WSO Podcast | E75: Non-target in US --> MSF in Europe --> BB IB in London --> L/S Hedge Fund
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In this episode, Rick shares his path from a complete non-target school in the midwest to breaking into a top MSF in Europe. Learn what he did that allowed him to break into a Bulge Bracket bank in London BEFORE his Masters in Finance and why he turned down offers from a private equity megafund. What he did when bridges were burned with some recruiters and how he ended up at a long/short hedge fund.
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WSO Podcast (Episode 75) Transcript:
Patrick (CEO of WSO): [00:00:06] Hello and welcome. I'm Patrick Curtis. Your host and chief monkey, and this is the Wall Street Oasis podcast. Join me as I talk to some of the community's most successful and inspirational members to gain valuable insight into different career paths and life in general. Let's get to it. In this episode, Rick shares his path from a complete, non-target school in the Midwest to breaking into a top MSF in Europe. Learn what he did that allowed him to break into a bulge bracket bank in London before his masters in finance and why he turned down offers from private equity mega fund what he did when Bridges were burned with some recruiters and how he ended up at a long, short hedge fund. Enjoy. Rick, thanks so much for joining the Wall Street Voices podcast. Thanks for having me. So be great if you could just give the listeners a short summary of your bio.
Rick: [00:01:06] Yeah, for sure, so I'm originally from Germany, but went to a non-target in the US graduated. Back in 2010, then went for massive science program in continental Europe, where I basically went through the traditional program of applying for internships, when for some in position at bank like JPMorgan MS. And then from there to a long, short equity hedge fund in continental Europe and have been on the buy side ever since.
Patrick (CEO of WSO): [00:01:36] You've been on the buy side, so you went banking to buy side, which is pretty traditional. But what was interesting is you started out in the U.S., so tell me a little bit, why were you in the U.S. and a non target randomly? You're you said you're from Germany.
Rick: [00:01:50] That's correct. I'm from Germany.
Patrick (CEO of WSO): [00:01:52] So it's basically to the states. Then why? Why you go to a school there?
Rick: [00:01:57] No, it's actually very interesting because in essence, I got an athletic scholarship for. Uh, for basketball, and that's how I basically went to a total non-target in the U.S. with no idea about finance and no idea about investment banking or markets for that matter, to be fair. And then, yeah, just kind of learned about all this Wall Street and actually through Wall Street wasted time, funnily enough. And that's how I basically went about. But that's why I ended up at a non-targeted in the Midwest. You know that no one ever heard about.
Patrick (CEO of WSO): [00:02:30] So they gave you a full ride scholarship to play basketball there.
Rick: [00:02:34] That's correct. Yeah.
Patrick (CEO of WSO): [00:02:35] And so you played basketball there. When did you when during your undergrad were you like, Hey, uh oh, I'm at an on target, I need to rebrand. When did you were you on Wall Street races back then? And then you're like, I need to go get a master's now. Is that what the thought process was? Or when did was it like your junior senior year? When did you kind of discover this whole world and think, Hey, this is might be something I want to do?
Rick: [00:02:56] So I discovered finance in my freshman year through one of my professors who used to actually work on Wall Street and kind of treat it, I guess, teaching as a retirement job or whatever. Yeah, and then then I went on a voluntary basis without an account. To be fair, I just read everything I could. I think back then, actually, Wall Street was fairly fresh on the scene as well, if I'm not mistaken here.
Patrick (CEO of WSO): [00:03:19] Yeah, we'd started in 06. So you were early days,
Rick: [00:03:23] Very early days, then. Yeah, but discussions picked them. Were already very, very
Patrick (CEO of WSO): [00:03:27] Helpful, actually. Was it was it? Was it still the monkey hanging with the banana logo?
Rick: [00:03:34] Yeah, yeah. Good times. Yeah. And then basically, I read through everything. And back then, to be fair, even though I was in the states right, my plan was to go back to Europe at some point and I did not have a clue about finance or M&A or anything, you know, for that matter, from or about Europe, because back then, conversations and discussions on Wall Street were very much U.S. centric. So whatever advice you got was very applicable to target schools or people that, you know, could actually get a job in New York, but was not very applicable to myself. So basically, I boiled it down for myself and said, Hey, look, the only way I'm going to get anything in Europe is if I go back and actually get into a target school, because even though the process is a bit different, it's still the same principles you apply in states.
Patrick (CEO of WSO): [00:04:23] So how did you even convince this this target school to accept you for a master's in finance coming from where you came from?
Rick: [00:04:30] Yeah, it was. It was a it was a combination of very strong motivational letters, good recommendation letters, hygiene and score. People think that. Gymnasts don't really matter, in my opinion. They really don't, but if you have a hygiene mat, it makes things a lot easier for you if you apply for schools. No matter where
Patrick (CEO of WSO): [00:04:50] You get in, you're at this master of science program in continental Europe. We'll just say, and you're one of the top schools there and you are start applying immediately for investment banking. Is that what you want and knew what you wanted to do?
Rick: [00:05:06] Actually, let's take a step back because what I did was actually something that I actually learned also is what I did was once I was basically done with my with my bachelor's degree, I actually started coming up with a process to network in Europe. So what I started doing was writing all these cold emails and reaching out to God in the world, trying to find him, or someone wants to talk to this. Nobody from the Midwest in the US that they never heard about to kind of get some kind of info or, you know, just a leg up on getting an internship somewhere. And I did it for a very long time and actually build an extensive network. I used to use Excel to track everything that I did from calls, emails, network, everything.
