day, and even then the only work I get delegated is menial note-taking and best-case scenario some data entry. It's frustrating because the work being done at my firm by Associates is super interesting (complex valuations, detailed analyses, overall some super fascinating deals), but nobody trusts me to tackle any interesting workstreams and these Associates have no interest to train or guide me. My firm's entire Associate class that joined with me have each completed at least one full platform deal, but the closest I've come to deal experience is taking notes on a few calls that happen to be related tangentially to some deals.

If anyone is considering PE out of undergrad at a non-MF program, I would HIGHLY encourage you to do your diligence beforehand. Or comment here and I can PM you to chat.

Mar 10, 2021 - 3:09pm

Hey! First-year undergrad from UK target here. Met a guy once who did the same thing and he said it was quite exciting. I would appreciate it if we could talk a bit about getting into the buy-side after undergrad

  • Analyst 1 in PE - Growth
Mar 13, 2021 - 6:37pm

I'm in kind of a similar situation. A partner at my firm wanted to try out an analyst program so the firm hired us analysts straight out of undergrad, but the firm quickly realized how little value we add and let us know that they would not be extending our contracts and that we should start job hunting. 

  • Intern in IB - Gen
Mar 10, 2021 - 1:14pm

The problem with your question is that there is huge variability in buyside roles out of undergrad. I don't think anybody here is saying you shouldn't join an established UMM/MF PE analyst program out of undergrad like those at KKR, Silver Lake, Blackstone, GTCR, Ares, Vista, Audax, Bain etc. Those roles offer an incredible opportunity for top candidates to go through a rigorous banking-like program while learning PE specific skills, and the kids who get them are almost always taking them over EB/ top BB offers and tend to be very polished anyway. That's not to say there aren't pros and cons to these programs, just that it probably has more to do with each person's specific goals and that you probably can't go wrong picking between these PE analyst positions and top IB.

What people here warn against joining out of undergrad are the myriad of random LMM PE / VC analyst programs where you are usually just doing sourcing, administrative tasks, or investment due diligence that may not be completely relevant to the work you would be doing at a much larger fund. There are probably diamonds in the rough that could be amazing experiences, but generally most people will be better off getting the training/network/optionality of an investment banking program.

  • Research Analyst in HF - Other
Mar 10, 2021 - 3:21pm

simple answer is because most ppl who are anti-buyside tried it and couldn't get in so they have to retroactively justify it as the right choice. sour grapes mentality.

  • Prospect in IB - Gen
Mar 10, 2021 - 4:23pm

Nuanced answer but I think that buyside role right out of undergrad could make sense if you are at a huge shop. From what I've seen, ppl who go straight to an MF with actual structured programs seem to do alright in the end.

  • Prospect in IB - Ind
Mar 10, 2021 - 10:50pm

Like everything in life, it's what you make of it. Finance is a fairly rigid industry, and most people travel the path of least resistance.

Mar 10, 2021 - 11:28pm

Joined buyside out of undergrad - would say I'm pretty happy with the decision. To be fair, investment banking was never really on the table for me - just wasn't interested in that. I know a lot of my colleagues who used to be investment bankers... speaking with them, they indicated that they moved to buyside for better work hours and more intellectually stimulating work. If you can skip a couple of years of torture and get to the same place - why not? If you go to a good buyside shop, they will absolutely train you on how to model/pitch etc. That's literally your job day in and day out lol

Mar 11, 2021 - 10:50am

From the responses in this thread I learn that u should avoid PE out of UG but what about HF? Something like a boutique HF should help you learn a lot right? Considering it's small and you get a lot of hands on learn as u go experience or is there something I'm not aware of?

  • Analyst 2 in IB - Gen
Mar 11, 2021 - 12:54pm

Assuming your end goal is eventually to work at a large cap PE fund or top HF, there are only a handful of programs out there that set you up with the ability to do so like a top BB / EB offer. There are the handful of MF PE analyst programs (KKR, Blackstone, Vista, SilverLake, Ares, Warburg, Bain Cap) -- they're of course great and get phenomenal candidates, but almost all of those programs require you compromising on something -- be that location, pay, how structured the analyst program is, 2 vs 3 yr analyst programs, not having a real analyst class, or culture / hours. At top banking groups like PJT Rx, GS TMT, etc. there are always at least a few kids in each class who turned down a MF PE analyst offer because one of those compromises was a deal breaker.  The MF PE program is really only worth it if you're sure you want to transition to a good hedge fund asap -- the hf exits at these programs are very very good and you can shave 2 years off the 2+2+2 path to get there, but at the best banking groups nowadays, you can make the jump straight to a great hedge fund anyway. Outside of the MF programs, there are an increasing number of MM PE firms that are taking kids out of undergrad -- yes these are good opportunities, but again, if your goal is to eventually get to a large cap pe fund or hf after your analyst stint, these MM PE analyst programs are much much much harder to get there from than a good BB / EB analyst program. 

