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Work for free, do 60+ hours a week, and other expert tips for success in hedge funds, private equity and investment banking

Hedge funds and private equity are still sexy, while the lustre of investment banking has faded for students looking to break into finance. But like any object of desire, jobs in the alternatives sector are also elusive and competition for a handful of places is intense.

A straw poll of students at the LSE Alternative Investments Conference this week suggests that more people are looking to break into private equity and hedge funds than investment banking. While there’s an element of self-selection in the audience, these are also growth sectors in which to base yourself over the next 20 years, according to Randall Dillard, chief investment officer and co-founder of hedge fund Liongate.

Dillard is a man you might like to listen to. He launched Liongate following his ‘retirement’ from financial services in 2003 (he was in his 40s and realised he couldn’t sit still). Before this, he was head of investment banking at Nomura, and also led their principal investments and prop trading businesses during his time there. In short, he’s a man who’s seen a lot of different facets of the financial industry. Here are some of his pearls of wisdom for breaking in the alternatives sector and success in investment banking.

1. Be proactive, be helpful and be cheap

Even at the junior level, financial services professionals are used to earning good money. Investment banks pay their interns more pro rata than the average salary in London and New York. Hedge funds, however, do not have the resources to employ large numbers of interns, and are generally reluctant to pay them. Put yourself forward – even if that means working for free, says Dillard.

“Go to hedge funds and offer to work for free – most people won’t do that,” he says. “One of my colleagues was 18 when he started getting some work experience at hedge fund, before he started at LSE. He’s 26 now, but has the hedge fund and investment knowledge of a 36-year-old. Offer value and save time and don’t worry about the price. Spending time with people in the industry will break down barriers.”

2. Prepare to be worked very, very hard

Yes, investment banks are attempting to rein in analyst hours, give them the occasional weekend off and perhaps even suggest they leave before midnight one day. Still, only 15% of analysts in banks work over 90 hours a week, according to a recent FT poll – these are the ones who will succeed. “Looking at people working 60-70 hours a week – you need to give an extra 10-20% of effort to distinguish yourself,” says Dillard.

3. And even harder if you work in private equity

Private equity is viewed as an exit option for a lot of junior investment bankers, who are increasingly looking towards the greater rewards and the option to take their foot of the gas a little. This is not the case. Dillard says he couldn’t even go to the cinema during his time in private equity for fear that a deal would disintegrate without him overseeing it.

“It doesn’t ease off, it goes the other way,” he says. “It’s the roughest business out there; after seven or eight years, you’ll want to commit suicide.”

4. Don’t under-estimate the soft skills

What do hedge funds and private equity firms want from their employees? Number one is problem-solving skills, followed by communication skills – they also ask for maths, economics, financial engineering and, in some strategies, computer science knowledge, but these are secondary. Soft skills will set you apart, says Dillard. Furthermore, he says, wisdom, understanding and knowledge will get you paid, even if employers tend to ask for information and data skills.

5. Remember, it takes a long time before you’re an expert

There’s no shortage of top traders under 30. If you want to make it in private equity, however, be prepared to accept that there are a lot of people you can learn from for a very long time before you can consider yourself a real professional. “It’s an eight to 12 year training process – start today,” says Dillard.

6. You will constantly need to prove yourself

There’s a huge fallout from the analyst classes – some suggest that only 20% make the cut, and (anecdotally) many are falling out from the current intake. Most people last 18 months, says Dillard, by which time they either realise they were more in love with the lifestyle which money affords, rather than the realities of job itself, or burnout. It’s no different once you reach the upper levels: “Managing directors in investment banking also last around 18 months,” says Dillard. “Most people simply cannot handle the amounts of revenue they are expected to generate year after year.”

7. Target growth sectors

Hedge funds, believes Dillard, are about to go mainstream. The new opportunities in the retail market, combined with UCITS and ETF funds, could see the industry expand into a multi-trillion dollar industry in the next ten years, he says. Getting in at the right time is the secret to his success – he entered investment banking during the boom years, switched into private equity when it was expanding and started a hedge fund when the industry was in its comparative infancy. “I was always in the right place at the right time. Some of this was luck, but it helps to be self-aware.”

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