Patrick (CEO of WSO): [00:05:47] How many people do you think you're reaching out to back? Were you using LinkedIn back then?
Rick: [00:05:51] And I was using I used everything I used to Facebook, LinkedIn. I use a platform called a small world, which was kind of a social community. I literally network everywhere, but LinkedIn probably was my my. Let's call it bread and butter. And if I remember correctly, I was for sure in. Four digits, so basically two to two and a half K of emails that I send out over probably four to six months. So you say literally doing nothing else for almost four months.
Patrick (CEO of WSO): [00:06:25] So this is after you graduated
Rick: [00:06:26] Undergrad and this was basically my last semester. Yeah, that's basically my last semester. I only took very easy classes. So for me, I know I had a lot of time on my hands.
Patrick (CEO of WSO): [00:06:34] So you were completely focused on, OK, I need to get to Europe, so I need to meet with people. So are you doing a lot of international phone calls?
Rick: [00:06:40] It was a lot of international phone calls and then I got back home and over the summer and networking even more. And obviously parallel to that, I had started applying to various math or science programs throughout Europe. I'm sure everyone is listening to this and knows the program. So I was lucky because when I got into the school that I got into, which is one of the top two feeder programs into London, I had network with so many alumni of that school that basically I knew all of them already. So I just basically, you know, could follow up and say, Hey, look, you know, I'm not at the same school that you went to when the next time I'm in London, let's go a coffee, let's go for lunch. Listen to that. And then from there, it was actually quite almost a snowball because. And everyone
Patrick (CEO of WSO): [00:07:23] That. How many, how many, how many people out of that two thousand five. So just to repeat that for listeners, you reached out to two thousand five hundred people cold emailing over a period of six months. Yep. So you were motivated.
Rick: [00:07:36] I was very motivated. That's awesome.
Patrick (CEO of WSO): [00:07:38] And so you once you got in to this national finance program, were you also studying for the GED at the same time or was that one home?
Rick: [00:07:45] No, I basically did that in my in my second to last semester. So basically, I know I had one year and I wanted I knew where I wanted to get. So I took the first semester of their last school year to focus on a gym and the second semester once I had my scores and my applications in line to basically focus on networking. And yeah, that's really how I did it.
Patrick (CEO of WSO): [00:08:05] I love I love it already. This is you're like, you're a machine going after this. So you're you get you got a lot of work, right? Your work, you're doing like 40 hours of networking a week. At least, it sounds like
Rick: [00:08:17] That's basically what it was for a very long period of time.
Patrick (CEO of WSO): [00:08:20] Yeah. So you had kind of all these alumni from the school you ended up going to, you had already reached out. You had already established connection, then you could send them an update and be like, great news. I got into XYZ school and maybe at the same program you are. So did you feel like? It was like you had already established a connection, then all of a sudden you have a stronger connection. Was it a big percentage of the people you had reached out to said of the two thousand five hundred, maybe only seven hundred got back connected with you or three? I don't know, three or four hundred. And then maybe only a couple of hundred. Talk to you on the phone. And then is that is that accurate in terms of how it funneled down?
Rick: [00:08:58] It was basically so to be fair, conversion rate on cold emailing is very low. Mm hmm. I've noticed that there's a clear difference between seniority of people, of course, and is not going to get back to you as quickly as a junior. However, I have to say the DMD and Ed's or DS, whatever invention actually got back to me were the most helpful. Ok? Because either they had a similar background saying, you know, non-target or just because they understood what I was trying to do and were actually. Very impressed by the motivation that are displayed, because I think not a lot of people do the whole networking thing and reach out to people and make it kind of make themselves known. Yep. And then the ones obviously from my from my university, my from the university I went to were obviously very much you added a personal touch it because suddenly, you know, you are in the same program. They really like what you're doing. So would ask
Patrick (CEO of WSO): [00:09:49] You, what was it like, 10, 10 people? Would you say that you'd had established connection with or was like a handful, like five or two?
Rick: [00:09:56] No, I think it was a bit more that had got a connection with. So basically, let's say, out of the ones that are really that I actually talked to that I met up with, I had probably a strong connection with maybe 10 to 12. And out of those 12, I would say probably six became actual friends or, you know, very close acquaintances. And all of those I one for sure, became a mentor for the first, let's say, five years of my career.
Patrick (CEO of WSO): [00:10:18] That's awesome. And so once you're in this in this program, this master in finance program is it's almost like a sure fire thing that you're going to get an internship or sorry, is this is this master in finance? Is it a one year program? So you're applying right away for full time, right, when you start?
Rick: [00:10:33] Well, it was. I made a I made the deliberate choice to go for a two year program because I wanted to have the chance to have a summer program and then come back.
Patrick (CEO of WSO): [00:10:41] Ok, so you had the internship, but you knew pretty soon once you got on the campus, you knew you were going to be applying to internships. Correct. And so tell me how that process worked was the reason you got into a bulge bracket bank. Was it because you had these connections or was it just through the on campus recruiting?
