Investment Consulting Please Help

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skwak88

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Hi. Long time reader, first time post here. Already searched around regarding this topic, but I wanted to revive it and open up some more specific questions to everyone. Point blank, I would really appreciate any inputs regarding a Hedge Fund Research Associate position at a major IC (i.e. CA, Mercer, TW). I’m waiting to go on my final round and it sounds like a mix of strategy/manager research, performance tracking, analysis, reporting, and lot of face-time with HF managers. What exactly is the career track here? I have heard that IC’s pay is awful but often serve as good career booster to top MBAs and PE/VC firms, which is a sacrifice I’m certainly willing to make. Can someone confirm the potential?
I also came across a few people who had some negative opinions about Manager Research/IC. I understand with its flat-fee structure, IC is obviously less lucrative and prestigious than IB, ER, etc and that skillsets from manager research doesn’t directly translate to direct investments. However, coming from a non-target with a 3.5, I need to get my foot in the door through something.
My end goal is pretty much an open sentence - I know that I want to be in investments, anything lucrative in the long run (IB/HF/PE/VC/PM open to all tracks). CFA (passed lvl 1) and MBA from a top-tier are crucial for me. I started a business in college that turned out to be pretty lucrative and I’m currently working outside of the industry but analyze nano to mid cap companies daily from a risk perspective (financial statements, CapIQ, Bloomberg, credit rating research), and attend meetings interviewing client’s mgmt teams (CEO, CFOs) to evaluate firm’s risks. For someone in my position would you say this is a good first transition into the industry?
There is really not much information out there on this, so any advice would be very much appreciated. Thanks.
 
Well, what are your other options? If you have none, you should put full effort into getting this position. If you have others, do post what they are.
 
No other interviews lined up as of now, but I haven’t been applying actively. I will be putting my full effort either way as there is no reason I shouldn’t for any type of interview, but I wanted to know if this is the best way to set myself up for a top MBA/long term prospects. Thanks.
 
The position you just described I would not consider “a good career booster to PE/VC firms” as you said.
It’s a fund-of-funds / manager-selection model, where clients don’t know how to choose from the thousands of managers out there, so instead go to a consultant or FofF. You earn a spread, like 40 or 50 bps on client funds.
Yes you do talk to managers, but you’re not doing any valuation or security selections. You do performance attribution on your mix of funds, run scenario’s of what your portfolio looks like if you say add a manager, or use different weights of managers.
These HF managers won’t have any interest in hiring you, there’s simply no overlap of skills from this job to a HF/PE/VC.
A top MBA will give you a much better shot at PE or VC. If you need a job just to tide you over or raise money for an MBA, that’s ok. But the experience won’t do anything for you in landing those jobs.
 
I think the job would be a good opportunity if you’re looking to get into a hedge fund. But PE/VC, that probalbly won’t help much.
 
It would never help with hedge funds or VC. Trust me I work in the industry. The highest level you can get from working in IC is to get to a college endowment or a pension fund.
 
manager research isn’t going to lead to a PE/VC/HF job, maybe a FoF but thats about it but thats 10yrs down the road w/CFA. Manager research at a top IC firm isn’t a top b-school feeder but its better then being a bank teller. Starting pay will be 45-55k with 0-10% bonus.
if your next goal is a top b-school… i’ve known people who gotten into top 5 programs with IC or Manager research exp but they had strong profiles (strong gmat, sports, international exp, prof designations, ivy UG).
 
Thanks everyone for your inputs. I actually do have another option I forgot to mention, it’s a fixed income research position for an investment subsidiary of an insurance company (~1B in AUM, investing premiums, income focused). How do these opportunities compare?
What is the income potential in IC 5-10 years down the road?
My next goal is a top b-school as I mentioned before. Any further advice is deeply appreciated.
 
MissCleo, when you say you’re in the industry, do you mean you’re in IC or HF/VC?
 
If you don’t mind sharing, which IC do you work in? Would you be able to answer the income potential question?
 
Agree with previous posts on here that manager research won’t directly lead to PE/HF position. Exit ops more likely to include asset manager consultant relations/client PM, investment consultant, managing fof, work on client side for pension team, or stay in manager research for career. income potential for 5-7yrs is slightly over six figures.
 