On the HF side, there are frankly little to no great options for undergrads that, after two years, would set you up with the quantity and quality of hedge fund looks you would get after two years at a good banking group. The funds that run dedicated recruiting programs out of undergrad and hire a real class every year are Point72, Citadel as of this year, Bridgewater, and DE Shaw. After two years of banking, you will definitely get looks from all the multimanagers like Citadel and Point72 anyway, but also all the top single manager funds that won't be as interested in you if you've spent the last two years trading quarters at a pod shop. If you want to do fundamental Long/Short, that definitely is not Bridgewater and DE Shaw's bread and butter. There will be one or two crazy good kids each year that get ad hoc offers at places like Samlyn, Matrix, Hound Partners, or other great single managers -- if you know you want to be in the public markets, these are opportunities you should jump on, but rest assured that they will expect you to come in and produce on day one -- there will be no hand holding, or training program. 

Outside of all this, almost all the big VC/Growth shops now have undergrad programs too -- GA, Insight, Bessemer, General Catalyst, etc. These are mainly sourcing roles and not a great option unless you know with 150% certainty that you want to do growth. 

Overall, the biggest answer to your question is that the kids that could get one of the pretty good buyside analyst offers could get a really good banking analyst offer which sets them up better to get that really good investing offer down the line. Those really good investing funds tend to care more about the most pedigreed candidates than the ones that have the most 'relevant' experience, meaning the analysts at a top banking group will always get better large cap investing looks than the analysts at a MM PE or multimanager HF.      

  • Prospect in IB-M&A
Mar 11, 2021 - 8:42pm

Great detail here thanks for your answer. I had a similar type of concern - currently have a summer lined up at an EB and go to a strong target. Have had numerous conversations with individuals at MFs for the PE Analyst program (particularly BX) and was told by some senior members that I would get some serious consideration for the FT program if I was interested. That said I keep thinking back to the BX PE Analyst comp - have heard its on the lower end (~150k if anyone can confirm???) compared to other MFs so I was slightly conflicted as analyst pay often exceeds 190k in 1st year in the group I'm joining. Wondering if you had any advice for individuals in that situation? Obviously the MF PE experience is great but the difference in comp seems to stick out like a sore thumb to me. Not sure if I'm just being stupid by even thinking about comp in this scenario and feel free to rip me apart for sounding like a spoiled brat if thats the case but was hoping to get some advice on this. Not trying to jump the gun either by assuming that I'd even have a good chance at landing the role - I realize chances are low but was just trying to anticipate the scenario if it does come down to it later this summer.

  • Prospect in IB - Gen
Mar 13, 2021 - 7:31pm

Also going to a top paying EB this summer and considering applying to MF PE analyst programs. My focus is really diligencing the work I'd be doing at both options because if I want to go to a top SM HF or MF PE I know the doors are open from either program. If the PE program has more substantial learning than banking I'll go there, I don't care about $100k pre-tax when the vast majority of our potential earnings are still in the terminal value. But if being a PE analyst just means similar bitchwork with possibly worse hours and pay I'll pass.

  • Prospect in IB - Gen
Mar 13, 2021 - 11:11am

Vanguard only takes a dozen kids a year mostly from targets or Philadelphia schools for their active side. Most of the firm is obviously not attractive to work at but this specific program really impressed me.

Mar 12, 2021 - 11:31am

Some really good answers here. I think what people have to keep in mind is that finance is really an apprenticeship-driven industry. You learn through mentorship and reps and that can often be missing from the less structured programs. I felt really bad for the analysts in my old team because they were all really smart and motivated, but with how lean the teams were there just wasn't enough time for them to get the same amount of reps and experience compared to in banking. Like we couldn't afford to just give an analyst a model to "figure it out."

Nobody is saying to turn down BX's analyst program for example, but otherwise from what I've seen an heard you often end up doing a lot of more admin work and not as much of the cool deal shit.