Rick: [00:10:59] I think it was. So basically one of the things that I want to point out is you do not need you really don't need to do a lot of networking to go through traditional ways of applying. And there's enough people that just get internships because of applications. But for me, knowing back then that I was not the most, let's call it streamlined candidate. The combination of networking and applying really made the difference because at some point, for instance, I mean, the bank that I later joined for my summer program and then full time afterwards, basically, I literally knew even on the floor that I ended up working on. I knew every guy that went to my university and out of those, at least a handful or two handful pushed for me for the internship.
Patrick (CEO of WSO): [00:11:47] Great. So that kind of made the difference. It was really that that. Groundwork you put in before even applying that. Absolutely. That you think helped you get the summer analysts position and was it was it really competitive at your master of finance program? So I don't know, let's say, how many people were trying to get summer analysts positions at banks and how many people ended up with them.
Rick: [00:12:12] I don't know the numbers, but I know that everyone
Patrick (CEO of WSO): [00:12:15] Trough numbers like rough.
Rick: [00:12:17] Probably say that probably 20 percent actually got internships in London, but from the whole class, you know, throughout continental Europe, everyone got something. Ok, but not always necessarily what they were actually aiming for. But I think for that class placement was fairly strong in London.
Patrick (CEO of WSO): [00:12:33] Ok, so you get into a strong group, add a bulge bracket you're in during the summer. And this was the interview difficult coming out of the semester in finance, do you think? Were you were you prepared for the technicals and all that stuff?
Rick: [00:12:47] That's actually that's actually the funny thing about it, because that's actually why I think that my networking helps so much. Because I mean, I've interviewed, you know, a lot of places and I had more than one summer offer. And to be fair, the one that actually accepted in the end, the interview was basically a day long. It was basically an assessment centre, and it was all focused on soft skills how well you do in group conversations. You know, the technical side was not really talked about. And I was very, very, very prepared for technical. Because I was thinking, Oh, they're going to grill me so hard on everything, you know, like mental math and how to do DCF, or, you know, how does it help your work or what is this bond to look for and so on and so forth? Or, you know, the typical accounting questions, and at the end of the day, nothing like that ever happened to me in any of these bulge bracket investments.
Patrick (CEO of WSO): [00:13:38] All that crap that you did was thrown out the window and you were forced to all of a sudden have these weird group conversations and interviews.
Rick: [00:13:45] Yeah. And I thought, you know, like, maybe I can, you know, maybe shine. Somehow you if I display my at this point, you know, very understanding of financial statement analysis, you know, but no one cared.
Patrick (CEO of WSO): [00:14:01] You start walking through a decaf suddenly without out of nowhere.
Rick: [00:14:06] Have you ever thought about how to do it? And like, No, that's not what we're talking about here.
Patrick (CEO of WSO) [00:14:10] So you're the interview kind of wasn't technical. It was more just more soft skills. Did you feel like you were prepared for that or did you feel it was natural for you or had you prepped for anything like that doing mock interviews?
Rick: [00:14:24] I had not known so to be blunt, I thought I felt a bit like coming to the deep end. And it was a bit unexpected because I fully expected to be grilled on, you know, very technical things. But at the end of the day, it just comes down to common sense, right? And I think that's really what they were trying to test or see and see how you do in group dynamics, because I think that's, you know, the attitude these days in banks is really we can teach you everything anyway in six to eight weeks, you know, so why would you bring all these technical skills with you? And so what do
Patrick (CEO of WSO) [00:14:59] You think is the toughest part in terms of how do you how should you behave in those group, do as group interviews? How do you behave in those kind of behavioral?
Rick: [00:15:08] Do you have any? I think I think you should have. I mean, when it comes to behavioral questions, you know, you should think about them before you go and you should have good answers because you know the ones that you read. And even no matter how good these manuals are about, what have you read in the interview? Perhaps it's, you know, they've heard it a million times and they don't find convincing if it's the same, you know, boilerplate or template that you give them, right? But if you come up with something unique that is actually fitting to your persona, it works much better for the group discussions. I mean, you need to be able to actually discuss and. Think about or articulate your opinion in a certain manner that actually convinces people around you, and if you have trouble doing so, then I would advise that you practice that somehow.
Patrick (CEO of WSO) [00:15:51] You know, I hear that a lot, but I think a lot of it's like how genuine you come across, right? So it's like, it's not you're not just regurgitating some boilerplate answer, you're actually being genuine and not be guessing, right?
Rick: [00:16:05] That's a very good point. And one thing I want to add really quickly because I had a friend who actually got killed by this in one of those group things. People have a tendency when they sit in group meetings or group discussions to let other people talk over them. And I've learned throughout my years at that bank that this is not a medical criteria. So one advice I would give people is don't let anyone talk over you in an interview when you sit in a group discussion because it will not do you any good with people that are assessing you.
Patrick (CEO of WSO): [00:16:35] Meeting somebody just jumps in and interrupts you.
Rick: [00:16:38] Exactly. You know, these are things you know that it I never really got why? Because you know, there's people that are just not, as you know, let's call it loud. And some people will just, you know, take a step back.
Patrick (CEO of WSO): [00:16:51] And that's not to be. I would think that if somebody interrupts you and you try to, like, interrupt back, I think it can look bad on both of you.
Rick: [00:16:58] Not entirely, I agree, but there's always ways you can play this in a favour if we can say, Hey, you know, look, let me just finish my sentence, please. You know, you can express it, you can tell me your opinion afterwards. And that's it shows maturity to a certain degree, and it shows that you can deal with pressure, right? But at the end of the day, you know, it's just one of those things because it happened to a friend and I felt it was very unfair. And it was one of those things where I thought, you know, like, he was very good at what he was doing was very prepared and it literally killed his chances.
