With headhunters likely beginning to reach out in December/January, I thought I'd put out a series of posts on making the transition from IB to HF. This one talks about getting that first interview.

If you're in a decent group, most--if not all--the major headhunters will reach out to you. The smaller ones are more sporadic/random in terms of who they reach out to and you'll need to proactively search for and contact these guys regardless of where you work. Most people who made the IB to HF transition got their first job through a headhunter, but there are also many opportunities available to those that are resourceful and proactively reach out to funds on their own.

Does pedigree matter?

Unfortunately for some, coming from a lesser firm puts you at a disadvantage. Your school also remains important. I was at a top group which collectively received every headhunter-driven interview out there. There were some funds that literally interviewed every one of the HF-pursuing analysts, but others picked only one or a select few. That minority tended to come from Wharton. It was not at all based on who the best analyst was, though our group as a whole didn’t really have any weak analysts as far as I was aware.

The reasoning behind this is relatively simple: hedge funds often hire multiple headhunters to fill a position, as well as reach out through personal and professional networks. Because a headhunter is limited in the number of candidates they can refer, they tend to select the “paper rockstars”—eg, top bb/elite boutique, high GPA, top target school kids.

By no means am I suggesting that only those of highest pedigree can get these jobs. You may have an uphill battle, but it can certainly be circumvented.

Also, note that the pedigree discrimination is most prominent early in the process when headhunters still haven't had an opportunity to assess your interview performance.

What should you be doing?

1. Reach out to all of the headhunters, even the obscure ones that may not have many opportunities for you. Dynamics and SearchOne have the most post-banking HF clients, but there are many others that can help you. Use LinkedIn, Google, fellow analysts, and any other contacts you can for this.

2. Crush the headhunter interview.

Demonstrate an unbridled passion for investing. Talk about the PA you’ve run since early college, even if you’ve never touched a brokerage account in your life. They need to be convinced that you love investing and you are absolutely certain that you want to be a HF analyst. Even better, tell them you felt that way since your early interest in college, and time and experience has only helped solidify that initial gut feeling.

You need to convince them that you are a top analyst, which, as long as you’re decent, will be easy enough to do because rankings at most banks don’t come out until you’ve completed your first full year. At that point, even if you’re second tier, it will be good enough. Do not do this if you think you’re going to be mid-tier or lower, because if you haven’t locked up a job by then, you will have some pissed off headhunters and they’ll have no trouble deciding they don’t want to work with you anymore

When they ask if you’ve considered PE, immediately respond with “no.” There should be no thinking. No hesitance. If you’re uncertain about whether you want to do PE or HF, 95% of the time you will fail the HF process and end up in PE.

Finally, get them to like you as a person. I swear each analyst class gets nerdier by the year, but for those of you that do have reasonable social skills, lay on the charm, be funny, and get them to develop a vested interest in you. This is racist, but if you’re Asian and come in fitting the stereotype, you are likely fucked.

3. You need to go into your first real hedge fund interview way over-prepared (will highlight what you need here in a future post). You need to impress these guys because if a headhunter has taken a leap of faith on you and you bomb on the first opportunity they give you, then you’ll have some difficulty winning their trust back.

4. If the headhunter route is relatively fruitless, networking and cold emails are another option. You’ll get plenty of rejections, but just like going out and approaching girls, you know it’s a numbers game. You will get rejected regularly, but with enough approaches you’ll get enough “yeses” to make it worthwhile.

5. You should also speak with fellow analysts and friends at other banks to try to figure out where they’re interviewing, and then send e-mails to those funds telling them that you’re aware they’re running a search process and you were hoping to be considered for an interview. Reword and include more than just that, attach a resume, and hope for the best.

6. Finally, you can look up to see what funds are launching or have recently launched and reach out to them to see if they have a need for analysts.

7. In securing a job, you absolutely need solid references. Have at least 2 people that will go to bat for you. Funds will sometimes call other random people they know at your firm, but hopefully you have a solid reputation and that’s not an issue. As long as you’re not a bad analyst, you should be fine. Furthermore, hedge funds may reach out to their friends at banks to figure out who they should proactively reach out to for interviews.

What do you need to know for the headhunter interview?

They may act relatively informal, but treat it like a real interview. This is your best and easiest opportunity to get a head start on the process. If they like you, you'll be among the first to hear about new opportunities. Know your story, convince them that you're passionate about the market and have no greater desire than to work at a HF. Also have a brief long and short pitch (this will be discussed in greater detail in another post).

Also have an idea about (1) what kind of investor you want to be (equity vs. credit) and (2) what kind(s) of fund(s) you're interested in.

Equity and credit guys tend to be very different. A credit guy once told me that if he had the same outlook in his personal life as he did on the job, he would never allow anyone in his life, save maybe a dog (under the belief that dogs love you unconditionally). As a credit guy, he sees the glass half empty, and he's expecting that at any moment some clumsy shit from the company will walk by and tip the damn thing over. Expecting that to happen, he tries to figure out exactly how much water will be left post-tippage, and makes bets accordingly.

What I mean to say is: credit guys are very concerned about protecting their downside and try very hard to quantify the risk/return of any investment with what they believe to be reasonable accuracy. After all, they're getting paid a coupon and have a specific maturity date when they're supposed to receive the principal payment. Furthermore, beyond understanding businesses, they get into the nitty gritty of credit docs, bankruptcy law, etc. These guys definitely develop a lot more legal knowledge than the typical equity analyst.

Equity guys, while also thinking about the downside, have to be a bit softer in their investment analysis. There is no coupon or principal payment. There is no maximum return. The most you can lose is the money you put in, but you can make 10x+ in return (obviously not your average investment). What I mean is: equity guys typically have a rosier picture of the world. That is, of course, unless you're Chanos.

Overall, equities are riskier, more volatile, offer higher potential returns (goes with the risk), and demand investors to have a softer view on investing than credit guys. There's more to it, but not worth it to go into too many details.

There are no pros and cons: some people are better at one than the other. It's a personality thing. I like working on the equity side more, so that's what I focus on. If I liked credit more, I'd spend more time there. I'm lucky to have that flexibility, but you usually don't have that opportunity. Before you commit to one or the other, try to figure out what your personality is like and go from there. Remember, credit guys focus on cash flow, the downside, and credit-specific technical knowledge (legal, for example).

If that's for you, go for it. If it's not, then you're probably an equity guy. Equities can be cut up into growth, value, etc, but I won't go into that now. Just keep in mind that most people venture toward value when they first start because that's all they know, but it may not be what they're truly best suited for. Keep an open mind.

2. Equity guys tend to gravitate toward L/S, while credit guys go to credit & distressed funds. There are also some event-driven and activist funds out there, but it's too small a space to exclusively set your sights on right out of IB.

My experience (and the vast majority of my peers would agree) was that it was far easier to get the interview is far easier than getting the job. Happy to answer any questions about this first step. Apologies in advance for any typos... wrote this up very quickly.