You may be wondering why anyone would ever consider leaving the buyside after putting in all that hard work to break in. While it may not make sense to you now, there are a ton of people I know who ended up being disappointed after transitioning to the buyside.
Many finance professionals (myself included) aimlessly follow the traditional path of banking then the buyside after undergrad. As a result, most do not even consider alternate career paths until they realize that maybe finance is not the best path for them longer-term.
The #1 problem with young finance professionals is that they believe the buyside is the “promise land” where you work less hours, get paid more and work on more interesting projects. They end up with very high expectations and an unrealistic image of the buyside life.
Regardless of how prestigious a job may seem, having high expectations will ultimately lead to unhappiness (ie. Happiness = Reality – Expectations). So, if you end up wanting to change careers after making it to the buyside, be aware that there are different exit opportunities depending on whether you join a hedge fund or private equity firm.
The path that I took after banking
After I finished my banking analyst program, I transitioned to a multi-manager hedge fund. I was ready to get out of banking and was extremely excited when I landed the job. Unfortunately, my ignorance before starting the new role led to high expectations.
Despite being in a position to make ~$500K in a good year, I quit in just one year. Before joining I thought I was going to be investing in undervalued companies, but instead I felt like I was speculating and trading over three to nine month timeframes. Learn more about why I quit by reading My Life Story – How it all Started.
So I left a multi-manager hedge fund, what were my exit opportunities?
One of the main reasons I quit after just one year is that I did not want to be pigeon holed into the multi-manager investment style (ie. short-term, quarterly focused).
I knew I really identified with traditional value investing, so I wanted to transition to another fund. If I stayed any longer at the multi-manager, it would have been much harder to pitch that I truly identified with the value philosophy.
I had three years of banking and one year at a multi-manager under my belt. I knew exactly the path I wanted to pursue, so I ended up getting a job at a value-oriented start-up fund that had a much longer investment horizon.
Unfortunately, that fund shut-down and I went from making potentially $500K per year at the multi-manager to ZERO in less than four months.
Your attitude and mindset is everything
You could imagine how I felt once I became unwillingly unemployed. I went from being so excited before starting my job at a large multi-manager, to quitting that job for a start-up fund, to being unemployed. This all happened in a span of less than 1.5 years.
At first, I was really asking myself how in the hell I ended up in the position I was in after being so successful for the first four years of my career. I became depressed and really took some time to figure out what my next move would be.
Unfortunately, you will run into many curveballs throughout your career and life in general. It took me a few months to realize I had to get off my ass. I knew I wanted to find a hedge fund with the investment philosophy that I really identified with, not just go back to another multi-manager. I started consistently reaching out to various funds and luckily landed at a $1Bn distressed/deep value fund.
If you ever find yourself in a similar position as I was, do not stress and be depressed about it. Keep a positive attitude, stay focused on the job you want to find and sooner or later you will land an opportunity.
Just remember, the longer you stay unemployed the more desperate you will be to find a job, regardless of what job that may be. So, the sooner the better or else you will drive yourself crazy at home trying to figure out what to do with all your free time!
Does private equity or hedge funds provide better exit opportunities?
In general, private equity provides you with a wider set of exit opportunities. In the job you learn how to manage a process with multiple counterparties (deal teams, lawyers, management teams, tax/supply chain advisors, etc.). Also, as you get more senior you learn to start managing others below you. These skillsets are very transferable to other types of roles.
Below is a list of specific roles that some of my friends transitioned into after their two years in private equity:
Private Equity Exit Ops
- Strategic Finance at Jet.com
- Business development at Impossible Foods
- Strategy/M&A at a podiatry roll-up
- Strategy/M&A at a gynecology roll-up
- Family offices
- Hedge funds
- Long-only funds
- Venture capital
- Entrepreneurship
- Other PE firms
Of course, this is not an exhaustive list. You can pursue any type of role you desire! Just have to work a little harder if it is not somewhat relatable to what you have done in the past.
The skillset you develop at hedge funds is a little more specialized. You are usually not managing a team / process and work pretty independently. Your exit ops are geared more to other investing and corporate finance roles in the industries that you have covered.
Below is a list of specific roles that my hedge fund buddies have transitioned to:
Hedge Fund Exit Ops
- Strategy/finance at Royal Caribbean
- Strategy/finance at JUUL Labs
- Long-only funds
- Sell-side equity research
- Investor relations roles
- Entrepreneurship
- Venture capital
- Other hedge funds
Regardless of whether you choose to join a hedge fund or a private equity firm, remember you are still young and are allowed to make mistakes! If you feel trapped in a career path or industry that you end up not liking, plan out a way to transition to another one. Your 20s are the best time to change careers as you are likely not married and have no kids.
Learn more about other finance careers and the Highest Paying Jobs in Finance.
Anyone ever exit to consulting (MBB)?
The only people that I know that exited to consulting from PE/HFs were ones that worked at consulting right out of undergrad for two years. Usually MBB guys have return offers and can come back to consulting after doing two years anywhere else.
What about HF MM to PE- does that ever happen or would you have to get an MBA as a pivot?
Personally I’ve never seen that happen. Anything is possible, as long as you can network and have a strong background. I don’t think MBA is necessary to make any pivot. If you know you want to do PE after working at a hedge fund, then you should focus all your efforts on finding a PE job and you should be able to land something. Don’t need to spend $200K to do so.
Hey there, was wondering if I could get your thoughts on late stage VC/growth equity exit opportunities. Say the job is more technical in nature than the average VC, and the individual (me) also has a previous internship in PE where I’ve done a bunch of modelling.
Is a move to HF possible from this sorta skillset? What about from growth equity back to traditional PE?
Cheers mate. This website is a gold mine.
It is tough to trantion from late stage VC/growth to traditional PE, unless you can find a PE firm that has a similar investment style or focus on similar industries. Transitioning to PE at a decent shop is generally tough unless you have a ibanking background or have the connections.
Move to HF after VC is definitely possible as long as you can show you have a passion for investing and have deep knowledge in a certain industry within TMT.