Patrick (CEO of WSO): [00:17:24] So how did he know that it killed his chances?
Rick: [00:17:28] Well, because he was he was two years below me, and that was the feedback we had in my group about his performance on.
Patrick (CEO of WSO): [00:17:34] Interesting. Yeah, I wouldn't think that would that would knock you out, so you were you were at this at this bank for a while. You did a lot of deals. Yeah, I'm a little bit about what it was really like to be on the inside. Finally, you kind of reached your goal and you had to reach the promised land and then you were working. Probably incredible, crazy hours. Am I right?
Rick: [00:17:56] Yeah. I mean, it starts off really good because they sent you to New York for training and you have a great work ethic. You have a great time in New York. You know, you live it up. You have, you know, you have a lot of fun and you come back and you again, you're thrown into the deep end and suddenly you sit there, you know, you started eight a.m. and you don't get home until the next morning at four a.m. and you wonder, why are you doing this right? My team was a very tough team. We covered a lot of industries. We covered all products. We did a lot of deals. A lot of big deals. I think we had to at some point I had to keep an excel of my working hours because they wanted to make sure that we are not overworked. So I think my average was at some point in my second year was above 100 hours, which was brutal. So that was that
Patrick (CEO of WSO): [00:18:43] Was the average was over one hundred hours.
Rick: [00:18:46] Yeah, that was that was the most brutal year I had. So my first year was OK. My second year was brutal and I left basically beginning of my third year or so
Patrick (CEO of WSO): [00:18:54] Because you couldn't prove it anymore. Basically, you're like, I'm out of here.
Rick: [00:18:56] No, because I had offers and I and I always said, You know, I'm going to do this for two years, you know, learn whatever I can, you know, because I know how the game works, right? You do two to three years of banking. You get out or you don't. Ok.
Patrick (CEO of WSO): [00:19:07] And tell me about the process of when you're looking. I know you ended up at a hedge fund, right? That's correct. So tell me about the process of recruiting for buy side or hedge funds out of the London office.
Rick: [00:19:21] It's very similar to the states, I have to say. So basically, there's headhunting firms that basically in your first, I mean, I got my first head call. I think the second day I'm on the desk. Yeah, and literally the first call I got was, Hey, you know, you just started, I know. But have you ever thought about joining a hedge fund hedge fund? I was like. I have never thought about this right now at this point, and but maybe you sure, maybe. What are you thinking? And then you meet for coffee with. You, you know you you basically are put in a file. I think you kept in the loop, you know, and you kind of. I mean, my first and my first, I think I also did to be entirely just for India and my first year I did three processes for private equity firms as well. Mm hmm. Megacap there basically is just like the U.S., they're the first ones to call you. Then you go in six months and you have your interview. You have an offer for your second year basically, right? Did you get an
Patrick (CEO of WSO): [00:20:14] Offer or did you strike out on those?
Rick: [00:20:16] I got an offer from one mega fund and one mid-market fund. So one is American, one is European. But they both want me to relocate to Munich, and I did not want to move to Munich. Tell me why, because I just got to London and I didn't want to leave after, you know, a year again. Plus, I felt that, you know, I did a lot of sponsor deals in my first year. I mean, relatively speaking, it's not like we close 25 deals, but yeah, I worked on, you know, a number of RFPs in a number of life transactions that sometimes never went anywhere to close, you know, and it was always biocides stuff. And to be fair, I didn't get the feeling that the people on the other side were doing much better than I was in terms of ours, in terms of lifestyle. So I felt that private equity felt a bit more like continuation of investment banking.
Patrick (CEO of WSO): [00:21:02] Yeah, Banking 2.0 is what they call it, sometimes at the megaphone.
Rick: [00:21:06] They told me exactly. I fully agree. And then I kind of again also came through my through my connections from my university. I spoke to the guy that I mentioned earlier that became a mentor, and he was a partner at a hedge fund, you know, and I said, Hey, you know, I'm looking at what to do next. You know, I I always enjoyed markets. I have been buying stocks since I was 15. You know, is that something I can do for a living, right? He explained to me basically the things he was doing, and I thought it was more interesting to keep an eye on the markets and the world economy. Then, you know, working in various processes or work streams. That was it.
Patrick (CEO of WSO): [00:21:45] So you kind of had your. It was interesting you went through the process of the megaphone in the middle market and it was really early in your in your banking days. You turn them down even though you had two offers. Yeah. And did that make you sorry,
Rick: [00:21:59] If I may interrupt? That did not boil well with them, by the way. The bank I remember getting a late night phone calls from one of the partners at the US fund, and he was really pissed.
Patrick (CEO of WSO): 00:22:11] Wow, why do you? Why do you think they're so upset? I mean, they have so many sharp people,
Rick: [00:22:15] They have no idea. But he was really upset. Maybe he pushed me very hard or whatever. I have no idea, but it was. He was really upset.
Patrick (CEO of WSO): [00:22:23] Hmm. I bet the recruiters weren't too happy with you either.
Rick: [00:22:26] Nope. That firm that got me, those interviews I never talked to again.
