2hr conversation with a PM

I just had a two hour convo with a PM who has just recently set up his own shop. I quizzed him about how he got there and what he would recommend for someone aiming to be a fund manager and he told me the following: The fastest way to get here is to start your career in IB preferably within M&A, you will learn to manage risk which is something sell side researchers always lack. After a few years you can transfer to the buy side, taking a small pay cut, and become a junior analyst before working it up from there. He also concluded saying that “anyone who believes the CFA is useless is a complete moron”. What do you guys think about his suggested career path towards fund manager?

I don’t have an enough info to disagree but I don’t see how an Ibanker in M&A (or any position) learns to manage risk in an equity portfolio. Per APD’s recent conference call regarding ARG, “your bankers would marry a snake to a rabbit”

yea investment bankers only care about one thing…getting the deal done regardless. their bonuses are caluclated on % of completed deal so when asked to serve two masters (themselves or the client) which one do you think they will serve? the compensation incentive is all wrong for banking…think about the billions of dollars in goodwill that have been written down after acquisitions…every company in my universe has written down nearly 100% of their goodwill from past acquisitions

Just out of curiosity, how much money was he starting off with?

builders Wrote: ------------------------------------------------------- > yea investment bankers only care about one > thing…getting the deal done regardless. their > bonuses are caluclated on % of completed deal so > when asked to serve two masters (themselves or the > client) which one do you think they will serve? So what do you make of his projected career path? He’s starting with $500M

mjbizzle87 Wrote: ------------------------------------------------------- > builders Wrote: > -------------------------------------------------- > ----- > > yea investment bankers only care about one > > thing…getting the deal done regardless. their > > bonuses are caluclated on % of completed deal > so > > when asked to serve two masters (themselves or > the > > client) which one do you think they will serve? > > So what do you make of his projected career path? > > > > He’s starting with $500M WTF>? this is complete BS… I am sorry but M&A? as in advisory M&A? He couldn’t raise $50mm in this environment…maybe he wants you to go M&A and advise him on the inside? be prepared to share a cell. gtfooh

I can see how M&A might teach you more about risk management than standard equity research, but I don’t see how the kind of risk management you might do in M&A really tells you all that much about how to manage portfolio risk. I think the main advantage of M&A is that you are likely to be paid enough gobs of money that you can start developing a track record with your own money without having to beg many others to go in with you while you are still unproven.

mjbizzle87 Wrote: ------------------------------------------------------- > The fastest way to get here is to start your > career in IB preferably within M&A, you will learn > to manage risk which is something sell side > researchers always lack. After a few years you can > transfer to the buy side, taking a small pay cut, > and become a junior analyst before working it up > from there. > This statement is hilarious. Who knew IB people know how to manage risk?

Well, an IB background can be valuable, since many people (i.e. employers) associate this with prestige, quality, etc.

ConvertArb Wrote: > > > WTF>? this is complete BS… I am sorry but M&A? > as in advisory M&A? He couldn’t raise $50mm in > this environment…maybe he wants you to go M&A > and advise him on the inside? be prepared to share > a cell. gtfooh i dont think theres any place for “gtfo”, really unnecessary. I passed it on to see what AF made of his comments, im not making it up for kicks. If you wanted to start in a corporarte environment and maybe transfer to a small fund later on. then surely this career path makes alot of sense, although perhaps not to the extent to which he recommends. SS Research just seems a bit reclusive and lacks the personal interaction that i would really want to be a big part of my job. Where can one enter into a bank, or fund for that matter, that would offer them lots of interpersonal experience/travel and intellectual stimulation. With a good grounding to move into a fund. Perhaps spec sales?

Sounds like the PM’s background is in M&A?

These threads are all redundant. There is no right way, there are however wrong ways. One thing that is consensus is networking, and lots of it.

Historically, I think merger arb funds (“riskarb”, hate that term) were started by M&A bankers. I can see how M&A experience can be useful in a variety of strategies, though as mentioned, far from the be all end all.

It is true that there are many ways to portfolio management and that, especially in hedge funds, the backgrounds can be quite diverse. If the guy is in merger arbitrage or possibly capital arbitrage, then an M&A background is highly relevant, and there are specific risks that an M&A guy would have seen before and can be incorporated into the events that the fund invests in. In my experience, many people in the field seem to think that *their* way of getting to their position is the *only* way to do it (or if not the only way, then the best way, at least). The tunnel vision that one sees out there is staggering, particularly from people who claim to have perspective and be informed. Ultimately you need to know what you are good at analyzing (or at least better than the competition), figure out how to turn that knowledge into a good risk-reward trade/investment, compose a portfolio of those trades, and then develop a way to demonstrate that you can do this consistently. Then you need to find who uses a similar approach to investing / portfolio management and network in that direction. IB work helps in terms of developing the analysis skills, the arm-twisting skills, the spin skills, and networks you to a bunch of the right people. ER doesn’t have the arm-twisting part, but also helps. So those are the most natural paths. But there are others. Remember that a key value for yourself is coming up with what is different about what you can add that you can’t get from the standard “hire an ex-sellside researcher” approach. If you can find that, then you have a diversification advantage.

Have to have a track record of convincing other people to put their money with your fund, or demonstrate to the Bosses why you can provide that confidence that you can attract more client $$ (through whatever methods available), imo is the ultimate high-level way. Yes, it doesn’t say much, but at the end of the day, its about moving money.

Well said bchadwick.