Getting a job on the buy-side should be a little bit easier. After all, both private equity firms and hedge funds are hiring graduates directly, and junior bankers are seizing opportunities at large and small firms alike.
But, the ongoing performance issues at hedge funds and ever-stiff competition for places among PE firms aside, there are other less obvious barriers to a buy-side career.
1. Brexit is a problem for the buy-side too
Now that it’s clear the UK government is aiming for a ‘hard’ Brexit that will potentially remove access to the EU’s single market, investment banks have started to firm up plans to move jobs out of London. While buy-side firms are also concerned with passporting, the biggest issue they face is lack of access to talent.
“The real impact of Brexit, first and foremost, is the free movement of people,” said Jay Wintrob, CEO of alternative investment firm Oaktree Capital Management at the LSE Alternative Investment Conference last week. “We have 135 people in London, and close to 50 are not UK citizens.”
2. You don’t have the skills
Hedge funds used to hire traders based almost entirely on their previous track record. But the industry is changing. As Matthew Granade, chief market intelligence officer at Point72 Asset Management, said, there’s been a rebellion against the old way of doing things, particularly when it comes to paying sky-high fees. “It’s kind of: ‘I promise you a Rolls Royce and I give you a Honda’,” he said.
Star portfolio managers are no longer the order of the day, he says, but nor are they simply being replaced by machines. Instead, hedge funds are increasingly looking to hire people with a mix of traditional investment skills and quant and programming expertise.
“It’s moving from an artistic process to an engineered process – discretionary portfolio managers are learning from quants, and it’s changing what they do and how they work,” he said. “At Point72 we have PMs who pursue both strategies.”
These skills are not easily found at entry level.
3. You are striving towards a bygone era
Moving into PE or a hedge fund for a big pay day? Good luck with that. Not only is pay not what it once was, you’ll have to disguise your motivations pretty well in order to make it through the recruitment process.
“We have a ‘no jerk’ policy – although we call it something more colourful,” says Wintrob. “There are people who could make a lot of money for the firm, and themselves, but what’s good in the short-term could mean long-term disruption of the culture here. So, they’re not a good fit.”
“If your main motivation is how you can make the most money, go look elsewhere. Go to Silicon Valley or something like that,” said Mark McCombe, global head of BlackRock alternative investors.
4. The qualities buy-side firms look for are nebulous
Private equity and venture capital firms hire MBAs because, says Dominique Vidal, partner at VC firm Index Ventures, they’re a known entity. Most have great analytical skills, and the majority tend to stick around for three years before moving on to something else. Those that make it longer term have less definable qualities.
“If you can tell me what is a good or bad about a company, it’s not enough. The question is whether we should pull the trigger and do the investment,” he said. “This is very hard to develop – people either have it or they don’t – and it’s near impossible to interview for.”
5. You are not working hard enough
Tom Sandell, chairman and chief investment officer at Sandell Asset Management, said that he sent out “100 letters to investment banks all over the world” when he was trying to break in and, once given a job, sometimes he was “literally working 24 hours” and seven days a week. Now that he’s on the buy-side, his advice is to be tenacious during the application process.
“Don’t just send an email. In today’s world, who has time to read all their emails properly? I don’t,” he said. “It’s rarer to get a phone call. Send a letter, if you don’t get a reply, phone up. Never give up, and never take no for an answer. No only means no today, tomorrow it could be a yes.”
6. You cannot convince employers that it’s your ‘vocation’
Guy Hands, chairman and CEO of private equity firm Terra Firma, does not focus on academic qualifications in those he takes on. As we’ve mentioned previously, he looks for a willingness to learn from mistakes and openness over straight A students. But, you must also view private equity a path, rather than a job.
“At an early age, I heard a recording of myself and realised quickly that I couldn’t sing, so should give up on that dream,” he said. “I had no choice but to be an entrepreneur, but I have found my vocation.”
Photo: Getty Images