  • Analyst 1 in HF - Event
Mar 12, 2021 - 12:43pm

Wanted to chime in on this-I interned at a top group in a BB but ended up taking an offer at a well-known hedge fund that I had done a sophomore internship with but that didn't have an established analyst program (the team had never hired out of undergrad before). I agonized a lot over all the points people have made on this site but I think I made the right choice to take the HF offer, though there definitely have been some downsides:

Upsides:

- Work has been much more technical than banking-my time breakdown is probably 40% modeling, 30% research/reading, 25% preparing IC memos (some overlap there with research), and maybe 5% administrative work (thing like compiling our quarterly portfolio reviews). I was in a very technical group in banking, though obviously I was only an intern

- I definitely have a bit more flexibility/freedom in my work; I can take time to think about ideas or do more general research to get smart on a thematic

- Resource access: this may be minor, but I have felt that having access to Bloomberg Anywhere, GLG, and other resources that you don't really have as an IB analyst is helping me to get smarter faster

- Less BS: Our IC memos are long (probably too long a lot of the time), but there is definitely less BS work (filler slides etc.) than I did in my brief time in banking

Downsides:

- Flexibility/hours: I have more flexibility than in banking and have a bit more control over my hours (I can usually keep my Saturdays mostly free), but my hours aren't honestly much better than banking-since starting in September, an average week has probably been 8am-12am Mon-Thursday, 8am-9pm Friday, 2-3 hours Saturday and 6-8 hours Sunday. A bad week-of which I've had more than a few-is easily 100+ hours. However, the hours on the team for the associated when I was a sophomore intern were much more in the range of 60-70, and people keep telling me things will calm down eventually (I think WFH has made hours substantially worse). As has been said many times on this board, HF hours are much busier than banking hours-there's basically no down time during the day.

- Lack of training program: this is a real thing-my first several months were very hard, and I'm still getting my head around a lot of things. The team is very friendly and answers my questions, but obviously there's only so many questions that you can ask as the most junior member of the team and I have had to figure a lot of things out on my own. However, I know I would have been terribly bored in IB training, and I think I have learned just as much (or more) from just modeling reps on name after name, but it has not been easy.

- General guinea pig problems: I'm not sure exactly how to put this into words, but there have been occasional issues that have happened basically because I'm in a seat we have never had before. Particularly with WFH, it's been hard to demonstrate for the PM the value I have been adding, although feedback from the sector analysts that I work for has been very positive. When I work on a project with a sector analyst, an associate, and myself, I think that the PM usually has assumed that I have been basically tagging along and just learning, rather than running the model and making most of the slides (as I have been doing). My assumption is that this kind of fades as an issue over time, but it's a stressful position to be in for now. 
- Siloing: Definitely something to think about. I like our strategy and think we make interesting investments, but honestly I have mixed feelings about doing this strategy for my entire career. It remains to be seen exactly how siloed I am from the perspective of a different strategy fund, but I do think that banking gives you a more generalist branding, even if I do ultimately know more about everything (other than maybe deep M&A analysis) from having done this job vs. being an IB analyst 

One factor that I see mentioned a lot on this site about buyside opportunities out of undergrad is the lack of having a name brand analyst program under your belt. I don't really think this is an issue, although I am working at a fund that anyone in our space is familiar with (though definitely is not the largest/most known/most WSO prestige fund in our space). If things didn't work out here I could definitely get a spot at a competing fund, or worst case easily just go back to banking.

Comp is slightly better than banking (same base and expected bonus ~100%), so no issue there.

On the whole, I think I made the right choice in choosing the fund, though there are certainly downsides to think about. I hope this helps anyone reading.

  • Research Analyst in HF - EquityHedge
Mar 12, 2021 - 1:51pm

I always find the comp piece of this discussion to be hilarious.

Imagine turning down BX PE analyst because comp is 30k per year lower. If you find the former BX PE analysts from class of 2010 or earlier, almost all of them make 7 figures and many of them make 8 figures. 

Mar 13, 2021 - 11:01am

Agreed, I always say that are a lot more important things than comp. I know kids that make the jump for 30% pay increase and think its worth it meanwhile its a shit placement, shit group, shit everything. 4 years out they realize it was a mistake.

Array
Mar 12, 2021 - 3:30pm

So many kids thing pay on the buyside is 10x better. That not always true. A lot more variables in play. I know so many people that make more on either sides.

Array
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