Patrick (CEO of WSO): [00:22:31] So you had enough confidence to turn these down. Why do you think you had that confidence? I mean, did you feel like, OK, I'm at a I'm at a good place, and you felt like the mentor gave you that confidence? Maybe.
Rick: [00:22:42] Yes. So basically one on one hand, obviously my mentor. To be fair. And on the other hand, you know, I always do something doesn't feel right. Just don't do it.
Patrick (CEO of WSO): [00:22:53] People just turn down those offers. That's super rare.
Rick: [00:22:57] It is. It is very rare.
Patrick (CEO of WSO): [00:22:59] That's probably why the guy was going crazy on you. Like, Are you stupid? Like, What do you do?
Rick: [00:23:05] Those were exactly almost exactly his words. It was kind of like, you know, he used a very nasty word, you know, but I want to repeat it here, but it's OK.
Patrick (CEO of WSO): [00:23:13] We can mark the episode as explicit if you want to repeat it.
Rick: [00:23:15] And I think he called me retarded. He called me retarded, and he put a lot of f words in there and a lot of F-bombs. It was a very weird phone call to get at 10 p.m. But look at the end of the day, it didn't feel right to me. I didn't want to do it. I kind of had another friend who was a similar fun doing his summer program. He was in an MBA program at the time, but he was doing a summer internship, I guess. And we compared notes, and he basically just validated my thesis. So I said, Look, you know, that's not for me.
Patrick (CEO of WSO): [00:23:46] And so how did you go into your, you know, and then the reward for not accepting those offers that you go into your second year and you start working 100 hour weeks? Were you ever thinking in your second year, like, what am I doing? I should have already had an offer lined up? Or did you did you more
Rick: [00:24:00] Than once or did you? Ones, I literally I sat there at my desk, sometimes at 4:00 in the morning or three about to kick myself in the ass and say, Hey, look, you know, you're the. Literally the most retarded person for turning down this offer is because at the end of the day, you should have taken those ran with it and see where it takes you. But then kind of, you know, the first. That's maybe three months in my second year were really bad. Then it kind of, you know, not it didn't get better work wise, but suddenly, you know, recruiting in the hedge fund space picked up and I got a I got, you know, a number of interesting interview opportunities.
Patrick (CEO of WSO): [00:24:36] And so these are from recruiters you hadn't burned bridges with. Obviously, basically. And they did. You tell them, did you tell them that you had turned down private equity offers because you're really interesting?
Rick: [00:24:47] I did. Yeah, that probably made you more attractive, which is not very helpful. Full disclosure because when they hear that you, you know, basically turned down an offer before where someone else in their same position invested a lot of work, then suddenly, you know you become a liability or you become high risk, right?
Patrick (CEO of WSO): [00:25:02] I don't know if you say if you say like, it's because I really want this hedge fund, then you become a liability in the sense of like, you're not afraid to turn down an offer, but you also show that you know what you want. So you may be higher like to close, like if you tell them, like if I get this offer, I'm in.
Rick: [00:25:16] Yeah. And that's the only reason why these people work with me because I said, Look, I turned down because I didn't want to be in the private side anymore. I'm not going to do the same if you get if I am successful in a hedge fund process. Okay.
Patrick (CEO of WSO): [00:25:30] How did you prep for the hedge fund process? You had a long, short pitch with a couple on each side.
Rick: [00:25:35] Yeah, basically. So again, I went in, I spoke to, you know, I spoke to my mentor. He was kind enough to introduce me to, you know, a couple of people that were on. So basically, I wanted to I wanted to join a long, short equity fund. So basically, I said, Hey, man, do you know anyone in the equity space? He introduced me to, I believe, three guys, two or three guys. One was long only, so it doesn't really count. But he had been at it long short fund as well. So he had good intel on the process and said, Look, what do I need? And they all said the same thing, you know, like, have pitches ready, have long. I did have a short idea, preferably two. And then you go in and you can show them that you know what you're doing because that's what they're looking for. You know, it's not like banking where they look for, does he tick the boxes or whatever it's like, can this guy actually make money for the firm? And I mean, how you talk,
Patrick (CEO of WSO): [00:26:24] How did you even come up with those ideas? It sounds like you really love public markets. You've been trading since a young age. So it was it just stuff that you had actually been trading or did you do research outside of what you're doing for your personal portfolio?
Rick: [00:26:34] So in essence, I felt sort of long ideas were the difficult because, you know, it's I always say it's easier to find good long ideas because, you know, at the time also the market was going up anyway, so you could have pitched anything that was a growth stock or whatever. You know what, if you make money, right? Yeah, I was having some difficulties in the beginning with the shorts, and screening for shorts was also an issue on top of, you know, doing it while working long hours in the bank rate. So admittedly, for the first couple of pitches, I got some help from the guys that I was talking to more as a sounding board, though. So basically I would pitch an idea and they would say, Hey, look, man, this is just not going to fly. Or, you know, that was actually the initial feedback for two or three pitches. Or they would say, look like in
Patrick (CEO of WSO): [00:27:20] An interview process or this was with like mock interviews with friends.
Rick: [00:27:23] This was in mock interviews in March.
Patrick (CEO of WSO): [00:27:25] Ok, so you and then you're testing these out to see if they would actually fly?
