If you work in an investment bank ('the sell-side'), chances are you'd like to work for a private equity fund or hedge fund ('the buy-side'). The chances also are that you're getting nowhere fast. Buy-side jobs are famously over-subscribed, with successful candidates making as many 2,000 applications before they're accepted.
So, assuming you have the necessary prerequisites (unblemished academic record from a top school, big brand finance names on your CV), what can you do to improve your chances?
At this week's Alternative Investments Conference run by the LSE in London, elite students from around the world are being regaled with advice by big industry names including Carlyle Group's David Rubenstein, GLG's Pierre Lagrange and Terra Firma's Guy Hands. "Almost everyone I run into wants to be in private equity," Rubenstein reflected.
And, this is why Rubenstein et al said most buy-side applicants are disappointed...
Investment banks like to hire people of a similar ilk: excellent academics, excellent schools, elite extra-curriculars.
Some buy-side firms go for a similar breed. Others avoid them like the plague. "People say great minds think alike," said Lagrange yesterday, "Not at all. We totally disagree with that: great minds think differently.
"We are trying to find people who are very different," said Lagrange. "That way you get challengers and people with different points of view."
If you want to work for a hedge fund like GLG, which has a strong quantitative bias, you'll need to be up with algorithms. "It's becoming more and more difficult to hold onto human decision making where markets are very technical and quantitative," said Lagrange.
This doesn't mean humans will be replaced by machines. It does mean humans need to work alongside machines. "No one has beaten a computer at chess for years, but a human working with a computer can still beat a computer at chess," said Lagrange. "It's about putting the brainpower of human decision-making alongside the quantitative machines."
If you're going into private equity for the carried interest, you're doing it all wrong.
"If you chase money for the sake of money, you won't get some," said Rubenstein. "The people who make money are the people who have an idea and are interested in the idea," he added.
Echoing Guy Hands, Rubenstein said the route to success is to find what's right for you. "No one has ever made money by hating what they do," he said. "You have to really love what you're doing and you won't find what you love until you've experimented a bit. Find something you really enjoy and then you can make a career out of it."
The people who succeed in private equity are those who decide that "the business of adding value to companies" is "a useful thing" for their "limited time on the face of this earth," said Rubenstein philosophically.
In the event that you do enjoy working in private equity, and you do make a lot of money in the industry, Rubenstein added that you should give it all away: "Your life shouldn't be about the accumulation of money...try to do something useful with the money that makes society a better place."
Rubenstein wasn't the only industry insider advocating income redistribution. Alexandre Friedman, chief executive of asset management firm GAM, said income inequality has become so extreme that we're "in a French revolution" situation. In the circumstances, citing money as your career motivation will get you nowhere.
Making money on the buy-side is, in any case, harder than it used to be. In the past, Rubenstein said people were "unsophisticated" and sold their companies for far less than they were worth, and PE funds could do deals that were 95% leveraged.
Nowadays, working in private equity is far less about financial leverage and restructuring and far more about making a difference to how a company operates. "Private equity has become about the opportunity to make a tangible change to the way companies are run," said Arif Naqvi, founder and chief executive of private equity fund the Abraaj Group. "It's about working with industry to create value, rather than working with Wall Street." New kinds of private equity funds are emerging as a result, Naqvi said.
"If you work in private equity now, you need to like building something," said Rubenstein. "You need to want to work with management to build something for the future."
If you want to work for an equity long-short hedge fund or a long-only fund now, you'll need some original investment ideas. As monetary policy diverges globally, Friedman said active managers with good stock-picking ideas are about to make a comeback. Lagrange said it's all about identifying "disruptive opportunities."
If you're going into private equity because you want to 'build companies', your calling in life might really be as an entrepreneur.
"The trick is to find out whether you want to be an entrepreneur, or whether you want to work in the system and move up over 5-10 years," said Rubenstein. "If you really want to make great wealth, you need to start your own company. But you also need to ask yourself whether you really want to make the sacrifices you need to to start your own firm."
If you're contemplating a career in private equity, you're probably bright. But there's such a thing as being too bright.
Rubenstein said he hires people with, "reasonable intelligence," not geniuses.
"Geniuses who are off the charts are not the best people to hire," said Rubenstein. "They're either great superstars, or crazy."
You can't work in PE if you want to go home every night at 5pm and work no weekends, said Rubenstein. "That's a reasonable way to live, but you will not be successful in private equity," he said. In private equity, you need to be willing to "work very hard, especially at the start."
Rubenstein also echoed Hands in advising against frittering your energy away on all sorts of diverse activities. "People who become successful focus on one thing," he said. "They become the world's expert in one area... If you don't focus, you won't be as successful as you should be."
If Abraaj is right, the big opportunities in private equity now are not in the West, but in Asia and Africa. "Two thirds of the world's future growth and consumption are going to come from emerging markets," he said.
Success isn't just about hard work combined with reasonable intelligence and passion for what you do. It's also about chance. "Many of the people [talking] at this conference got very lucky," said Rubenstein. "We're not geniuses, we had luck."
Lastly, buy-side firms are smaller than investment banks. If you're objectionable, people are going to notice.
"Have a sense of perspective and humour," said Rubenstein. "Don't take life so seriously."
Ex-Goldman banker and fund manager, Anthony Scaramucci, added that there are three things that will make you successful on the buy-side (and in life): trust, reciprocity and karma.
To make people trust you, you need to show your vulnerability, Scaramucci said. To build reciprocal relationships, you need to do things for other people without necessarily expecting them to do something for you. And to earn karma, you need to be kind - and not just to people you think are in a position to help you out.
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