I worked at what a lot would consider a “top” IC though not one named in your OP. I’ve seen people go from the sort of role you’re describing to Yale SOM, Stern, Darden, Fuqua, and even Columbia and HBS. So it’s not like you can’t end up at a “top” bschool from that sort of role.
Career path, as others have said, would be something like funds of funds, or pension manager, or university endowment chief investment officer. Is it as baller as investment banking or a hedge fund? No, probably not but it’s a very nice lifestyle, you’re still investing, and the compensation can be good.
 
I currently work as an IC for a large insurance based broker-dealer, and spend 50% of my time ‘consulting’ with the field (portfolio construction/market commentary) and 50% on manager research. For what it’s worth, here are some comments addressing your post:
- I haven’t a clue if it is a good ‘feeder’ into a hedge fund. I have never seen it done, but then again I think a professional poker player or physics professor have a better shot at getting HF jobs than most who actually work in the industry. That said, also be aware that while many HF jobs pay incredibly well, these are high stress/high turnover jobs (think the NFL vs. MLB). I would rather make 130k/year for 10 years and know I will likely have a job and see my family, than make 1mm for 2 years and never know when the ride will end. But, that is just personal preference.
- Which leads me to my next point…Yes, you can make money in IC. With limited experience and no CFA, probably under 70k. With some exp and CFA it will likely be over 100k.
- Of coarse the position can be levered to a top MBA. But, like any scenario, you must be a strong candidate with something to offer. An uninteresting bore at a top IB with a mediocre GMAT and narrow skill-set will not be as attractive as a well rounded, intelligent IC. It is not about the job, but the person….so, you may be doomed whatever job you end up in.
- Finally, Investment consulting is about being an ‘asset allocator’ vs. an ‘security selector’. There is limited overlap between the two and neither will be a natural ‘springboard’ to the other. Your skillset and interest level will likely favor one or the other and that is the direction you should persue…rather than the one that pays the highest. Luckily, we work in an industry that is well compensated over time, regardless of the sub-industry that you find yourself in. So think about where you want to end up and if its being a PM at some large money manager…then go the analyst route, and do not persue the IC job.
Hope that helps.
 
Thank you very much, everyone. Every comment is sincerely appreciated. Don’t know what I’d do without this forum. Will post again with results soon.
 
Just out of curiosity… for those of you who work in IC or manager research. Do you actually build security models? How do you assess if the managers know their shiet or not?
If a manager tells you that XXX has a clean balance sheet, double digits EPS growth and a medium term catalyst. Do you verify the statement or just take it as is…
I’m already out of IC, working in a pension fund. However, I find myself reading more broker reports than ever…
 
yuoska Wrote:
——————————————————-
> Just out of curiosity… for those of you who work
> in IC or manager research. Do you actually build
> security models? How do you assess if the managers
> know their shiet or not?
>
> If a manager tells you that XXX has a clean
> balance sheet, double digits EPS growth and a
> medium term catalyst. Do you verify the statement
> or just take it as is…
>
> I’m already out of IC, working in a pension fund.
> However, I find myself reading more broker reports
> than ever…
That’s the same question as asking any equity research analyst if their target price of XXX is sound. Do you go and rebuild that companies’ DCF model and see if you agree? And even if you do, you will come out with difference numbers. Same reason why different equity research analyst have different target price but the underlying information is the same.
There’s some subjective opinion and it’s not all about how they pick their stock.
 
yuoska Wrote:
——————————————————-
> Just out of curiosity… for those of you who work
> in IC or manager research. Do you actually build
> security models? How do you assess if the managers
> know their shiet or not?
>
> If a manager tells you that XXX has a clean
> balance sheet, double digits EPS growth and a
> medium term catalyst. Do you verify the statement
> or just take it as is…
>
> I’m already out of IC, working in a pension fund.
> However, I find myself reading more broker reports
> than ever…
Generally, no. I haven’t seen a fund-of-fund manager literally go verify what’s being said. If there are a few stocks the FoF managers knows well, it may raise some questions or eyebrows, but generally no.
 
While I agree building model (or get your hand on it) isn’t the common approach, I would’ve thought verifying the statement is quite common. On a similar topic, we run segregated mandates… as an asset owner, wouldn’t you want to know what you invest in?
whystudy, I’m not sure if I follow your ‘rebuilding DCF’ argument. I’m asking if you carry out minimal due diligence to see if they’re telling the right story… the three items I mentioned are quite ‘standard’ i.e. it’s not too difficult to see if they have a clean balanced sheet, double digit EPS growth and medium term catalyst.
Anyway, thank you for responding. Sounds like I’m doing too much…
 
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