Rick: [00:27:28] Exactly. And then I mean, in some pitches, you know, like, Hey, this is the right idea, but the work you're putting in, if you want to convince someone to actually give you a job, it's just not granular enough, which is decent feedback because, you know, when you sit somewhere and you do something, you always think it's very good or it's great. But at the end of the day, when someone else looks at today, hey, look, there's so many flaws in this. You should really sit down again. You're going through the right direction, but do more work around this. Look at this risk factor more detail. Have an answer for this question, you know? And then, yeah, and then I just took it from there, and then I came up with some really good pitches. I got hang over it, how to generate ideas because of that, to be fair, which I still use to this day. And then I went in for, I think, maybe for funds that interviewed me. I got to the office stage with with two. It's great. And then basically, I last minute got an intro to someone else and they ran an accelerated process for me and I accepted the offer from that fund.
Patrick (CEO of WSO): [00:28:28] Michael, so tell me a little bit about the work you did at that fund. It was long, short equity, right? Yep. And. Did you feel like there, so knowing kind of what the hedge fund space has been through over the last several years, it's been kind of a rocky few years. Did you did you kind of have your eyes wide open seeing that already unfolding before you went to this fund? Or was it something that like you started and things started? Kind of. Crumbling. I don't know if I don't even know if this fund that you're at did really well or what the what the whole pattern was, if there were a lot of redemptions. But can you talk to me a bit a little bit about what you saw going in and how the whole industry kind of evolved while you were there for a couple of years?
Rick: [00:29:12] Know for sure. So basically, I mean, the fund that I worked for was focused solely on continental European equities. And at the same time, one of the major shifts within Europe at the time was. I would say a greater focus on shareholder activism. So when I actually joined in, I joined halfway through a year, the long short was not performing well at all. They were, we were down, I think, two or three percent, which is not a killer, obviously, but it's not great either. But at the same time, we launched a dedicated activist product. Ok, so I was lucky enough that I was one of two analysts in that firm focused on long short, but the only analysts focused on shareholder activism.
Patrick (CEO of WSO): [00:30:03] Tell me what is fair for the listeners that don't know what shareholder activism means? Tell me, like, can you give me a quick summary of what that means, like what? What is a hedge fund trying to do
Rick: [00:30:13] When they're so basically? So basically, when you when you are an active shareholder, you take a stake in a company, be it usually you go for a significant stake or at least so that you appear in a shareholder register if you don't have as much money and then you literally push for change in the company because you believe that there's value to be unlocked. So I, I tend to call shareholder.
Patrick (CEO of WSO): [00:30:36] So can you can you give me an example like so you would go and buy up 10 percent of the shares outstanding and kind of, for instance, demand a board seat or like, what would you do? Like, say, Hey, we need to fire the CEO. This is terrible. Like, what would you?
Rick: [00:30:51] I mean? So throughout my throughout my time there, we did three campaigns. So basically, we covered all the let's called basic campaigns that a shareholder can run. But the first one was probably the best one because we basically went in, we bought 10 percent of the company. We placed three people on the board who fired the CEO. We went for cost cutting and then we made the company sell itself to a conglomerate. Hmm. So that's basically literally tick all the boxes of shareholder campaign in the second campaign. It was a bit different. Were you
Patrick (CEO of WSO): [00:31:20] Able to unlock a lot of value with that
Rick:00:31:21] With that trade? Yeah, I mean, we bought we bought shares. Don't quote me on this. Let's call it in the 15 16. Yeah. And the company was taken over for 90.
Patrick (CEO of WSO): [00:31:31] Wow. So and how long did that take two years?
Rick: [00:31:34] Yeah, it was a two year campaign. Yeah, that's great.
Patrick (CEO of WSO): [00:31:36] It's a great return. Ok. And then, sorry, go ahead. You were going to give me another example.
Rick: [00:31:42] And then a second campaign that we did was basically we bought about four and a half percent of the company was much larger than the first target. But that case was solely based on cost cutting. So we published numerous plans about how to how to cut costs and how to streamline and increase efficiency. And to be fair, the company never did any of this share price still doubled, and we got out with a nice little profit.
Patrick (CEO of WSO): [00:32:10] So they never did anything of it. But do you feel like the publishing of those reports and the promotion of those reports puts pressure on the company?
Rick: [00:32:18] Oh yeah, exactly. That's the beauty of public markets, right? Sometimes fantasy just propelled the share prices up, you know, even if nothing ever happens.
Patrick (CEO of WSO): [00:32:25] So you they didn't actually implement any of the cost cutting of the streamlining that you said, but you kind of outlined the path to to greater profitability or better margins for this company. And that was you think that played a role in the share price going up so high? Or do you feel like it was just it was part of a bull market that you guys were,
Rick: [00:32:43] You know, it was there was. So the stock had underperformed everything. And once we came on the scene, you can actually put every time we put something out, the share price went up. I think it was a combination of, you know, like the fantasy of or maybe they'll do it in number two. We believe if they don't do it, they'll make them do it by going to the AGM or replacing someone like they did last time.
Patrick (CEO of WSO): [00:33:05] This fantasy becomes reality. Exactly. People want to buy before that happens and before it's announced. Exactly. Ok, so really interesting. So is this shareholder activism is. Do you feel like this is fairly common in hedge funds? Are there funds? There are certain funds that are just dedicated just to do just that, right?
Rick: [00:33:26] Oh yeah, totally. I mean, there's dedicated activist funds. Usually there are only there. There's some that have a long short portfolio and they do activism opportunistically, but try to hedge it via the short
Patrick (CEO of WSO): [00:33:39] Book or Ackman against Herbalife or whatever.
