Self-confidence can be elusive, especially when you are trying to break into investing, one of the toughest careers to get into. Give yourself credit, though. Just making that career decision alone speaks volumes about you. Remember the moment that you put your foot down on having a hedge fund career? That was already a major vote of confidence in yourself. Yet, why do so many of us doubt ourselves as we dive deeper into the hedge fund job search? Why do we have constant insecurities about whether we have the right background for hedge funds?
This self-doubt is pervasive. It affects everybody who has ever thought about making a transition to asset management. I mean everybody, from the ex-Goldman Harvard Business School grads to the liberal arts college seniors.
The self-doubt comes in an alphabet soup of “if only” thoughts:
- “If only I had gone to ABC ivy league for undergrad…”
- “If only XYZ business school had accepted me…”
- “If only I had done investment banking at a bulge-bracket firm like GS/JPM/MS…”
- “If only McKinsey/Bain/BCG had taken me on as a consultant…”
- “If only I had jumped to private equity at Blackstone/KKR/Carlyle…”
- “If only I had worked in the NY/SF/LA office…”
- “If only I had the CFA designation…”
- “If only I had majored in finance or econ…”
- “If only I had a better personal network…”
The perfect background for hedge funds
There is no perfect background for getting into hedge funds.
No one has the perfect background because there is no “perfect background” for investing.
For every candidate with the Goldman/Blackstone/HBS background, I can give you 10 successful investors whose resumes aren’t padded with prestigious brands and accolades.
So where did the intense focus on your credentials for investing come from?
It comes from hedge fund’s two neighbors – investment banking, and private equity.
In investment banking and private equity, credentials do matter. Doing company research and financial modeling well matter. But beyond the technical skills, these two industries revolve around completing deal transactions.
To succeed in private equity and investment banking, you need to source potential deals, coordinate financing, and advise company management.
Having a strong personal network is tremendously important to doing these 3 things well. What helps you to develop that network over time? Having a strong set of credentials plays a big part.
In essence, this is why investment banking and private equity care about your credentials. Breaking into investment banking and private equity is hard without a set of blue-chip brand names on your resume.
However, people also tend to project the qualifications needed for investment banking and private equity onto hedge funds.
Having a great network helps in doing company research. But at the end of the day, the hedge fund industry is a knowledge-based profession. Your research skills and investment acumen drives your performance.
The truth is, in the hedge fund interview, very little time is spent on going through your credentials and accolades.
Hedge fund interviewers want to focus on just 2 things: your passion for investing and your investing acumen.
Are you passionate about investing?
How passionate are you about investing? Do you stay up late to read industry and company primers? Do you think about your investment positions in the shower? Do you constantly debate with friends about the markets and businesses?
Having passion means that you care. It means that you’d care so much about doing your job well that investing is on your mind 24/7. It means that you’ll make money for your clients to the best of your abilities.
How do you demonstrate your passion for investing to interviewers?
Tell them about the things you’ve done to improve your investment skills. Name all the companies you own in your personal trading account. Walk them through the books you’ve read, and make a case for which one is your favorite. Tell them about the courses you’ve taken on corporate finance, accounting, valuation, and what you enjoyed in those classes.
Do you have investment acumen?
How do you demonstrate your investment acumen?
If you’ve put in the work to develop a good investment pitch, your passion and technical skills will come through to your interviewers. The pitch would show to your interviewers how much you care.
Having the investment pitch would also give you a tangible investment opportunity to talk about. You can walk through your investment thesis and valuation for the business.
Go through your investment thesis and valuation of the business in detail. Talk about the industry trends that affects the company as well as the business’ key drivers. How did you forecast the company’s revenues, margins, and cash flows? What are the risks to the growth of these businesses?
Better yet, address all of your interviewers’ concerns about this company. Anticipate their questions and prepare your answers ahead of time. Convince your interviewer that you’ve done the work and that this investment makes sense.
Did you speak with the company’s investor relations or sell-side analysts? What due diligence questions did you ask them? Or what would you ask them if you get the chance to meet them?
If you have answers to all the questions the interviewer can throw at you about your pitch, it shows that you’ve thought deeply about your investment thesis.
The meritocracy of investing
Don’t doubt your background and abilities. Investing is the most meritocratic skill there is. It doesn’t recognize credentials, accolades, brands, gender, race, or age. If you have what it takes, you’ll succeed.
And what does it take? Passion and investment acumen. Demonstrate these two and sooner or later, someone will take a chance on you.
Good luck! Keep me updated on your journey.