Rick:00:33:42] Yeah, kind of like that. But that was I mean, that was that was a short seller campaign. I mean, if I if I remember correctly, he was betting that will go to zero and he got burned on it heavily.
Patrick (CEO of WSO): [00:33:52] Yeah. Initially dropped. And then then Icon came out and said, he's full of it. This company is fine. It's growing fast. And then, yeah, exactly rocketing back up and it was just back and forth. But people,
Rick: [00:34:05] That's obviously a derivative of an activist campaign, right? I mean, if Ackman goes somewhere and presents a short case and I think they've made a Netflix documentary about it, you know, yeah, that's a form of activism. But in Europe, for the time being, at least, there's some share short selling activism, but not a lot. But there is. A significant increase in shareholder activism where people try to unlock value, either by reducing complexity or by replacing people and so on and so forth.
Patrick (CEO of WSO): [00:34:38] Do you think that's more common now that long short equity is under pressure?
Rick: [00:34:42] I think that's one of the reasons. Because in essence, you know, the question is always and it's a valid question, because since 09, we've been in a bull market, right? It's the longest bull market. If I if I, if I'm not mistaken for ever in the history. So basically, you have, you know, hedge funds charging two in twenty rate. People say, Hey, look, you know, you're not up from your index, why should I give you twenty rate? But if you have an activist program, you always say, Hey, look, you know, because we buy shares in companies, we actually work for money by implementing strategic changes or and you can see the work we're doing because there's, you know, press releases, so on and so forth. And I think that's a valid point to be made, you know?
Patrick (CEO of WSO): [00:35:14] Very cool. So you're there. You're it sounds like you're enjoying your time. You have a couple of really good trades. And you leave or what happens as fund shuts down? What's? Why did you leave?
Rick: [00:35:27] Oh, so in essence, the person who was the founder of the company at some point decided, Hey, you know, I'm going to basically shut it down after almost 20 years. So basically, you know, there was nothing to be done anymore
Patrick (CEO of WSO): [00:35:43] Was there because a lot of redemptions and it was just because there's a rough patch. Or do you feel like it was because he was just wanting to retire?
Rick: [00:35:48] No, he just wanted out. He may. He made enough money, you know, he wanted out. He wanted to basically go for the second spring, so to speak, you know, new wife, blah, anyway. And yeah, then and then, yeah, one thing led to another and one another partner of that firm. And I got together and said, Hey, look, let's start over. Let's start our own. And we took some investors from that fund and seeded or seeded Newfoundland. We basically managing it in the same fashion that, you know, the old fund was managed and we try to do the same things.
Patrick (CEO of WSO): [00:36:22] Ok, so you've been you've been doing that now for the last couple of years,
Rick: [00:36:26] Roughly,
Patrick (CEO of WSO): [00:36:27] Ok? And then I guess just in terms of that whole process of like spinning out, can you talk to me a little bit about like what somebody would do to position themselves well for like creating a new fund like that? I assume there was a ton of work to do. I mean, you had the LP or you had the relationships with the investors, right? So that's as much work. But just in terms of just getting the whole fund structure up where you one of two people that were founding that, that new hedge fund?
Rick: [00:36:53] Yep.
Patrick (CEO of WSO): [00:36:54] So a lot of work on your plate, just some just logistical stuff.
Rick: [00:36:58] Um, funnily enough, not really, because in essence, the structure we have is a very common, you know, one thing that basically I always say, you know, if you start a hedge fund and you actually do have either seed capital or you have, you know, family and friends that actually believe in you, you know, you basically you need, let's say, I mean, in Europe at this look, I can't speak for the US because I know in the US you need a lot more, um, because of regulatory loss and so on and so forth. But in Europe, if you, let's call it, played a bit smart and for the first couple of years, keep yourself under the radar and don't manage too many assets because at some point you pass, you cross a threshold where you actually do have significant regulatory costs. You basically you invest 150k and you have the chance to become, you know, multimillionaire. It's almost like a call option.
Patrick (CEO of WSO): [00:37:45] And so the fund was relatively small. So initially, yeah. And is it something where you saw yourself doing this or you see yourself still doing this thing in the hedge fund space? Or is it something where you're thinking, you know, I've had my taste of the public markets? I mean, what's your thought now with like the whole, do you feel like you want to focus more on the activism stuff you feel like that's still a place to unlock a lot of value?
Rick: [00:38:11] No, to be fair, I think I mean, first question to answer that, totally. I mean, if you if you really do love public markets and if you see yourself doing this, then you stick with it. And that's just what you do. Even I mean, even the old guys, you know, old not being disrespectful, but even the older guys that I know have been doing this for 30 years, you know, even those guys, you know, they even if they stop running a fun ride, they still sit at home in front of a computer and sometimes trade or have a portfolio of their own money, right? Right. So if you do actually love this, you don't you don't stop doing it. And why would you? Because there's not a lot of things in the world where you can make and I don't want to sound like, you know, very like a douchebag. But that's not a lot of things in the world. We can make a lot of money like this, just trading stocks or trading anything, right?
Patrick (CEO of WSO): [00:38:59] So, so I guess, speaking of money, do you mind going through kind of the comp or rough ranges of what you had when you were at the bulge bracket bank? And then kind of how that how that changed when you went hedge fund, we went by side.
Rick: [00:39:11] Know for sure, so take these with a grain of salt, because I mean, again, first of all. So I'm going to try to I'm not going to try to put this in dollar terms because I don't know the exchange rates, but anyway before. So basically in pound, for my first two years, I think I got 50 and 55 consecutively. And then at six in my third year and bonuses. So I always had had a very strong ranking. So I guess top bucket bonus, I would assume, but I think my first year, my bonus was 50. Second year was 54 and my last year I did not have a bonus because I left. And so that's pounds or euros. So, yeah, but I heard that the bonus in the third year was basically almost, you know, for Typekit also almost 100 percent plus the associate sign on which I never obviously got. But.
Patrick (CEO of WSO): [00:40:02] And then when you're once you jumped,
Rick: [00:40:05] Once I jumped in knocking, you give it to you in dollar terms because they basically know. So basically my first year, I total calm for, I mean, for the long shot, it was a shitty year for the activism fund was a great year, so it kind of balanced out. So my first year I got 300 K total comp in second year was closer to 400. And then in my third year, we left halfway through, so I just got to basically stop right?
Patrick (CEO of WSO): 00:40:33] Yeah.
Rick: [00:40:33] And was that I was not representative was. And one caveat, because I mean, I was a I was basically a minority equity partner in the business after my second year, right? So there was some kind of economics that flew back that it basically had some cash streaming to me, but that was because I owned shares in the management company.
Patrick (CEO of WSO): [00:40:51] Got it. And so you were getting management fees? Exactly. Yeah. And so can you tell me a little bit about specifically the balance between base and bonus there, though, that the hedge fund? So was it? Was it skewed more or was it like you can tell me? Like, was it much higher bonus or was it pretty even like
Rick: [00:41:10] Banking or was it was much higher bonus, but just because. So basically, the way that that the guy ran his firm was basically he obviously had a portfolio, but every analyst had his own P&L. Ok. So basically, if you make money, then you know you got a higher bonus. If you lost money than your average, your bonus was not as great, right? Yeah. So in essence, for me, my performance part was significantly higher than the base
Patrick (CEO of WSO): [00:41:37] Because of those activist trades you did.
Rick:: [00:41:39] And because of the long, short stuff that I did. Yeah, so it was a combination. Ok. It's kind of nice because I mean, if I give you if I give you a percentage. So basically if you probably one and a half times base or even one point eight times base, and then obviously the shares on top, so that was an additional tab. Great.
Patrick (CEO of WSO): [00:42:00] So anything else before we call it any kind of advice you'd give to the younger listeners that are playing basketball in the middle of nowhere at an on target? How do they follow in your footsteps? How to how to go besides sending two thousand five hundred emails? I guess they could start there.
Rick: [00:42:20] I mean, it's the same advice that anyone probably would give you. If you are literally in the middle of nowhere, you really need to network a lot. You need to make sure that you get your name on some somehow on the radar and try to make it call the ninja, make ninja moves so that you basically, you know you, you get you stay under the radar, but you're still somewhere close to the people that can make decisions for you, right? Just network beef up your CV. Don't be ashamed to actually take the first internship for free. It sounds stupid, but that's just the reality we're in. Um, and then everything else will fall into place. And I mean, there's this again, there's ninja moves, right? I mean, I'm sure you've heard about search funds. There's a lot of search funds that pop up left and right. If you play a cards right, you can do an unpaid internship there, which is basically nothing less than a P internship these days. Because these guys are so streamlined, it's almost like working for a fund. And maybe a bit more start up, but it's still dual sourcing, LBO modeling so on and so forth. That may be a ninja move, right?
Patrick (CEO of WSO): [00:43:24] Another ninja moves you have up your sleeve. I mean, it sounds like you weren't doing too much ninja moves, you're doing more brute force moves when you're when you started.
Rick: [00:43:34] Yeah, but you know how it is once you get older, you get wiser. Another thing that I really enjoy and that I kind of did back then as well, you know, you can always come up with investment ideas and there's enough platforms out there these days where you can pitch these right. You can always upload them. You can pitch, you can get feedback on them, right? It's never too early to start trading your own account if you want to be in a public market fund because people will ask you about the track record and if anything, ever blood was Facebook, then good luck.
Patrick (CEO of WSO): [00:44:07] Facebook IPO at thirty eight dollars.
Rick: [00:44:09] Well, I mean, OK, fair enough, you know, you probably don't need to. And then it
Patrick (CEO of WSO): [00:44:12] Tanked. No, and then it tanked.
Rick:00:44:15] You know, that's just some. I mean, I'm a big fan of reading a lot of books, but if you really and you know this as well, because I mean, you can read all the books in the world, but when it comes down to it, you know, maybe five books that really can help you. And for anyone out there, you know, another point that I will make it, there's a book called Financial Shenanigans. Maybe get it, read it, understand it, and you'll be much better positioned for interviews than most of your peers. Great. Great. And I think that's literally everything I can. I can advise someone to do because at the end of the day, it comes down to hard work and how much you want greatness.
Patrick (CEO of WSO): [00:44:50] Let's end it there, Rick. Thanks so much for joining us today.
Rick: [00:44:54] Thank you so much for having me, Patrick.
Patrick (CEO of WSO): 00:44:55] And thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis dot com. And till next time.
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